Legislature(2005 - 2006)CAPITOL 124
01/26/2006 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
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| Regulatory Commission of Alaska | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
January 26, 2006
8:07 a.m.
MEMBERS PRESENT
Representative Kurt Olson, Co-Chair
Representative Bill Thomas, Co-Chair
Representative Gabrielle LeDoux
Representative Mark Neuman
Representative Sharon Cissna
Representative Woodie Salmon
MEMBERS ABSENT
Representative Pete Kott
COMMITTEE CALENDAR
OVERVIEW: REGULATORY COMMISSION OF ALASKA
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
KATE GIARD, Commissioner, Chair
Regulatory of Alaska (RCA)
Department of Commerce, Community, & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Presented an over of the RCA and answered
questions.
ACTION NARRATIVE
CO-CHAIR KURT OLSON called the House Community and Regional
Affairs Standing Committee meeting to order at 8:07:27 AM.
Representatives Olson, Thomas, LeDoux, Neuman, and Cissna were
present at the call to order. Representative Salmon arrived as
the meeting was in progress.
^REGULATORY COMMISSION OF ALASKA
8:08:03 AM
KATE GIARD, Commissioner, Chair, Regulatory of Alaska (RCA),
Department of Commerce, Community, & Economic Development
(DCCED), in outlining the course of her discussion, related her
belief that the RCA has to be production-oriented in order to
adequately respond to the business needs of the regulated
utilities and pipelines. Ms. Giard explained that she is trying
for the 2007 sunset review of the RCA to not be a repeat of the
2003 RCA sunset review. Therefore, as the chair she said her
goal is to listen to the legislature, the utilities, and the
pipeline companies and try to turn the RCA to a direction that
outlasts herself. In that vein, she highlighted the work she
has done, such as public meetings and meetings with the industry
over possible changes. Ms. Giard characterized the RCA as an
introverted agency in which decisions are sometimes made in
isolated chambers and lacking transparency. Therefore, for two
years the RCA has talked with regulated and unregulated
utilities and the owners of the Trans-Alaska Pipeline System
(TAPS). Ms. Giard said that she hoped the changes being made
are long-lasting, although she mentioned that the changes aren't
happening fast enough for her liking.
8:13:35 AM
MS. GIARD turned to the global perspective of the RCA and
provided the committee with a chart entitled, "Regulatory
Commission of Alaska - Production Performance Since Last Sunset
Review". She related that the feedback she receives from the
utilities is that they will accept the RCA's decision, although
they may not like it. However, the utilities want the RCA to
come to its decisions faster, to be more transparent in its
decisions, and a bit predictable and stable. Utilities say, she
further related, that they don't produce fast enough, and
therefore they don't meet the RCA's business needs. Ms. Giard
highlighted that although the production performance chart looks
good because it shows the RCA moving from 376 cases July 1,
2003, to 107 cases June 30, 2005, it doesn't specify how long it
took to decrease the number of cases. She said that she could
gauge the success of the RCA if she could provide an average
timeline for each docket and have benchmarks for the length of
time for the RCA to make a decision and the time the order went
out the door. Such benchmarks would show the utilities that
the RCA is responding.
8:18:27 AM
MS. GIARD moved on to what it looks like when the RCA is
involved in a docket. She provided the committee with a
spreadsheet that lists the current dockets. She said that if
there were a lot of dockets open from 2003, she would be
uncomfortable coming before the committee, although she was
uncomfortable with 2004 dockets still being open. She noted
that some of the dockets have 15-month timelines and others have
no timeline. Furthermore, some of the dockets won't be closed
because the RCA is waiting for a filing from the utility.
8:21:41 AM
MS. GIARD then provided the committee the docket detail for U-
oo-o88, which is the oldest active docket. Review of the
hearing and order histories specify that activity is occurring
with this document. She also provided the committee with the
docket detail for U-o5-oo7, another open docket. This docket is
interesting because it was opened on 1/26/05, but the RCA didn't
take action until 11/25/05, almost 10 months later. She viewed
the aforementioned as an unacceptable length of time to respond
to a docket. However, this can happen when the RCA is busy and
doesn't carefully manage its dockets. The system being
implemented will take care of this, she stated.
8:26:30 AM
MS. GIARD addressed the changes that the RCA is making to better
respond and met the needs of the utilities. After meeting with
the pipeline companies, the RCA began to better understand the
significant challenges they face with the regulatory paradigm in
Alaska. She informed the committee that at this point the RCA
has issued regulations for comment. These regulations would
change the way in which the RCA views pipeline regulation in the
state. After meeting with everyone, including the Federal
Energy Regulatory Commission (FERC), the RCA has moved forward
on those regulations, which have been well received thus far.
