Legislature(1999 - 2000)

05/11/1999 02:00 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
           HOUSE FINANCE COMMITTEE                                                                                              
              May 11, 1999                                                                                                      
                 2:00 P.M.                                                                                                      
                                                                                                                                
TAPE HFC 99 - 125, Side 1                                                                                                       
TAPE HFC 99 - 125, Side 2                                                                                                       
TAPE HFC 99 - 126, Side 1                                                                                                       
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Co-Chair Therriault called the House Finance Committee                                                                          
meeting to order at 2:00 p.m.                                                                                                   
                                                                                                                                
PRESENT                                                                                                                         
                                                                                                                                
Co-Chair Therriault   Representative Foster                                                                                     
Co-Chair Mulder                                                                                                                 
Representative Austerman   Representative Kohring                                                                               
Representative Bunde   Representative Moses                                                                                     
Representative J. Davies   Representative Williams                                                                              
Representative G. Davis                                                                                                         
                                                                                                                                
Representative Grussendorf was absent from the meeting.                                                                         
                                                                                                                                
ALSO PRESENT                                                                                                                    
                                                                                                                                
Senator Drue Pearce; Representative Jim Whitaker; Ginny Fay,                                                                    
Deputy Commissioner, Department of Commerce and Economic                                                                        
Development; Eric Yould, Executive Director, ARECA,                                                                             
Anchorage; Walt Wilcox, Staff, House Special Committee on                                                                       
Utility Restructuring.                                                                                                          
                                                                                                                                
TESTIFIED VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Jimmy Jackson, Regulatory Attorney, GCI Electric; Bob                                                                           
Christenson, Chairman, Alaska Oil and Gas Conservation                                                                          
Commission; Mark Vasconi, Director, Regulatory Affairs,                                                                         
AT&T;                                                                                                                           
                                                                                                                                
SUMMARY                                                                                                                         
                                                                                                                                
HB 62 "An Act relating to the Alaska Public Utilities                                                                           
Commission; and providing for an effective date."                                                                               
                                                                                                                                
 HB 62 was heard and HELD in Committee for further                                                                              
consideration.                                                                                                                  
                                                                                                                                
HB 183 "An Act relating to the powers and duties of the                                                                         
chair of the Alaska Public Utilities Commission;                                                                                
relating to membership on the Alaska Public                                                                                     
Utilities Commission; and relating to the annual                                                                                
report of the Alaska Public Utilities Commission."                                                                              
                                                                                                                                
HB 183 was heard and HELD in Committee for further                                                                              
consideration.                                                                                                                  
                                                                                                                                
CSSB 133(RLS) am                                                                                                                
"An Act creating and relating to the Regulatory                                                                                 
Commission of Alaska and transferring to it                                                                                     
certain powers and duties of the Alaska Public                                                                                  
Utilities Commission; repealing the Alaska Public                                                                               
Utilities Commission; relating to the powers of                                                                                 
the chair of the Regulatory Commission of Alaska;                                                                               
relating to regulatory cost charges for public                                                                                  
utilities and pipelines; relating to the appellate                                                                              
procedures of the Regulatory Commission of Alaska;                                                                              
relating to the Alaska Oil and Gas Conservation                                                                                 
Commission; and providing for an effective date."                                                                               
                                                                                                                                
CSSB 133(RLS) am was heard and HELD in Committee                                                                                
for further consideration.                                                                                                      
                                                                                                                                
CSSB 134(RLS)                                                                                                                   
"An Act authorizing the Alaska Oil and Gas                                                                                      
Conservation Commission to determine the amount of                                                                              
and to collect a charge for operating wells                                                                                     
subject to the commission's jurisdiction, and to                                                                                
allocate expenses of investigation and hearing;                                                                                 
authorizing the commission to employ additional                                                                                 
professional staff; repealing the oil and gas                                                                                   
conservation tax; and providing for an effective                                                                                
date."                                                                                                                          
                                                                                                                                
CSSB 134(RLS) was HELD in Committee for further                                                                                 
consideration.                                                                                                                  
CS FOR SENATE BILL NO. 133(RLS) am                                                                                              
                                                                                                                                
