Legislature(1999 - 2000)
05/06/1999 08:12 AM House CRA
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
May 6, 1999
8:12 a.m.
MEMBERS PRESENT
Representative Andrew Halcro, Co-Chairman
Representative John Harris, Co-Chairman
Representative Carl Morgan
Representative Lisa Murkowski
Representative Fred Dyson
Representative Reggie Joule
MEMBERS ABSENT
Representative Albert Kookesh
OTHER MEMBERS PRESENT
Senator Dave Donley
COMMITTEE CALENDAR
HOUSE BILL NO. 178
"An Act relating to removing solid waste collection and disposal
service from regulation by the Alaska Public Utilities Commission;
requiring certain municipalities, and permitting other
municipalities, to regulate solid waste collection and disposal
service within the municipal boundaries; and providing for an
effective date."
- FAILED TO MOVE OUT OF COMMITTEE
(* First public hearing)
PREVIOUS ACTION
BILL: HB 178
SHORT TITLE: DEREGULATION OF GARBAGE UTILITIES
SPONSOR(S): REPRESENTATIVES(S) KOTT
Jrn-Date Jrn-Page Action
4/07/99 670 (H) READ THE FIRST TIME - REFERRAL(S)
4/07/99 671 (H) CRA, L&C, FIN
4/15/99 (H) CRA AT 8:00 AM CAPITOL 124
4/15/99 (H) HEARD AND HELD
4/15/99 (H) MINUTE(CRA)
5/06/99 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
PAT HARMAN, Legislative Administrative Assistant
to Representative Kott
Alaska State Legislature
Capitol Building, Room 118
Juneau, Alaska 99801
Telephone: (907) 465-3777
POSITION STATEMENT: Testified on behalf of Representative Kott,
the bill's sponsor.
JONATHON LACK, Legislative Assistant
to Representative Halcro
Alaska State Legislature
Capitol Building, Room 418
Juneau, Alaska 99801
Telephone: (907) 465-4939
POSITION STATEMENT: Provided information from the subcommittee
research and answered questions.
KEVIN RITCHIE, Executive Director
Alaska Municipal League
217 Second Street
Juneau, Alaska 99801
Telephone: (907) 586-1325
POSITION STATEMENT: Viewed HB 178 as shifting refuse regulation to
local governments.
BOBBY COX, Vice President
Alaska Division of Waste Management
6301 Rosewood
Anchorage, Alaska 99518
Telephone: (907) 563-3717
POSITION STATEMENT: Discussed HB 178.
RON ZOBEL, Assistant Attorney General
Fair Business Practices Section
Civil Division
Department of Law
1031 West 4th Avenue, Suite 200
Anchorage, Alaska 99501-1994
Telephone: (907) 276-3697
POSITION STATEMENT: Discussed legal issues pertaining to HB 178.
BRUCE GAGNON, Attorney
Atkinson, Conway & Gagnon
Municipality of Anchorage
420 L Street
Anchorage, Alaska 99501
Telephone: (907) 276-1700
POSITION STATEMENT: Discussed legal concerns of the Municipality
of Anchorage.
DAVE VEAZEY, Member
Fairbanks North Star Borough Assembly
1996 Red Leaf
Fairbanks, Alaska 99709
Telephone: (907) 455-4013
POSITION STATEMENT: Testified in opposition to HB 178.
PAM KRIEBER, Part Owner
Valley Refuse
PO Box 879109
Wasilla, Alaska 99687
Telephone: (907) 892-6606
POSITION STATEMENT: Rebutted Mr. Cox's comments.
SHARON DANIEL
Copper Basin Sanitation
PO Box 513
Glennallen, Alaska 99588
Telephone: (907) 822-3600
POSITION STATEMENT: Testified in opposition to the deregulation of
refuse service.
MARY HUGHES, Municipal Attorney
Municipality of Anchorage
PO Box 1977
Anchorage, Alaska 99519
Telephone: (907) 343-4235
POSITION STATEMENT: Testified with regard to the Municipality of
Anchorage's view of HB 178.
FAY VON GEMMINGEN, Member
Anchorage Assembly
PO Box 1977
Anchorage, Alaska 99519
Telephone: (907) 562-1615
POSITION STATEMENT: Discussed concerns with HB 178.
REPRESENTATIVE KOTT
Alaska State Legislature
Capitol Building, Room 118
Juneau, Alaska 99801
Telephone: (907) 465-3777
POSITION STATEMENT: Testified as sponsor of HB 178.
ACTION NARRATIVE
TAPE 99-30, SIDE A
Number 0001
CO-CHAIRMAN HARRIS called the House Community and Regional Affairs
Standing Committee meeting to order at 8:12 a.m. Members present
at the call to order were Representatives Halcro, Harris, Morgan,
Murkowski, and Dyson. Representative Joule arrived at 8:17 a.m.
Representative Kookesh was not present.
HB 178-DEREGULATION OF GARBAGE UTILITIES
CO-CHAIRMAN HARRIS announced that only order of business before the
committee was HOUSE BILL NO. 178, "An Act relating to removing
solid waste collection and disposal service from regulation by the
Alaska Public Utilities Commission; requiring certain
municipalities, and permitting other municipalities, to regulate
solid waste collection and disposal service within the municipal
boundaries; and providing for an effective date."