She related positive comments from BP, the Kenai Kachemak
Pipeline, LLC (KKPL), and Union Oil Company. Ms. Giard said
that [the regulation change] is coming along, although not as
fast or clean as she would like. She then turned to the
comments of General Communication, Inc. (GCI), which are
representative of the frustrations some have with the RCA.
MS. GIARD said that in order to attract qualified, diligent
commissioners who are willing to put in the time, they need to
be dedicated. Therefore, the wages for the RCA need to be
raised, she opined. She indicated her acceptance of the
public's disapproval of that suggestion. In fact, GCI said that
before giving commissioners a raise, the RCA should put in place
performance metrics, define its workload, and review the
performance under the timelines adopted in 2002. Therefore, Ms.
Giard opined that now is the time to move forward on performance
measures and setting benchmarks. The commissioners have agreed
to do so. With regard to whether benchmarks are adopted as part
of a regulation or part of something that's the purview of the
chair is yet to be determined. However, she noted her
preference to place [the benchmarks] in regulation. She
mentioned that the metrics would be brought to the public for
comment, which should be done by the time the legislative
session is completed.
MS. GIARD noted that there are some comments regarding
timeliness in relation to a document GCI and ultimately AT&T
filed requesting the issuance of an order by a specific date.
However, the RCA didn't recognize the importance of the request
until she communicated directly with [GCI representatives and
the former RCA chair]. Once it was determined what would
happen, the RCA responded. Such situations, she opined, won't
be settled by a system because it requires communication between
the parties. As long as the door is open, the RCA can react,
she said. She related that the RCA is working on how to be
clearer in the future.
8:39:29 AM
MS. GIARD concluded her testimony by speaking about the
statutory timelines under which the RCA operates. She noted
that for some things there are no statutory timelines, such as
for ETC applications and disaggregation plans. Therefore, she
as the chair, has, in some dockets, set a timeline in the
docket. Once the case management system is in place, the RCA
should be able to place a timeline in every docket. The parties
can still protest the timelines. She expressed her hope that
the timelines will be in place by July 1. She suspected that
during the 2007 sunset review, the legislature will want to know
whether the RCA has adhered to these timelines and whether
[other] timelines should be established. Ms. Giard opined that
the RCA can adhere to any timeline so long as there is a system
in place to track the statutory timelines. She recalled missing
a statutory timeline and expressed the need not to allow that to
happen again because it means that something went into place
that could negatively impact ratepayers. Therefore, Ms. Giard
suggested that the aforementioned system be put in place and
that the RCA talk with the utilities regarding timelines. She
mentioned that she would be working on the 2007 sunset review
beginning July 1.
8:43:49 AM
CO-CHAIR OLSON noted that he spent a significant amount of time
this interim working on gas line issues and actually met with
Ms. Giard regarding issues in Cook Inlet. He recalled that the
KKPL cost $20 million and the expenses associated with the RCA
totaled $3.5 million. He related his understanding that the
time it took for KKPL to get permitted and the expenses of the
RCA were much higher than in other states [contributed to a much
higher total expense]. Therefore, he inquired as to how the RCA
can be more efficient in the permitting process without "killing
them" with the expense.
MS. GIARD expressed hope that the regulations being brought
forward would have had a positive impact on KKPL, which was an
adversarial docket about the rate. She acknowledged that the
rate-setting process for KKPL took a long time and is still a
matter before the RCA. She then turned to the matter of what
can be done so that such situations as that with KKPL don't
happen again. She informed the committee that most of the Cook
Inlet pipeline disputes are settled by alternative dispute
resolution (ADR) that was working at the Federal Energy
Regulatory Commission (FERC). Although use of ADR tends to
lengthen the time frame, ADR has been successful. She
emphasized that a business-to-business resolution is far better
than the RCA making a rate decision. The RCA is moving forward
with ADR, she related.
MS. GIARD opined that part of the problem is the RCA's liberal
rules regarding allowing parties into dockets. The pipeline
companies have challenged the aforementioned and discussed
narrowing who is allowed into the dockets. However, others say
that there's better evidence with more parties. Ms. Giard
indicated that the correct balance on that matter is difficult
to find. She then noted that the RCA has sought comment on the
notion of exempting a pipeline from RCA regulation if it's only
shipping its own fuel, which she referred to as a tier system.
The RCA ensures that the rates are fair and reasonable in order
to encourage development around the pipeline.