"An Act creating and relating to the Regulatory                                                                                 
Commission of Alaska and transferring to it certain                                                                             
powers and duties of the Alaska Public Utilities                                                                                
Commission; repealing the Alaska Public Utilities                                                                               
Commission; relating to the powers of the chair of the                                                                          
Regulatory Commission of Alaska; relating to regulatory                                                                         
cost charges for public utilities and pipelines;                                                                                
relating to the appellate procedures of the Regulatory                                                                          
Commission of Alaska; relating to the Alaska Oil and                                                                            
Gas Conservation Commission; and providing for an                                                                               
effective date."                                                                                                                
                                                                                                                                
SENATOR DRUE PEARCE, SPONSOR testified in support of CSSB
133 (RLS) am. She read from the sponsor statement.                                                                              
                                                                                                                                
Senate Bill 133 will accomplish several goals regarding the                                                                     
Alaska Oil & Gas Conservation Commission (AOGCC) and Alaska                                                                     
Public Utilities Commission (APUC).  The APUC will be re-                                                                       
pealed and re-structured under the new title of the                                                                             
Regulatory Commission of Alaska (RCA).  This new structure                                                                      
will be more capable of addressing the current expanding                                                                        
workload of the commission.  Relocating to the same physical                                                                    
location as the APUC will strengthen the AOGCC.  Long term                                                                      
efficiencies will be gained by utilizing a common building,                                                                     
sharing clerical staff and record keeping facilities.  In                                                                       
addition, Legislative Budget & Audit (LB&A) will write a                                                                        
report during the interim, which will consider the functions                                                                    
of the two commissions and what structure would best serve                                                                      
the states interests.                                                                                                           
                                                                                                                                
Senator Peace explained that HCS CSSB 133 (L&C) does not:                                                                       
                                                                                                                                
1. Does NOT combine the two commissions into one.                                                                               
                                                                                                                                
2. Does NOT de-regulate garbage.                                                                                                
                                                                                                                                
3. Does NOT transfer pipeline regulation to the AOGCC.                                                                          
                                                                                                                                
4. Does NOT make any policy changes to either commission.                                                                       
                                                                                                                                
5. Does NOT transfer any function from one to commission to                                                                     
the other.                                                                                                                      
                                                                                                                                
6. Does NOT alter the number of commissioners on either                                                                         
commission.                                                                                                                     
                                                                                                                                
SB 133 makes the following changes to the APUC:                                                                                 
                                                                                                                                
1. Repeals the APUC and creates the Regulatory Commission of                                                                    
Alaska (RCA), effective July 1, 1999.  All commissioners                                                                        
shall be either re-appointed or replaced.  All staff                                                                            
shall remain.  All regulations and pending matters before                                                                       
the commission shall be carried forward to the new                                                                              
commission.                                                                                                                     
                                                                                                                                
2. The new commission will be composed of five                                                                                  
commissioners.  The five commissioners shall be members                                                                         
of the general public with no requirement for areas of                                                                          
specific expertise.  I feel that requiring specific                                                                             
expertise is limiting and that the public interest would                                                                        
best be served by having maximum flexibility in acquiring                                                                       
qualified individuals from the general public.                                                                                  
                                                                                                                                
                                                                                                                                
3. SB 133 strengthens the position of the Chairman.                                                                             
The Chairman:                                                                                                                   
a) Shall have limited authority over the other                                                                                  
commissioners.                                                                                                                  
b) Shall have oversight of all commission staff.                                                                                
c) Shall assign the work of the commission and staff.                                                                           
d) Shall set timelines by which a matter shall be                                                                               
resolved.                                                                                                                       
e) Shall determine when advocacy staff is required                                                                              
given certain standards.                                                                                                        
                                                                                                                                
4. Streamlines the hearing process.                                                                                             
a) The chair shall empanel three or more commissioners                                                                          
to a hearing panel to decide the case.  This allows                                                                             
the Chairman to assign the applicable number of                                                                                 
commissioners depending on the size of the case.                                                                                
b) Limited the appeals process to only be considered                                                                            
when a decision taken is contrary to commission                                                                                 
precedent.                                                                                                                      
c) Mandated that the commission promulgates timeliness                                                                          
standards, depending on the complexity of the                                                                                   
docket, for the types of cases that come before the                                                                             
commission.  These regulations shall be adopted by                                                                              
December 31, 1999.                                                                                                              
d) Provided for formal hearings to be held before an                                                                            
arbitrator in appropriate cases.                                                                                                
e) Established within the commission a separate                                                                                 
advocacy section to represent the public interest                                                                               
when necessary.                                                                                                                 
                                                                                                                                