PAT HARMAN, Legislative Administrative Assistant to Representative
Kott, Alaska State Legislature, testified on behalf of the bill
sponsor. Mr. Harman pointed out that the committee never formally
adopted the proposed committee substitute (CS) at the April 15,
1999, meeting. There are two versions, a D and a G, for which Mr.
Harman offered to discuss the differences.
CO-CHAIRMAN HALCRO moved to adopt the proposed CS, Version
LS0811\G, Cramer, 4/20/99, as the working document before the
committee. There being no objection, it was so ordered.
MR. HARMAN explained that the CS worked on by Representative Kott's
office addressed the three concerns of the Alaska Public Utilities
Commission (APUC) who had endorsed HB 178. Section 2, paragraphs
(1)-(3) allows immediate competition in a service area if that is
desired by the local governing body. In response to the APUC's
concern that the definition of "fair market value" would create
complications, that definition was deleted. With regard to the
original bill's language requiring a fixed rate for five years, the
APUC felt that there may be changes in technology or economies of
scale that could suggest a decrease in rates. Therefore, there is
an amendment which would address that concern. The amendment would
cap the rates, but allow for the rates to be lowered.
Number 0389
CO-CHAIRMAN HALCRO moved that the committee adopt Amendment 1:
Page 3, line 14, after "customers"
Delete "at"
Insert "no more than"
There being no objection, Amendment 1 was adopted.
MR. HARMAN pointed out that a memo from Steve Mulder dated April
29, 1999 had been received from the Anchorage Solid Waste
Commission which offered several suggested language changes. The
sponsor does not object to any of those suggested changes, although
there are no formal amendments addressing those concerns.
CO-CHAIRMAN HARRIS reminded the committee that at the April 15,
1999, meeting HB 178 was turned over to a subcommittee consisting
of Co-Chairman Halcro and Representative Joule. Therefore, he
requested that Co-Chairman Halcro report what was accomplished in
the subcommittee.
CO-CHAIRMAN HALCRO commented that a substantial amount of work had
occurred on HB 178 since the last meeting. A number of legal
opinions regarding the antitrust situation were obtained.
Furthermore, a number of municipalities' outside legal counsel's
opinion of HB 178 were requested. Additionally, opinions were
solicited from private independent contractors, refuse haulers.
Number 0642
CO-CHAIRMAN HALCRO stated that HB 178 poses some large questions,
the biggest being, why? The 3-ring binder prepared for the
committee does not contain one letter of support from any consumer.
The binder includes many letters opposing HB 178 from refusal
haulers and from municipalities. He pointed out that the Anchorage
Assembly passed a resolution in support of deregulation that would
protect taxpayers and ratepayers, but not supporting HB 178 in
particular. This franchise agreement would create problems,
especially for the Municipality of Anchorage which is currently in
the solid waste business. The Municipality of Anchorage has
approximately a $20 million investment in solid waste services.
Therefore, the purpose of HB 178 is in question because there has
not been any consumer outcry. Although the APUC did not have any
difficulty in letting go of refuse regulation, that only amounts to
one to two percent of its workload.
CO-CHAIRMAN HALCRO explained that upon review of the testimony from
the April 15, 1999, hearing and the new information and legal
opinions there are concerns. There are concerns regarding the
manner in which franchise agreements are carried out and the way
local governments would be burdened with the regulation of refuse.
In Co-Chairman Halcro's opinion, HB 178 is a solution in search of
a problem. Furthermore, at the April 15, 1999, hearing Waste
Management's counsel referred to HB 178 as Waste Management's bill.
He concluded by saying that this is the wrong time and place for
this.
CO-CHAIRMAN HARRIS asked if any time was spent with the sponsor to
address the concerns.
CO-CHAIRMAN HALCRO said that there was contact with the sponsor
during the initial phases of drafting the CS which resulted from
the recommendations from APUC. There was some brief follow-up. He
pointed out that the subcommittee focused its attention on the
effects of HB 178.
Number 0962
JONATHON LACK, Legislative Assistant to Representative Halcro,
Alaska State Legislature, stated that Representative Kott's staff
has been very willing to work on HB 178. He noted that he was
initially requested to review the constitutional and antitrust
issues of HB 178. Outside counsel was sought to review those
matters. Ron Zobel, Assistant Attorney General, forwarded a letter
to Representative Halcro and Representative Kott regarding takings
issues and antitrust issues; those are included in the committee
packet. The Municipality of Anchorage contracted with Atkinson,
Conway, & Gagnon, Inc., in order to address antitrust issues. A
letter from Atkinson, Conway, & Gagnon, Inc., is also included in
the committee packet. From conversations with Mary Hughes,
Municipal Attorney, Municipality of Anchorage, Mr. Lack understood
that the municipality is willing to work on achieving a means to
deregulate refuse. However, due to the municipal revenue sharing
issue the municipality has not been able to address the refuse
issue since the last meeting. There are others on line from the
municipality who can speak to the resolution it passed.
CO-CHAIRMAN HARRIS asked if any one issue stands out as a problem
for those objecting to HB 178.
MR. LACK identified two basic questions. First, there is the
antitrust issue. Currently, one who is granted a certificate from
the APUC is exempt from antitrust regulation. Under the new
system, those granted a franchise would be exempt from antitrust
regulation if the local government chose to regulate the refuse
industry. Mr. Zobel's correspondence includes concerns for smaller
communities that may not be able to regulate. Therefore, Mr. Zobel
would be more qualified to answer that question.