8:51:03 AM
MS. GIARD, in further response to Co-Chair Olson, specified that
currently all pipelines go through the same regulatory regime at
the RCA. Therefore, [the RCA] can allocate and differentiate in
order to promote economic development and the existing pipeline
structure while not dampening the desire to build [a pipeline].
8:51:51 AM
REPRESENTATIVE NEUMAN noted that he has talked with utility
companies. He then stated that he is somewhat disturbed with
what he is hearing today. He highlighted that the RCA has
consistently violated statutory directives for timeliness that
were adopted by the legislature in 2002, and yet it was
presented that the RCA will adopt new regulations regarding
timeliness. He also noted that in several rural communities the
RCA has had to have certificates to operate. With regard to the
notion that the RCA is an isolated agency, Representative Neuman
viewed that as a difficulty for utility companies. Therefore,
he suggested [making the RCA more approachable]. Representative
Neuman then turned to Ms. Giard's willingness to pay the
commissioners more, and suggested that such could be reviewed
after the RCA shows that it can be more efficient and timely.
Therefore, he inquired as to what the RCA is doing to establish
a better relationship with the companies it regulates.
8:56:48 AM
MS. GIARD reiterated that she has met with the utilities that
the RCA regulates and inquired as to their view of the RCA,
which didn't happen in the past. Furthermore, the RCA has had
public meetings during which the public is allowed to comment on
possible changes. Ms. Giard opined that the utilities have more
input now than they ever have. She characterized these as steps
in the right direction, although perhaps not at the speed
desired.
8:59:57 AM
REPRESENTATIVE LEDOUX returned to the deadline that the RCA
almost missed and her understanding that it's not a deadline
that a computer system would catch.
MS. GIARD explained that the deadline isn't one that a computer
system would normally catch because it couldn't be programmed in
the system. The deadline is driven by a request that has to be
read by a human.
REPRESENTATIVE LEDOUX asked if there could be a form with
locations to insert critical dates, which could be input into
the computer.
MS. GIARD replied yes.
9:01:11 AM
REPRESENTATIVE CISSNA opined that the case reviews provided
don't seem to give enough information to specify the complicated
situations of each. Therefore, she said it would be more useful
to have some coding that specifies where, in the process, the
case is. In regard to the [isolated agency], she asked if the
role of the commissioners is similar to a judge in the court
system such that a firewall of sorts is required.
MS. GIARD specified that the role of the RCA is legislative in
that it makes regulations, and thus the RCA should be very open.
However, the role of an RCA commissioner is also very judicial
in that he/she makes judicial decisions on disputed dockets
similar to cases before the court. The aforementioned requires
discretion such that most of the time [the RCA commissioner]
will not talk with the utility about an open docket in order to
avoid violating due process. The aforementioned has contributed
to the introverted nature of the RCA. Still, Ms. Giard opined
that the chair of the RCA should be allowed and actually have an
obligation to represent the agency and the administration in
regard to the dockets.
9:06:50 AM
REPRESENTATIVE SALMON inquired as to who sets the rates for the
utilities in the villages. He also inquired as to how the RCA
regulates [the utilities in the villages].
MS. GIARD pointed out that Representative Salmon's district
includes a numerous amount of utilities certificated by the RCA.
Furthermore, many of [the utilities in the villages] aren't
economically regulated and thus the RCA doesn't set the rates
for those. She noted that she has brought staff who could
discuss the specifics of each utility in the member's district.
In further response to Representative Salmon, Ms. Giard
confirmed that if the RCA doesn't set the rates, then the
utility company does so.
9:08:55 AM
REPRESENTATIVE CISSNA returned to her suggestion to use coding
that would specify "who's the one that has to toss [the ball]
next."
MS. GIARD said that the more sophisticated data in which
Representative Cissna is interested isn't tracked. Therefore, a
case management system would generate such reports.
9:09:44 AM
REPRESENTATIVE LEDOUX pointed out that the court system uses a
system by which the judges have to periodically certify that
decisions have been made within a specified time frame. If
there isn't a legitimate reason why a case hasn't been decided
within a specified time, the judge doesn't receive his/her
salary. She asked if something similar has been considered for
use with the RCA.
MS. GIARD clarified that [the RCA] isn't bringing forward
legislation for raises, rather she has merely inquired as to
what the utilities think of such. In response to Representative
LeDoux, Ms. Giard specified that when she reviewed the
commissioner's salaries she had reviewed the possibility of
tiering their salaries and tying performance on dockets to
salaries. However, she indicated that care must be taken to
ensure that commissioners don't "bang" through a docket in order
to receive their salary. Although the RCA has only missed one
statutory deadline in its history, she noted that it has the
ability to extend statutory deadlines for 90 days. When it does
extend statutory deadlines, it must report those to the
Legislative Budget and Audit Committee. She recalled that in
calendar year 2005 the RCA extended the statutory deadline in 16
cases. In further response to Representative LeDoux, she
directed attention to the chart which specifies that the RCA
opened 131 cases and closed 179 cases.