5. SB 133 instructs the commission to adopt a time                                                                              
management system to ensure accurate accounting for time                                                                        
billed to each aspect of the commission's functions.                                                                            
LB&A has been recommending a time management system for                                                                         
the APUC in every audit since 1979.  To date, the APUC                                                                          
does not use industry or utility codes on payroll time                                                                          
sheets and therefore workloads are approximated using                                                                           
rough estimates.  A time management system will provide                                                                         
improved accuracy when assessing regulatory cost charges                                                                        
to individual sectors of the utility industry.  This will                                                                       
assist in assuring that the cost causer is the cost                                                                             
payer.                                                                                                                          
                                                                                                                                
SB 133 makes the following changes to the AOGCC:                                                                                
                                                                                                                                
1. The AOGCC will physically move to the same location as                                                                       
the RCA (APUC) as soon as possible, but not later than                                                                          
July 1, 2000.  The two commissions will share record                                                                            
keeping facilities and clerical staff after that time.                                                                          
                                                                                                                                
2. The AOGCC shall have access to hearing officers at the                                                                       
RCA (APUC) following the effective date, July 1, 1999.                                                                          
                                                                                                                                
SB 133 authorizes LB&A to prepare a transition report to be                                                                     
delivered to the governor and the Legislature on the first                                                                      
day of the second session of the 21st Legislature. The                                                                          
Governor shall appoint one commissioner from each commission                                                                    
to work with LB&A on the transition report.  The report will                                                                    
address both commissions and their functions and shall make                                                                     
recommendations on changes that would serve the best                                                                            
interests of the state.                                                                                                         
                                                                                                                                
SB 133 will improve our ability to protect the long-term                                                                        
public interest through increased functional efficiencies of                                                                    
both commissions. She noted that the Department of                                                                              
Administration is in the process of moving the AOGCC. The                                                                       
move is estimated to take place in September 1999. As soon                                                                      
as the commissions are in the same building they would be                                                                       
able to share record keeping facilities and clerical staff.                                                                     
The AOGCC would have access to a RCA hearing officer                                                                            
following the effective date of July 1, 1999.                                                                                   
                                                                                                                                
Senate Pearce observed that the bill was amended in the                                                                         
House Labor and Commerce Committee.                                                                                             
                                                                                                                                
PATRICK CARTER, STAFF, SENATOR PEARCE explained that the                                                                        
Regulatory Commission of Alaska would make available a                                                                          
hearing officer to the Alaska Oil & Gas Conservation                                                                            
Commission. The legislation adds a hearing officer to the                                                                       
Alaska Oil & Gas Conservation Commission.                                                                                       
                                                                                                                                
Mr. Carter reviewed proposed changes to the legislation. He                                                                     
referred to page 9, line 30. He explained that the APUC is                                                                      
authorized to act in the best interest of the state. "State"                                                                    
would be changed to "public" to clarify that the commission                                                                     
would act in the best interest of the public.                                                                                   
                                                                                                                                
Representative J. Davies observed that there is an attorney                                                                     
general's opinion on the difference between "state" and                                                                         
"public". Mr. Carter was not aware of the opinion.                                                                              
                                                                                                                                
Mr. Carter observed that "inability to serve" would be                                                                          
inserted on page 2, line 20. He explained that this would                                                                       
allow the removal of a person who was incapacitated.                                                                            
                                                                                                                                
Co-Chair Mulder asked if there is a statutory definition for                                                                    
"inability to serve". Mr. Carter pointed out that the                                                                           
governor would have to go through due process to remove a                                                                       
person that was unable to serve.                                                                                                
                                                                                                                                
Co-Chair Therriault asked that staff provide a clarification                                                                    
on the removal for cause process. He noted that currently                                                                       
members could be removed with the approval of the                                                                               
legislature. He thought that the current language requires a                                                                    
cause. Mr. Carter stated that AOGCC language was used when a                                                                    
preferred methodology could not be reached between the AOGCC                                                                    
and the APUC, because the AOGCC seemed to be operating more                                                                     
functionally.                                                                                                                   
                                                                                                                                
Mr. Carter explained that "Initial Terms of Members of the                                                                      
Regulatory Commission of Alaska would be change on page 12,                                                                     
line 7 to "Terms and Initial Appointments". He explained                                                                        
that there is some constitutional concern that the governor                                                                     
would not be able to appoint persons to a commission that                                                                       
does not exist. Appointments under this section would not                                                                       
take effect until after July 1, 1999.                                                                                           
                                                                                                                                