MR. LACK identified the second issue as the potential exposure of
local governments. He directed the committee to the language on
page 3, paragraph (3) of the CS which is of concern in that it may
result in great financial exposure to local governments, if
required to purchase the facilities and equipment of a current APUC
refuse certificate. He indicated that Ms. Hughes and Mr. Gagnon
could address that concern.
MR. LACK noted that the committee addressed one other issue at the
last hearing which is addressed in the letter from Kevin Ritchie of
the Alaska Municipal League (AML). The issue is the potential for
a company, during the initial bidding for a franchise agreement, to
finance a low bid. Then there would only be one player left after
five years and no one would be left to bid on a contract.
Therefore, competition which is the tenet of HB 178 would not exist
as the regulating factor.
Number 1310
REPRESENTATIVE DYSON inquired as to whether Alaska's antitrust laws
are sufficient to protect small refuse providers from predatory
pricing.
MR. LACK deferred that question to Mr. Zobel or Mr. Gagnon.
CO-CHAIRMAN HALCRO requested that Mr. Lack address a situation in
which under the HB 178 market place, one of three competitors for
a franchise agreement purposely bids high with the understanding
that he/she will not receive the bid. Therefore, the municipality
would have to purchase his/her equipment and certificate.
MR. LACK said that two scenarios could be problematic for the
Municipality of Anchorage. If HB 178 passes and the municipality
allows contracts for the non solid waste service area and if
Anchorage Refuse Service did not obtain the contract, the
municipality would give the contract to a third party. In that
case, the municipality would potentially be liable to buy the
certificate, facilities and equipment of Anchorage Refuse Service
even if there is no need for them. In another case, if the
municipality decides to discontinue Anchorage Refuse Service's
certificate and the municipality decides to provide the service
itself, the municipality would also be liable to purchase the
certificate, facilities and equipment of Anchorage Refuse Service.
Mr. Lack informed the committee that the reasoning behind those
scenarios comes from the two electric utilities cases discussed in
the committee packet. In those cases, the local government took
control of the electric utilities and the local government needed
to utilize the facilities and equipment of the present electrical
utility. Since there is basically one electric utility line going
to a house, the city was taking control of the line. However, in
the refuse industry there is no guarantee that the Municipality of
Anchorage would need the equipment and facilities of the private
company. So, this may force the municipality to purchase the
private company's facilities and equipment when there may not be a
taking requirement to do so. There is no question that the taking
requirement would require the municipality to purchase the
certificate and the remaining value, but there is question with
regard to whether the municipality would have to purchase the
facilities and the equipment.
REPRESENTATIVE MURKOWSKI commented that many of the letters in the
committee packet speak to the legal issues surrounding HB 178. If
this committee decides that HB 178 should move forward, there
should also be a recommendation that the bill goes before the House
Judiciary Standing Committee in addition to those already assigned.
MR. LACK said that the possibility of a Judiciary referral was
discussed, but since there is no such referral Co-Chairman Halcro
requested review of these issues.
CO-CHAIRMAN HALCRO pointed out that the judiciary issues affect
local communities.
Number 1702
REPRESENTATIVE DYSON acknowledged that there are several ways to
view this issue. One view is, as presented, to not change it if it
is not a problem. Such a view does not examine the status quo in
search of a better way. Representative Dyson pointed out that in
the last 20 years there has been a progression of deregulation in
North America. In general, deregulation has worked. He said, "The
question we need to ask: if government ever needed to be involved
in, state government, in regulating garbage collection; does it
need to continue?" All of government's functions should be viewed
from that vantage. "Is the garbage industry one that has to be
regulated?" Representative Dyson stated that he did not begin with
the philosophy that if people are not clamoring for a change, then
it should not be reviewed. Furthermore, this is not an issue which
most people would have problems with.
REPRESENTATIVE DYSON said he believed that the question as to
whether this is a legitimate government function should be asked.
If this is a legitimate government function, then what level of
government should perform this function. Representative Dyson
informed the committee of his philosophy, "When in doubt, if you
can, decentralize." With the refuse industry, he believed that
most of the larger communities could handle whatever level of
regulation the industry needs. He acknowledged that there are many
smaller communities that would struggle with that. He indicated
the need for HB 178 to include a provision for the APUC to help the
smaller communities that will have difficulty. Representative
Dyson announced that he would vote to move this bill.
Number 2092
KEVIN RITCHIE, Executive Director, Alaska Municipal League (AML),
informed the committee that AML's Transportation and Utilities
Committee reviewed HB 178. The committee packet includes a letter
from AML regarding HB 178. He interpreted HB 178 as shifting
refuse regulation to local governments. The question is who can
best provide refuse service. Mr. Ritchie felt that shift would be
burdensome for small communities and potentially for all
communities. To keep the type of expertise on staff to deal with
refuse services could not be done therefore, some of the work would
have to be contracted out. He suggested that all the cities in
Alaska could join together to create something similar to the APUC
in order to take advantage of retaining people with this expertise.
Mr. Ritchie understood that on the state level, the fees charged
for this service cover the cost of the service. Therefore, there
is not a state cost savings.
REPRESENTATIVE JOULE inquired as to the process that would be
involved with a community creating its own regulations for refuse
service, if HB 178 was passed.