9:12:21 AM
CO-CHAIR THOMAS noted his agreement with Representative LeDoux
regarding the RCA's salary structure to match that of judges.
With regard to the charts provided to the committee, Co-Chair
Thomas pointed out that they should also specify how many
appeals occur yearly. He then recalled reading that the RCA has
about 20 percent less cases than in the past, and therefore he
questioned why the same amount of commissioners would be
necessary.
MS. GIARD, in regard to the number of appeals of RCA cases,
explained that after the RCA issues an order there's an
opportunity for petition of reconsideration to the full
commission. After the RCA confirms or denies the panel, the
parties have the opportunity to appeal to the Alaska Superior
Court. She noted that lately there have been a number of
appeals filed on RCA decisions. However, generally speaking RCA
decisions are upheld on appeal. She recalled there only being
one or two remands, which she viewed as a sign of thoughtful
decisions from the RCA.
9:15:49 AM
CO-CHAIR THOMAS requested that he be provided a copy of the
RCA's response to GCI. He mentioned that he likes consistency
in reporting so that one can easily see changes. He asked if
the RCA has the authority to have hearing officers hear dockets
and provide opinions for lower level complaints, and if so, are
such positions utilized.
MS. GIARD, in addressing whether the same amount of
commissioners is necessary, said that it would be a good topic
for discussion during the sunset review. She opined that if the
proposed systems and the funding for them aren't in place, then
the RCA shouldn't decrease the number of commissioners to three.
Again, she said that the topic would be appropriate to review
during the sunset review. Furthermore, decreasing the number of
commissioners would be something about which the RCA would want
to solicit opinions from the utilities. Having five
commissioners allows for a variety of different philosophies for
which there is a cost and a benefit. Ms. Giard noted that the
annual report is provided to legislators. She acknowledged that
she thinned down the report, perhaps too much, and will attempt
to achieve a better balance with the upcoming report. On the
matter of hearing examiners, the utilities have recommended that
the RCA use more hearing officers. The governor's office has
supported that and thus the RCA is pursuing two more hearing
officers for a total of four hearing officers. She explained
that the hearing officers are being placed more directly in
control since they are attorneys.
9:20:38 AM
REPRESENTATIVE SALMON expressed the need to sit with Ms. Giard
for answers to his questions.
MS. GIARD reiterated that her staff is available to
Representative Salmon at any time.
9:21:15 AM
REPRESENTATIVE LEDOUX asked if a decision is made by one
commissioner or the entire RCA.
MS. GIARD answered that every decision that the RCA makes on a
case has to be decided by three commissioners, save procedural
decisions that can be made by one commissioner or a hearing
examiner.
REPRESENTATIVE LEDOUX asked if there is a problem with
consistency in panels due to the varying philosophy of the
commissioners.
MS. GIARD replied, "yes and no." She explained that the RCA
tries to make decisions based on the precedence it has or "to
distinguish." However, she acknowledged that the aforementioned
isn't always successful. She noted that she, as the chair,
assigns commissioners to panels. In doing so for important
dockets that have economic impact on a broad section of
ratepayers, all five commissioners are assigned.
9:24:26 AM
REPRESENTATIVE NEUMAN asked if adding two hearing officers would
allow the hearing officers the ability to do the work twice as
fast.
MS. GIARD answered that she didn't believe so. The desire [with
adding the two additional hearing officers], she explained, is
to provide the pipelines and utilities better ongoing
management. There is a balance between the cost to the
ratepayers to manage the dockets and the benefit to the
utilities to have better management, she opined.
9:25:47 AM
REPRESENTATIVE NEUMAN related his belief that generally a
business hires more staff to get the job done faster. However,
if the job isn't getting done faster, he questioned whether
additional staff merely created more paperwork for the
utilities.
MS. GIARD pointed out that frequently the RCA isn't able to
determine whether parties disagree. She explained that the
number of motions, to a degree, determines the effort required
to manage the case. She expressed her belief that additional
hearing officers are a good idea in trying to manage the dockets
better.
9:27:57 AM
CO-CHAIR OLSON turned to the RCA's request for comments on the
[salary] package for the RCA's commissioners, and inquired as to
why the RCA wants to give [control over the commissioner's
salary] to the governor.