Co-Chair Therriault questioned how the fiscal note would                                                                        
reflect the change. Mr. Carter clarified that appointments                                                                      
would not take affect until July 1, 1999. He noted that                                                                         
AOGCC commissioners are paid slightly more than APUC                                                                            
commissioners are paid. Under the legislation all                                                                               
commissioners would be paid the same with the exception of                                                                      
the chairman. He pointed out that the chairman's duties have                                                                    
been increased. Senator Pearce added that the chairman would                                                                    
be paid at the current level of AOGCC commissioners.                                                                            
                                                                                                                                
Mr. Carter observed that "administrative law judge" would be                                                                    
added on page 3, line 16, 18 page 4, line 20, and page 7,                                                                       
line 8. There would be a new section 4 to clarify that                                                                          
administrative law judges are partially exempt employees.                                                                       
                                                                                                                                
Mr. Carter discussed proposed changes on page 4, line 29. He                                                                    
noted that there was lengthy discussion in the House Labor                                                                      
and Commerce Committee regarding a technical amendment. The                                                                     
statute citation for pipeline regulations, AS 42.06.140                                                                         
would be added following "AS 42.05.171. He noted that "or if                                                                    
a hearing is not required to otherwise consider" would be                                                                       
added to address permit for right-a-ways, where a hearing is                                                                    
not needed.                                                                                                                     
                                                                                                                                
On page 5, line 3 "there is an allegation that " wold be                                                                        
would be deleted and replaced with "the". "If a decision of                                                                     
a hearing panel is not subject to appeal to the commission                                                                      
or if the commission denies an application to appeal, the                                                                       
decision of the hearing panel is a final decision for                                                                           
purposes of appeal to the courts" would be deleted and                                                                          
replaced with "If a decision of a hearing panel is not                                                                          
subject to appeal to the commission or if the commission                                                                        
denies an application to appeal, the decision of the hearing                                                                    
panel is a final decision for purposes of appeal to the                                                                         
courts."                                                                                                                        
                                                                                                                                
Senator Pearce explained it made sense to allow a smaller                                                                       
number of commissioners to be impaneled. The chairman can                                                                       
impanel any number of commissioners from three and up. She                                                                      
explained that the language allows an appeal to the full                                                                        
commission if the panel makes a decision contrary to prior                                                                      
decisions or the law has changed. The Commission has the                                                                        
right to turn down a request for appeal, in which case, the                                                                     
party could appeal to the courts.                                                                                               
                                                                                                                                
Co-Chair Therriault questioned if a commissioner could                                                                          
object if they felt that they were being excluded by the                                                                        
impaneling of three commissioners. Senator Pearce responded                                                                     
that the statute does not address objections.                                                                                   
                                                                                                                                
Mr. Carter noted that the hearing panels would be set up in                                                                     
an effort to streamline functions. A hearing panel can                                                                          
consist of an arbitrator, hearing officer, administrative                                                                       
law judge, or three or more members of the Commission                                                                           
impaneled. The full Commission has to ratify the decision in                                                                    
order for it to be an action of the Commission.                                                                                 
                                                                                                                                
In response to a question by Co-Chair Therriault, Mr. Carter                                                                    
clarified that the Commission only reviews records of the                                                                       
arbitrator's decision. No new information could be entered                                                                      
at that point.                                                                                                                  
                                                                                                                                
Representative J. Davies asked if the Commission is limited                                                                     
to procedural issues. Mr. Carter explained that the appeal                                                                      
has to be based on the decision being contrary to commission                                                                    
precedent or intervening law. If the appeal is granted the                                                                      
case is reheard. The arbitrator would make a recommendation.                                                                    
The full Commission would review the record and decide if                                                                       
the decision should be ratified. If the decision taken by                                                                       
the arbitrator were contrary to commission precedent then it                                                                    
would go through the appeals process as a new hearing.                                                                          
                                                                                                                                
Vice-Chair Bunde questioned if the appeal is based on the                                                                       
process not the facts. Mr. Carter stated that a decision                                                                        
could be appealed if it is contrary to a proceeding decision                                                                    
made by the Commission.                                                                                                         
                                                                                                                                