MR. RITCHIE understood the bill to lock in a process for the first
five years. He informed the committee that, as a former City
Manager for Juneau, he had become involved with the APUC over a
rate issue with the local refuse utility. Mr. Ritchie believed
this to be a very complex area of law with many cases and
precedents across the U.S. In his opinion, it would be difficult
for each municipality to develop its own regulations.
REPRESENTATIVE JOULE asked whether there would be costs associated
with bringing people on board with this specific expertise.
MR. RITCHIE replied yes. He recalled that the legislation calls
for between a half percent and two and a half percent add on to the
local customers in order to pay for this. In larger communities,
it may be possible to hire the necessary expertise while in smaller
communities Mr. Ritchie doubted that amount would cover the cost.
REPRESENTATIVE JOULE inquired as to whether someone could speak to
this possibility of shifting the cost to communities, in terms of
drafting the regulations.
Number 2389
REPRESENTATIVE DYSON guessed that there would be firms with model
legislation from many jurisdictions. Furthermore, he suggested
that a subcommittee of AML would be able to develop model
regulations with a variety of options for local communities.
Representative Dyson stated that he has watched many rural
communities get involved in areas that they knew nothing about and
eventually learn to do the activity well. If communities are going
to be involved in any utilities, the refuse utility is the least
sophisticated to work with.
REPRESENTATIVE JOULE reiterated that the question is "At what
cost?"
REPRESENTATIVE DYSON acknowledged that someone always pays. More
importantly, is the refuse industry one that needs to be regulated
and who is best in a position to make the decisions. He hoped that
most communities wanted to make decisions close to home.
REPRESENTATIVE JOULE pointed out that aid to municipalities is
being reduced by as much as one third which he interpreted as the
elimination of aid to municipalities in three years. Yet, there
are costs associated with establishing an infrastructure. Once
again, the cost is shifted to Alaska residents. "First, they are
going to make up the difference, if they don't dissolve if they
have the ability through some sort of taxing scheme. Then we add
something like this which if it's going to, in fact, cost money.
And I wish I could get a handle on what it would cost to initiate
these kinds of things." He agreed that there are probably models
available, but at what cost.
CO-CHAIRMAN HALCRO posed a scenario in which HB 178 passes out of
committee. "Under the guise of giving local communities the
ability to regulate, we give them the ability to incur more costs
in contracting with law firms to develop special regulations that
fit their needs in their local communities. For what purpose?" As
an advocate of free enterprise, Co-Chairman Halcro agreed that the
APUC should move away from those industries that it should not
have. However, the refuse industry is only one to two percent of
the APUC's workload. Furthermore, smaller communities will incur
legal representation costs and regulation administration costs. He
indicated that this would place communities in a position of
incurring costs that would not otherwise be incurred.
REPRESENTATIVE DYSON commented that if one likes centralization,
then do not change the refuse industry. On the other hand if one
prefers decentralization, then the refuse industry is worth review.
Representative Dyson pointed out that there is an amendment for a
new Section 11 which would allow municipalities with a population
of 5,000 or less to continue to have the APUC regulate their solid
waste.
Number 2775
REPRESENTATIVE JOULE indicated that he would support the amendment
in this committee, but wondered how long the language would remain.
He pondered how the split service would be handled.
REPRESENTATIVE DYSON pointed out that since Alaska is so varied,
the split service is already done with Rural Electric Associations
(REA). Also how airports are handled is different in the rural and
urban areas.
REPRESENTATIVE MURKOWSKI inquired as to how one could truly make
the distinction of deregulation when it occurs in some communities
and not others. Therefore, she indicated the need for more review
of the amendment. Representative Murkowski asked Mr. Ritchie what
input AML has received from communities on this issue.
MR. RITCHIE stated that AML has not received any input from any
community that was in favor of this, although there may be some
"shades of gray" with regards to the appropriateness of
deregulation. Mr. Ritchie understood HB 178 to be mandated local
regulation not deregulation. He believed that all of the major,
large municipalities as well as some small municipalities were
involved in AML's Transportation and Utilities Committee meetings
on this issue.
TAPE 99-30, SIDE B
REPRESENTATIVE JOULE inquired as to AML's opinion of the amendment
which would allow municipalities with a population of 5,000 or less
to request APUC to continue its current status in refuse.
MR. RITCHIE said that if HB 178 were to pass, it would be good to
get as many municipalities out of this situation. Mr. Ritchie had
not seen the amendment.
Number 2913
BOBBY COX, Vice President, Alaska Division of Waste Management,
turned to Co-Chairman Halcro's comments regarding why this
legislation exists. At the first hearing, the APUC testified that
refuse regulation does not fit the model of other utilities which
is a concern being addressed. The attempt is to find a better
model that will work for everyone. Mr. Cox indicated that there is
a lack of understanding of what is trying to be accomplished with
HB 178. From his perspective, the goal is to try to move the
regulation to the local level in order for people to be able to
deal with the issues. The refuse industry is very different than
the electric utility industry. In the refuse industry, there is a
low barrier to entry.
MR. COX informed the committee that there are a total of about 52
certificated refuse utilities in Alaska of which 13 are controlled
by Waste Management. Therefore, Waste Management only has about 25
percent of the refuse utilities certificated in Alaska. Of the 52
certificated refuse utilities in Alaska, 26 are certificated to
municipalities. Under HB 178, that would not change; the
municipalities would continue to control those certificated areas.
Mr. Cox saw HB 178 as continuing to allow the municipalities to
control their service areas. Those small communities with
certificated operation through a small local entity could continue.