MS. GIARD specified that the salary issue is part of a group of
materials about which the RCA wants to talk with the utilities.
Ms. Giard related that she proposed [the salary schedule for the
RCA] to mirror that of the Alaska Oil and Gas Conservation
Commission (AOGCC), which the governor establishes. The force
behind this is to determine what [salary] it takes to attract
good quality people regardless of who sets the salary. In
further response, she noted that nothing has been brought to the
legislature, although she opined that she personally believes it
to be a good idea.
9:31:33 AM
CO-CHAIR OLSON asked if any utilities that the RCA currently
regulates could be deregulated.
MS. GIARD suggested that cooperatives managed by members are
probably good candidates to move outside of the regulatory
paradigm. Such cooperatives would be Homer Electric and Golden
Valley Electric Association (GVEA). However, the challenge
would be in regard to how wholesale and retail are related and
whether one is regulated and the other isn't. In the Lower 48 a
method by which cooperatives aren't regulated is utilized. "The
challenge with just legislatively setting them free, is that
members in every single one of those utilities have the ability
to vote themselves out of regulation," she related. In regard
to refuse collection, Ms. Giard stated that there is a monopoly
situation for refuse in certain communities. She acknowledged
that some commissioners believe that refuse shouldn't be
regulated.
9:33:52 AM
REPRESENTATIVE NEUMAN asked if the RCA regulates small utility
communities, such as those owned by a subdivision with its own
wastewater treatment plant.
MS. GIARD answered that the RCA regulates some of them, but it
depends upon the number of connections. Therefore, if there are
15 or fewer connections, the RCA doesn't regulate it. She noted
that the RCA has provisional certification for water utilities
with 25 or fewer connections.
REPRESENTATIVE NEUMAN commented that it's quite common in his
district for subdivisions to have their own utility systems. He
asked if Ms. Giard believes the current system works in a fair
and expedient way for these small, privately owned utility
companies.
MS. GIARD informed the committee that the provisional
regulations were enacted about 12-14 months ago and it seems to
be moving along. The regulatory effort for a water facility is
[addressed] on a case-by-case basis.
REPRESENTATIVE NEUMAN suggested that perhaps other utilities
could be helped by [providing provisional certification] for
utilities with 500 or less connections.
MS. GIARD noted that the 25 or fewer connections is a statutory
requirement.
REPRESENTATIVE NEUMAN offered to help change that and any other
statutory changes that would help the RCA with its work and the
developers of subdivisions.
9:37:17 AM
CO-CHAIR OLSON inquired as to whether there will be any phone
wars this year.
MS. GIARD opined that when moving from a monopoly paradigm to a
competitive paradigm, the economics of private commerce is being
toyed with. Therefore, until all markets are fully competitive,
there will be phone wars in Alaska. Ms. Giard related that the
RCA is always involved in phone wars whether or not it comes to
the attention of the legislature. She explained that in rural
areas when competition arrives, the existing company often wants
to remove the subsidy it has provided [to the satellite
communities]. Therefore, competition drives rates to cost,
which could be an increase or a decrease depending upon whether
the area received a subsidy when [there was a monopoly].
9:42:03 AM
REPRESENTATIVE NEUMAN asked if, when competition arrives in a
large community where the existing telephone service provides
service to the satellite communities, the competition has to
provide services to those satellite communities as well.
MS. GIARD answered that has yet to be decided.
REPRESENTATIVE NEUMAN assumed that if a utility company enters
an area, it can't cherry pick and only provide service to the
areas it desires. He asked if that currently happens.
MS. GIARD said that it hasn't happened yet.
9:43:00 AM
CO-CHAIR OLSON inquired as to the RCA's greatest challenge for
the next 12 months.
MS. GIARD responded that the challenge is meeting the bar in
2007.
9:43:53 AM
CO-CHAIR THOMAS expressed concern that in 2007 many of
legislators won't be here and the same "story" will be told to
the new legislators. Therefore, he suggested that legislators
need to sit [on the committee] for four years in order to ensure
consistency.
MS. GIARD emphasized that the legislators get to vote on the
sunset.
9:45:43 AM
REPRESENTATIVE LEDOUX inquired as to what happens if the RCA is
sunsetted.
MS. GIARD explained that there is a wind-down provision if the
RCA is sunsetted. She pointed out that just as the former
Alaska Public Utilities Commission was replaced by the RCA, the
RCA would be replaced by another agency. Ms. Giard related that
the RCA's work would continue and [until a new agency is put in
place], the work would be done by the legislature.
9:47:21 AM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:47 a.m.
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