Mr. Carter discussed page 4, line 24. He pointed out that                                                                       
there was some discussion on a separate public advocacy                                                                         
section. He explained that it is not the chair's decision.                                                                      
He recommended the deletion of "when the chair believes                                                                         
that" and the insertion of "when participation is in                                                                            
accordance with a commission policy "It is in the public                                                                        
interest to do so" would be deleted and "the chair of the                                                                       
commission directs it to do so under AS 42.04.070(c) would                                                                      
be inserted.                                                                                                                    
                                                                                                                                
Co-Chair Therriault questioned why the public advocacy                                                                          
section should be restricted to when the Commission invites                                                                     
them to participate. Senator Pearce explained that, at this                                                                     
time, staff decides when to employ advocacy. The legislation                                                                    
would require that standards be developed to rule when the                                                                      
public advocacy is used. Co-Chair Therriault questioned if                                                                      
it would be better to leave it to the public advocate to                                                                        
decide when they should have input. Senator Pearce responded                                                                    
that the separate public advocacy section came out of a                                                                         
National Regulatory Research Institute (NRRI) study.  The                                                                       
advisor and advocate would be separated. She emphasized that                                                                    
the public advocate would have the right of discovery.                                                                          
                                                                                                                                
(Tape Change, HFC 99 - 125, Side 2)                                                                                             
                                                                                                                                
Senator Pearce emphasized the need for standards. The                                                                           
process can be protracted. The Commission has the right to                                                                      
contract out for specific expertise.                                                                                            
                                                                                                                                
Vice-Chair Bunde suggested that the public advocacy should                                                                      
remain separate. Senator Pearce observed concerns that there                                                                    
is no immediate control over the staff's concept of the                                                                         
public's interest and the specific direction that the                                                                           
advocacy can take. She noted that the advocacy staff must                                                                       
work for someone. There is no executive director. The                                                                           
legislation clarifies that the staff works for the                                                                              
Commission. It tells the Commission that they must adopt                                                                        
standards to direct the public advocacy section. She                                                                            
maintained that it is problematic that staff currently                                                                          
directs the Commission.                                                                                                         
                                                                                                                                
Vice-Chair Bunde summarized that the chairman would apply                                                                       
the regulations adopted by the Commission. Senator Pearce                                                                       
added that the Commission adopts the policy through                                                                             
regulations. The chair makes decisions based on policy of                                                                       
the Commission.                                                                                                                 
                                                                                                                                
Vice-Chair Bunde questioned if the Commission can appeal the                                                                    
chairman's decision if it is misapplied. Mr. Carter stated                                                                      
that the issue is addressed on page 4, line 24.                                                                                 
                                                                                                                                
Representative J. Davies asked for further clarification of                                                                     
page 5, lines 22 and 23. Mr. Carter explained that "it is in                                                                    
the public's interest to do so" would be deleted and                                                                            
replaced by "the chair of the commission directs it to do                                                                       
so."                                                                                                                            
                                                                                                                                
In response to a question by Representative J. Davies, Mr.                                                                      
Carter pointed out that the chairman serves at the direction                                                                    
of the Commission.                                                                                                              
                                                                                                                                
Mr. Carter reiterated that participation would be at the                                                                        
direction of commission policy. Senator Pearce stressed that                                                                    
members of the Commission do not have the time or expertise                                                                     
to put the record together. She observed that the Department                                                                    
of Law was not interested in added this function to their                                                                       
department. Contracting was not considered due to cost                                                                          
concerns. She stressed the desire for commission members to                                                                     
work as a team.                                                                                                                 
                                                                                                                                
Senator Pearce anticipated that testimony on proposed                                                                           
qualifications for commission members would be forthcoming.                                                                     
                                                                                                                                
Representative G. Davis observed that staff members function                                                                    
as the public advocacy. He questioned if this function is                                                                       
being extended to full time. Senator Pearce responded that                                                                      
the Commission's personnel estimates that 50 percent of                                                                         
their work is on advisory functions and 50 percent is spent                                                                     
on advocacy. She noted that there is always advisory work.                                                                      
Commissioners need to receive orders in writing and have                                                                        
more access to staff. The Commission would determine the                                                                        
number of staff they need to deal with the workload on an                                                                       
annual basis. Advocacy staff would not do advisory work.                                                                        
There are currently enough decisions before the Commission                                                                      
to require a number of advocates. She could not anticipate                                                                      
the number of staff that would be needed for advocacy. She                                                                      
added that the Commission might hire an administrative                                                                          
manager to take care of on-going daily work that has to                                                                         
happen. She pointed out that the legislature reviews through                                                                    
the power of appropriation. She noted that the Commission                                                                       
would have the option to set up their own flow chart.                                                                           
                                                                                                                                