MR. COX expressed, as an industry representative, the desire to
move to a model that makes sense for everyone and that is fair to
the consumers. Currently, other industry participants claim they
are able to compete which is not really true. In many cases, there
is unregulated competition. For example, in the Mat-Su Valley
there is a competitor with a rate that is significantly lower than
Waste Management, but Waste Management is not allowed to adjust its
rate without a massive rate case.
Number 2780
REPRESENTATIVE JOULE turned to Mr. Cox's statement that the APUC
testified that it had difficulty with the refuse utility. He
commented that he agreed with that statement and "would just a[s]
soon get rid of it." He noted that those who are regulated by APUC
may complain that the APUC process takes longer, but he had not
spoken to anyone who wanted to leave the APUC regime.
MR. COX used Anchorage with its multiple competitors as an example.
Many of those competitors can price effectively below the market
and continue to operate with the protection of the APUC. Those
competitors are not subject to antitrust or other issues. Mr. Cox
emphasized that if there is going to be competition, it should be
a fair playing field for everyone. However, if there is going to
be a regulated market, it must make sense. He stated that the
difficulty with the APUC is that companies such as Waste Management
do not receive much attention due to the commission's larger
issues. Furthermore, when the APUC does deal with refuse cases it
is difficult because the APUC is not accustomed to dealing with the
industry. He said, "We end up kind of getting the short end of the
stick with the regulatory process." He highlighted the lengthiness
of refuse cases. For example, Waste Management has had
certification proceedings go two to three years which is not
appropriate in a competitive business environment.
CO-CHAIR HALCRO pointed out that if it is difficult for the APUC to
regulate refuse, how will local governments with no experience in
establishing rules and regulations handle this.
MR. COX identified the following three key aspects to HB 178.
First, the bill attempts to create a franchise system that would
allow a contractual relationship with a service provider.
Competitive bidding and utilization of the contract process would
accomplish such. The second option would be to open the market to
competition. Then non exclusive franchises could be granted for
people to compete. Under the bill's current language, if there are
competing franchise those people would be able to compete at the
same level. If this bill passed, all those currently holding
certificates in Anchorage would continue to hold certificates, but
they would not be exclusive. The city would not be forced to buy
out those certificates. Mr. Cox moved on to the third option which
is regulation at the local level. The Municipality of Anchorage
would have the capability to do so. Mr. Cox said he supported the
amendment addressing small communities however, he did not think
the amendment is necessary under the bill's current language
because a local community with a certificated provider could
continue to use that certificated provider by granting it a
franchise.
CO-CHAIRMAN HARRIS commented that the amendment provides some
feeling of protection for those communities that are unorganized.
MR. COX recognized that as a difficult situation.
Number 2519
RON ZOBEL, Assistant Attorney General, Fair Business Practices
Section, Civil Division, Department of Law, testified via
teleconference from Anchorage. Mr. Zobel noted that he had no
comments regarding whether it is a good idea to shift refuse
regulation to the municipality. The Department of Law is concerned
that Section 8 would grant an exemption to antitrust laws for all
conduct by an exclusive franchisee without assurance that the
conduct would be reviewed or regulated by a municipality. That
would result in eliminating the state's ability to review for
antitrust concerns where conduct by an entity with an exclusive
franchise would result in any anti-competitive effects.
Furthermore, the absence of any guarantees that the municipality or
other regulatory body would conduct such a review is the
elimination of the state's antitrust review authority.
MR. ZOBEL explained that the distinction being made here is the
difference between an exemption for an entity versus an exemption
for conduct that has been reviewed and approved by a regulatory
body. Mr. Zobel quoted Mr. Gretsky(ph), who was an official for
the Antitrust Division of the U.S. Department of Justice when the
following statement was made. Mr. Zobel quoted Mr. Gretsky(ph) as
saying:
As we think about increasing competition and
deregulating, we do not want to end up with the worst of
all worlds which I would describe as deregulated
monopoly. Simply deregulating monopoly is not the same
as facilitating competition. Where there is no consumer
choice, consumers should not be left at the mercy of the
deregulated monopoly.
MR. ZOBEL expressed concern with the present language in Section 8.
The concern is that a municipality could grant an exclusive
franchise and, for whatever reason, not regulate specific conduct
such as rates or other conditions of service. He did not believe
an exemption should be given unless specific review of a rate or
conduct has occurred. Such review would provide assurances to the
public that there is not a deregulated monopoly. The current
provision grants an exemption where there is an exclusive franchise
and furthermore, a municipality could allow nominal PERA filings.
Such an exemption should not be granted. There should be some
antitrust review where rates or conduct have not been regulated.
MR. ZOBEL informed the committee that at the federal level there is
a requirement that there be a state policy which is included in HB
178. The federal level also requires active supervision of the
particular act or conduct that is immunized. This provision,
Section 8, could be modified to achieve such with the following
language: "the conduct or act of such a solid waste collection or
disposal carrier that's actively supervised and approved by a
municipality where there is such an exclusive franchise." Such
language would remedy the problem noted in a letter to
Representative Kott.
REPRESENTATIVE DYSON inquired as to how much antitrust provisions
would protect against predatory pricing in a deregulated
environment.
MR. ZOBEL pointed out that if the antitrust laws apply to the
particular act or conduct, there is a body of law that controls
predatory pricing. He explained that predatory pricing is a price
that falls below cost in order to drive others out of the market.