Representative Foster observed that the position of                                                                             
executive director is deleted under the bill. He provided                                                                       
members with a letter from Alyce Hanley, dated 3/28/99 (copy                                                                    
on file).                                                                                                                       
                                                                                                                                
Senator Pearce observed that the present system is not                                                                          
working well. The executive director position would not be                                                                      
continued. The Commission could decide to hire the person                                                                       
who is currently in the executive director's position. The                                                                      
legislation clarifies that the staff works for the                                                                              
Commission.                                                                                                                     
                                                                                                                                
Vice-Chair Bunde noted that members are disqualified from                                                                       
having an official connection with a public utility. He                                                                         
questioned if Mr. Carter explained that the language is from                                                                    
existing statute.                                                                                                               
                                                                                                                                
REPRESENTATIVE JIM WHITAKER provided information on SB 133.                                                                     
He expressed concern that the AOGCC and the APUC be given                                                                       
the opportunity and ability to protect the public's best                                                                        
interest in regards to oil and gas resources. He referred to                                                                    
a 1997 Attorney General's opinion. The opinion concluded                                                                        
that the AOGCC has the authority to consider revenue and                                                                        
engineering issues, not economic issues, in reservoir                                                                           
management and development. Once the companies have agreed                                                                      
amongst themselves and the commissioner of the Department of                                                                    
Natural Resources adopts the development plan the AOGCC has                                                                     
no right to review the plans to see if they protect the                                                                         
public's best interest in those fields. He maintained that                                                                      
independent review of the agreement is essentially blocked.                                                                     
Independent review is the reason the AOGCC was established.                                                                     
He urged the Committee to keep the powers of the AOGCC                                                                          
intact. He questioned how the AOGCC could make                                                                                  
determinations without reservoir models.                                                                                        
                                                                                                                                
Co-Chair Therriault noted that his office has received a                                                                        
proposed committee substitute from Representative Whitaker.                                                                     
                                                                                                                                
Representative J. Davies stressed that it is critical that                                                                      
the AOGCC has the capacity to understand reservoir models.                                                                      
He observed that they could develop their own models, but                                                                       
emphasized that it would be costly.                                                                                             
                                                                                                                                
Representative Whitaker stated that he is not trying to                                                                         
hinder the progress of the legislation.                                                                                         
                                                                                                                                
MARK VASCONI, DIRECTOR, REGULATORY AFFAIRS, AT&T testified                                                                      
via teleconference. He recommended changes to SB 133. He                                                                        
noted that AT&T has proposed four changes to the                                                                                
legislation. The first would occur on page 2, line 2. He                                                                        
stressed that there is an ambiguity of whether a new                                                                            
governor can appoint a new chairman prior to the expiration                                                                     
of the chair's four-year term. To balance the for cause                                                                         
removal provision and reduce politicization and enhance                                                                         
independence the new governor would have to wait till the                                                                       
current four year term expires before appointing a new                                                                          
chair. He suggested that "whenever the position becomes                                                                         
vacant" be added on page 2, line 2 to clarify that the                                                                          
governor would have to wait for the chairman to retire.                                                                         
                                                                                                                                
The second amendment would occur in Sec. 42.04.020(a). He                                                                       
suggested that the following language be added:                                                                                 
                                                                                                                                
"To qualify for appointment as a commissioner, a person                                                                         
must be a member in good standing of the Alaska Bar                                                                             
Association or have a degree from an accredited college                                                                         
or university with a major in engineering, finance,                                                                             
economics, accounting, business administration, or                                                                              
public administration.  Actual experience for a period                                                                          
of five years in the practice of law or in the field of                                                                         
engineering, finance, economics, accounting, business                                                                           
administration, or public administration is equivalent                                                                          
to a degree."                                                                                                                   
                                                                                                                                
The amendment would require that the commissioner be in good                                                                    
standing with the Alaska bar and have a degree in public                                                                        
administration. Commissioners could come from a broad                                                                           
background.                                                                                                                     
                                                                                                                                
Senator Pearce questioned if someone who had served at least                                                                    
five years as a member of the board of a regulated utility                                                                      
would qualify if their degree were in anthropology. Mr.                                                                         
Vasconi replied that person would qualify.                                                                                      
                                                                                                                                
Mr. Vasconi noted that the third suggested amendment applied                                                                    
to Sec. 42.04.080(b).  He observed that AT&T Alascom                                                                            
continues to believe that the internal appeals procedure is                                                                     
unnecessary and should be deleted.  It will add an                                                                              
additional layer to the decision making process, which will                                                                     
result in delays and add to the commissioners workload.  He                                                                     
recommended that this section be deleted.                                                                                       
                                                                                                                                
The last suggested amendment pertained to Sec. 42.04.150.                                                                       
Mr. Vasconi noted that AT&T Alascom prefers the current                                                                         
system of designating a staff advocacy team on a case by                                                                        
case basis.  He suggested that Sec. 42.04.150 be harmonized                                                                     
with Sec. 42.04.070(c) to assure that the chairman                                                                              
determines when it is appropriate to involve the public                                                                         
advocacy section.  In the two sections of the act, the two                                                                      
should be the same so that there will not be potential                                                                          
disputes.                                                                                                                       
                                                                                                                                
JIMMY JACKSON, REGULATORY ATTORNEY, GCI, addressed the                                                                          
public advocacy section of the bill.  He maintained that the                                                                    
current system works and now would not be a good time to                                                                        
change it.  Presently, staff acts as a party to represent                                                                       
the public interest in cases of rate increases.  The current                                                                    
system has been in place for many years and it works.  SB
133 proposes to change this structure by creating an                                                                            
advocacy staff.  It is a structure that is used by some                                                                         
other commissions.  The change would require a significant                                                                      
increase in personnel. He did not believe that the change                                                                       
would work without an increase in cost that would be passed                                                                     
on to the utilities and their consumers.  If the change were                                                                    
made, the present level of the regulatory cost charge (RCC)                                                                     
would have to be raised over 1%.  He reviewed the current                                                                       
system.                                                                                                                         
                                                                                                                                
The Commission currently makes the decision to appoint staff                                                                    
in an advocacy role.  Mr. Jackson maintained that it would                                                                      
be a bad idea to combine the change in the advocacy role at                                                                     
this time. Time will be needed to allow the new commission                                                                      
to get up to speed.  He encouraged an amendment to maintain                                                                     
the existing role of staff.                                                                                                     
                                                                                                                                
Co-Chair Mulder questioned the additional costs for the                                                                         
advocacy section.  Mr. Jackson guessed that personnel would                                                                     
need to be increased by 50%.                                                                                                    
                                                                                                                                
(Tape Change, HFC 99 - 126, Side 1)                                                                                             
                                                                                                                                
Senator Pearce explained that each staff member has a                                                                           
different expertise and that they all work 50/50 on advisory                                                                    
vs. advocacy issues. She disagreed that it would require a                                                                      
50% increase in staff. She pointed out that it would take                                                                       
some time to develop additional expertise in some areas. She                                                                    
stressed that there is no consumer protection agency within                                                                     
the Department of Law. She reiterated that the NRRI report                                                                      
recommended that the attorneys that handle advisory and                                                                         
advocacy activities for the Commission be separated. Many                                                                       
states have separate public advocacy sections. She                                                                              
acknowledged that there would be separate costs but                                                                             
questioned if the cost would be as high as estimated. The                                                                       
Administration and utilities with the exception of AT&T and                                                                     
GCI support a separate public advocacy section.                                                                                 
                                                                                                                                
GINNY FAY, DEPUTY COMMISSIONER, DEPARTMENT OF COMMERCE AND                                                                      
ECONOMIC DEVELOPMENT spoke in support of the legislation.                                                                       
She maintained that the changes outlined by Mr. Carter are                                                                      
relatively minor technical adjustments.                                                                                         
                                                                                                                                
Co-Chair Therriault questioned the level of staffing and                                                                        
funding in the current budget. Ms. Fay stated that the NNRI                                                                     
recommendations have been reviewed. She emphasized that it                                                                      
is the sponsor's intent to improve public protection through                                                                    
the advocacy section by not having staff change back and                                                                        
forth between advocacy and advisory functions. The                                                                              
department's fiscal note identifies some cost savings                                                                           
through efficiencies in administrative functions. She noted                                                                     
that the legislation was originally crafted to contract out                                                                     
the public advocacy functions. She stressed that the                                                                            
administration felt that it was more appropriate to have in                                                                     
house advocacy staff. She acknowledged that it might be                                                                         
necessary to have a combination of in house expertise and                                                                       
contractual staff to meet demand.                                                                                               
                                                                                                                                