As stated earlier, when the refuse industry is no longer a utility
then it does not have an exemption under the state antitrust laws.
Therefore, he believed the rules against predatory pricing would
apply to places where there is not an exclusive franchise. He was
concerned with the application of the antitrust laws in places
where there has been an exclusive franchise granted, but particular
prices, conduct, and actions are not reviewed by the municipality.
Mr. Zobel believed that where there is a "competitive" market, the
antitrust laws regarding predatory pricing would apply under HB
178.
Number 2154
REPRESENTATIVE DYSON asked, franchising aside, how practical it
would be for small contractors to go against the large contractors
on antitrust and predatory pricing.
MR. ZOBEL commented that any antitrust case is difficult. The
Department of Law's capability to initiate antitrust cases is
limited. Antitrust cases are a more complicated type of case.
Under HB 178, entities or competitors or consumers who thought they
were being harmed could bring an antitrust suit, but it would be
difficult. Furthermore, an antitrust suit is not what a consumer
or small competitor would do. Due to the expense, antitrust suits
are the last resort. In further response to Representative Dyson,
Mr. Zobel agreed that antitrust cases are lengthy and often result
in a settlement following much discovery. Only a few cases
continue to a full court battle.
REPRESENTATIVE DYSON said that Mr. Zobel's comments confirmed his
suspicion that the smaller entities would starve waiting for an
antitrust decision.
MR. ZOBEL interjected that he did not want to devalue the deterrent
value of having antitrust laws.
REPRESENTATIVE DYSON posed a situation in which a small company
prevails against a large company after five years in an antitrust
suit. Could that small company recover damages which take into
account their lost business opportunity?
MR. ZOBEL indicated that some damages for that could be collected
if the small company could trace the damages to an antitrust
violation. In further response to Representative Dyson, Mr. Zobel
believed it fair to say that antitrust laws would attempt to make
that small company whole from the damage caused by the violation.
He noted that some compensation for attorney's fees could be
obtained.
REPRESENTATIVE MURKOWSKI informed Mr. Zobel of the amendment before
the committee. She asked if he felt the amendment is practical and
would it help the APUC.
MR. ZOBEL said that the amendment is probably legally possible and
could be done. He noted that he has dealt with many of the refuse
cases for which an accountant, an engineer, and an attorney were
needed. The smaller class of cases subject to APUC regulations,
should allow APUC to do so in that smaller class. He indicated the
need to discuss this with the APUC.
Number 1747
BRUCE GAGNON, Attorney, Atkinson, Conway & Gagnon, testifying via
teleconference from Anchorage, noted that he was requested by the
Municipality of Anchorage to address HB 178. He indicated that the
committee should have a copy of his letter in the committee packet.
Mr. Gagnon had two concerns which remain even with the CS. He
identified one concern as the option to grant an exclusive
franchise which in the case of the Municipality of Anchorage such
would be granted to Waste Management. However, it is unclear as to
whether it would be an exclusive franchise just in the service area
currently being serviced or throughout the entire municipality.
Even with the addition of the language referring to competitive
franchises, the exclusive franchise would most likely occur if this
legislation passed. He predicted that under HB 178, the
municipality's waste management services could not operate. Mr.
Gagnon did not see what would be gained by giving Waste Management
an exclusive franchise. Currently, Waste Management's certificate
of public inconvenience and necessity exposes them to competition.
Under this act, that would not happen due to the five year
exclusive franchise period.
MR. GAGNON identified the second concern as the compulsory buy out.
He believed that there would be great exposure to the Municipality
of Anchorage and other communities that sought to impose
regulations which were viewed as a deprivation of rights.
Number 1559
CO-CHAIRMAN HARRIS understood Mr. Gagnon to have said that this
legislation would require or force municipalities to grant
exclusive franchises. However, Co-Chairman Harris read the
legislation to not only allow exclusive franchises, but also
competing franchises.
MR. GAGNON agreed that the legislation provides for exclusive
franchises, competing franchises, or a buy out. He pointed out
that the competitive franchise language, on page 3, has a trigger
date of January 1, 2000. Currently, the municipality is not a
competing franchise with Waste Management. Furthermore, it would
be difficult for the municipality to place itself in a position of
being a competing franchise by January 1, 2000. As a matter of
policy, the municipality avoids getting into business in areas
where private businesses provide services. "What it contemplates
is that there will be someone who will be a competing or someone
who will want to be a competing franchisee. If that doesn't
happen, then this particular option will not be implemented and a
municipality then would have to go back to the exclusive franchise
regime contemplated by the first option." If there was a competing
franchise, then there "shall be no price regulations" which is
problematic from both an antitrust standpoint and a policy
standpoint. This legislation has divested the municipality of
having any power to regulate the prices and it creates an exposure
to predatory pricing.
MR. GAGNON pointed out that the franchise, under the competing
franchise option, would last forever. There is also a provision
retaining the buy out rights which hangs over the municipality. He
said that whenever the franchisee felt threatened by potential
regulation, the buy out provision would come forward as a
possibility.
MR. GAGNON, in response to Co-Chairman Halcro, said that he had
just received the amendment and had not yet reviewed it.
CO-CHAIRMAN HALCRO asked if the amendment would create problems
under the equal protection provision of the Alaska Constitution.
MR. GAGNON answered, "Probably not."
CO-CHAIRMAN HALCRO referred to the last paragraph on page 4 of Mr.
Gagnon's letter dated April 21, 1999. That paragraph says that
Anchorage taxpaying residents, who are treated differently than
Fairbanks taxpaying residents under HB 178, may have a case under
the equal protection provision.
MR. GAGNON explained that he was attempting to address cities that
are in similar circumstances being treated differently when there
is no apparent rational basis to do so. He did not believe that
paragraph in his letter would address the special circumstances of
smaller communities.
Number 1092
DAVE VEAZEY, Member, Fairbanks North Star Borough Assembly,
testified next via teleconference from Fairbanks in opposition to
HB 178. Mr. Veazey stated that Fairbanks is not in a position to
regulate a large company, or monopoly such as Waste Management.
From the APUC home page, Mr. Veazey had obtained information
reporting that Waste Management, Incorporated has recently acquired
control of nine different companies serving 39 different
communities. At present, he was not convinced that the deregulated
free market environment exists in Fairbanks. Mr. Veazey expressed
concern with Section 1(b)(4) and Section 2(e)(1) and (2) which he
believed are in direct conflict with the interests of Fairbanks
borough citizens. The borough has a hauling contract which is
competitively bid. He illustrated that the competitive process has
served the borough well; the price has decreased from about $60 per
ton to $27 per ton. However, hauling prices appear to be
increasing. At this point, Mr. Veazey said that the borough would
have to hire Waste Management, a monopoly which would be
noncompetitive, to do this work. If Waste Management is not chosen
or Waste Management provides a poor service, for which he did not
see any protection, the borough would be obligated to purchase
them. Such prospects are unappealing and not acceptable. In
conclusion, Mr. Veazey urged the committee to reject HB 178.
CO-CHAIRMAN HARRIS inquired as to why Mr. Veazey would think the
refuse industry should be regulated at all.
MR. VEAZEY said that in the current situation in which the refuse
industry is practically a monopoly, it is important for the refuse
industry to be regulated for the interests of the citizens. He
specified that it is important to maintain fair prices and ensure
quality service.
REPRESENTATIVE DYSON appreciated Mr. Veazey's comments, especially
that often real competition does not exist in small areas.
Number 0728
PAM KRIEBER, Part Owner, Valley Refuse, testified via
teleconference from the Mat-Su Valley. Valley Refuse operates in
competition with Waste Management in the Mat-Su Valley. She
stressed that the issues have not changed since her testimony at
the last hearing on HB 178. With regard to Mr. Cox's statement
that Waste Management only owns 13 certificates, those 13
certificates have the market share of the business. If you review
gross revenues, the belief that Waste Management owns 95 percent of
the market is valid. She understood Mr. Cox to indicate that Waste
Management has a real problem with its competitor, Valley Refuse,
in the Mat-Su Valley. Reader's Digest basic theory on rate making
states that higher expenses can justify higher rates. All
regulated utilities are free to submit tariff advisements to the
APUC in order to allow the APUC to review their tariffs for
fairness and adjust them accordingly. Therefore, Waste Management
is free to do so. Ms. Krieber stated that Valley Refuse has a low
overhead and makes garbage disposal affordable for many in the
Mat-Su Valley.
CO-CHAIRMAN HARRIS asked Ms. Krieber if Valley Refuse has a special
rate or a way that allows the rate to be lower.
MR. KRIEBER emphasized that Valley Refuse is subject to the same
rules as Waste Management. She explained that Valley Refuse offers
multiple levels of weekly service which Waste Management could
offer as well.
Number 0450
SHARON DANIEL, Copper Basin Sanitation, testified via
teleconference from Glennallen in opposition to the deregulation of
refuse service. She stated that refuse collection statewide should
be regulated whether by APUC or another entity. Refuse collection
is tied to public health and therefore, should be regulated. There
are unorganized areas in the state and those areas do not have
refuse regulation if the APUC is to deregulate. She acknowledged
that the amendment addresses that issue. She pointed out that
small communities already have small companies that fall under the
dollar limit for active oversight from the APUC. In other words,
only the large problems go to APUC. The amendment to regulate in
unorganized areas of the state and small municipalities effectively
moves the large population areas into regulation by the
municipalities which she did not care for.
Number 0213
MARY HUGHES, Municipal Attorney, Municipality of Anchorage,
testified via teleconference from Anchorage. She informed the
committee that Mr. Harman misspoke because the APUC did not make
any recommendations as to how HB 178 could be amended. However,
the APUC indicated to the municipality that the APUC was opposed to
HB 178. With regard to the discussion as to how municipalities
could regulate the services now regulated by the APUC, HB 178 does
not allow the municipality to regulate. The legislation says that
the municipality "shall franchise." Ms. Hughes echoed her comments
from the previous hearing that the Municipality of Anchorage could
regulate refuse, but the cost to do so would be borne by the
ratepayers. However, HB 178 does not allow such. Ms. Hughes
stated that the Anchorage Assembly is not in support of HB 178.
TAPE 99-31, SIDE A
MR. HUGHES indicated that the Anchorage Assembly supported the
Municipality's 1999 Legislative Policy. There are three provisions
which must be included in any bill that the municipality supports.
Those provisions are included in AR 99.102. Ms. Hughes pointed out
that AS 29.35.050 (a) cannot be altered, although that would be the
case under HB 178. She informed the committee of the need for
provisions allowing the municipality to maintain its own refuse
service in its certificated area. Furthermore, the Anchorage
Assembly should be provided the option to provide regulation under
42.05. Therefore, some of the problems discussed by Mr. Zobel
would be addressed through this regulation.
FAY VON GEMMINGEN, Member, Anchorage Assembly, testified via
teleconference from Anchorage. She explained that the main concern
and reason for the passage of the resolution was to ensure that the
Anchorage ratepayers were protected from increased cost of service
while being provided a safe and reliable service. There is also
the need to protect the Anchorage taxpayers from the loss in value
of that utility. She expressed concern that the municipality does
not really have the ability to regulate refuse. Furthermore, there
is great concern with the possibility of having to buy back a
certificate and assets of one of the companies which would place
the ratepayers and taxpayers at considerable risk.
CO-CHAIRMAN HALCRO asked if Ms. Von Gemmingen received constituent
complaints regarding poor refuse service.
MS. VON GEMMINGEN replied no.
Number 0333
REPRESENTATIVE KOTT, Sponsor, Alaska State Legislature, commented
that complaints regarding utilities are not generally directed to
assembly members. He indicated that the most appropriate place for
complaints to be directed would be the APUC since that is the
regulator. Furthermore, Representative Kott believed that much of
the testimony has been based on a misunderstanding of HB 178.
There is a provision in the legislation which allows a municipality
to continue to provide the same level of refuse service it
currently provides. With regard to franchise agreements, it would
not be a provision that the municipality would have to purchase the
certificate.
REPRESENTATIVE KOTT stated that the antitrust issues should be
addressed in the House Judiciary Standing Committee. Therefore, he
hoped that the chairs of this committee would forward a letter to
the Speaker requesting a House Judiciary Standing Committee
referral. Representative Kott agreed with Representative Dyson's
earlier comments regarding the need to determine if refuse service
should be regulated and if so, at what level of government which he
felt should be at the borough or municipal level.
CO-CHAIRMAN HARRIS commented that he believed it would be the will
of the majority of the committee members to request a House
Judiciary Standing Committee referral. There being no further
testimony, the public testimony portion of the hearing was closed.
Number 0636
REPRESENTATIVE DYSON moved that the committee adopt Amendment 2:
Page 7, line 20
Insert a new bill section to read:
*Section. 11. AS 29.35.050 is amended by
adding new subsections to read:
(k) The Alaska Public Utilities Commission shall continue
to have regulatory authority over the collection and
disposal service of garbage, refuse, trash, or other
waste material to the public for compensation to areas of
the state that are not municipalities as defined under
Section 3(j)(2) of this Act. Therefore, AS 42.05.431(f),
42.05.431(g), 42.05.711(m) and 42.05.990(4)(F) shall
continue to apply to areas of the state that are not
municipalities as defined under Section 2(j)(2) of this
Act.
(j) Municipalities with a population of 5,000 or under
may request the Alaska Public Utilities Commission to
regulate the collection and disposal service of garbage,
refuse, trash, or other waste material to the public for
compensation under AS 42.05.431(f), 42.05.431(g),
42.05.711(i), 42.05.711(m) and 42.05.990(4)(F).
There being no objection, Amendment 2 was adopted.
REPRESENTATIVE DYSON commented that Amendment 2 addresses a
significant amount of his concern. The amendment gives the smaller
communities that would struggle with competition and regulation an
option. Representative Dyson informed the committee that if HB 178
is moved from this committee he would support that and sign amend
on the report. Adoption of Amendment 2 addresses one of the
responsibilities of this committee. With regard to the franchise
portion of HB 178, he felt that the House Labor & Commerce Standing
Committee is an appropriate place to deal with that issue.
Number 0769
REPRESENTATIVE DYSON moved to report CSHB 178 out of committee with
individual recommendations and the accompanying fiscal notes.
CO-CHAIRMAN HALCRO objected. He expressed frustration with the
work he has seen in which committees take a bad piece of
legislation and move it to the next committee where it will somehow
improve. This committee's purview is communities and not one
community has come forward in support of this legislation. The
communities have stated that they do not want this. Four letters
have been received from communities in opposition to this.
Co-Chairman Halcro maintained his objection to report HB 178 from
committee. However, he offered to work with the sponsor on this
over the interim.
REPRESENTATIVE MURKOWSKI informed the committee that she was not
comfortable with this legislation, but she would support reporting
it from committee. That support is based on the fact that there
are two more committees of referral. She emphasized the need for
HB 178 to also be assigned to the House Judiciary Standing
Committee. She indicated that this committee's job has been done
with regard to its purview.
CO-CHAIRMAN HARRIS agreed with Representative Murkowski. He
announced that he would be making a request for HB 178 to be heard
in the House Judiciary Standing Committee.
REPRESENTATIVE DYSON commented that if Amendment 2 or language
addressing the smaller communities is not maintained through the
process, the committee should request return of the bill.
Number 1245
Upon a roll call vote, Representatives Dyson, Murkowski, and Harris
voted in favor of reporting CSHB 178 from committee and
Representatives Morgan, Joule, and Halcro voted against reporting
CSHB 178 from committee. Representative Kookesh was not present.
Therefore, the motion failed with a vote of 3-3
ADJOURNMENT
There being no further business before the committee, the House
Community & Regional Affairs Standing Committee meeting was
adjourned at 10:03 a.m.
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