Co-Chair Therriault, Ms. Fay stated that the fiscal note                                                                        
reflects the Governor's request for the year 2000, which                                                                        
includes addition of staff. She recommended that adjustments                                                                    
be made after staff is shared.                                                                                                  
                                                                                                                                
ERIC YOULD, EXECUTIVE DIRECTOR, ARECA, ANCHORAGE spoke in                                                                       
support of the legislation. He noted positive elements of                                                                       
the legislation. He emphasized that the legislation:                                                                            
                                                                                                                                
1. Adds a new time tracking system for staff;                                                                                   
                                                                                                                                
2. A management information system that would be                                                                                
accessible through the Internet;                                                                                                
                                                                                                                                
4. Expanded use of hearing officers and arbiters;                                                                               
                                                                                                                                
5. Timelines established by the commission for                                                                                  
hearing dockets;                                                                                                                
                                                                                                                                
6. More authority for chair to exercise authority                                                                               
over staff; and                                                                                                                 
                                                                                                                                
7. Allocation of RCC based level of effort by the                                                                               
industry sector and the development of the                                                                                      
independent public advocacy section.                                                                                            
                                                                                                                                
He emphasized that the legislation would allow dockets to be                                                                    
issued in a timely manner. He noted that there would be                                                                         
transitions.                                                                                                                    
                                                                                                                                
In response to a question by Representative Williams, Mr.                                                                       
Yould stated that ARECA supports a separate public advocacy                                                                     
section within the APUC. He stressed that it needs to be                                                                        
properly funded and staffed. He felt that sufficient work                                                                       
exists to warrant full-time staffing. The APUC has nine                                                                         
vacant positions. He suggested that these positions, if                                                                         
filled, could take care of the advocacy staff. He suggested                                                                     
that the new commissioners could do their own internal audit                                                                    
to discern staff needs.                                                                                                         
                                                                                                                                
CSSB 133 (RULS) was HELD in Committee for further                                                                               
consideration.                                                                                                                  
CS FOR SENATE BILL NO. 134(RLS)                                                                                                 
                                                                                                                                
"An Act authorizing the Alaska Oil and Gas Conservation                                                                         
Commission to determine the amount of and to collect a                                                                          
charge for operating wells subject to the commission's                                                                          
jurisdiction, and to allocate expenses of investigation                                                                         
and hearing; authorizing the commission to employ                                                                               
additional professional staff; repealing the oil and                                                                            
gas conservation tax; and providing for an effective                                                                            
date."                                                                                                                          
                                                                                                                                
SENATOR DRUE PEARCE, SPONSOR spoke in support of SB 134. She                                                                    
noted that SB 134 addresses the issue of funding for the                                                                        
Alaska Oil and Gas Conservation Commission (AOGCC) It                                                                           
appeals the existing Oil and Gas Conservation tax and                                                                           
institutes a stable funding source to assure that the                                                                           
Commission is capable of carrying out their objectives of                                                                       
protecting the public interest. The AOGCC's primary goal is                                                                     
to ensure that no hydrocarbons are wasted and that                                                                              
operations are conducted in manner that provides maximum                                                                        
recovery of the resource.                                                                                                       
                                                                                                                                
The original intent of the Legislature was to have the oil &                                                                    
gas industry pay for the function of the Commission through                                                                     
the Oil & Gas Conservation Tax. While this system may have                                                                      
been adequate in the past, it is no longer sufficient to                                                                        
cover the costs associated with the operation of the                                                                            
Commission. The conservation tax is directly proportional to                                                                    
production with 4 mils per barrel fee rate.  The work of the                                                                    
Commission, however, is not proportional to the production                                                                      
of oil and gas.  Production is declining but the work of the                                                                    
Commission is not.                                                                                                              
                                                                                                                                
SB 134 creates a program receipt system in which the                                                                            
regulatory cost charge is directly associated with the total                                                                    
volume of fluids produced or injected.  This type of system                                                                     
more accurately reflects the factors directly associated                                                                        
with the workload of the Commission. SB 134 also contains a                                                                     
provision to provide for recovery of costs associated with                                                                      
an investigation or hearing.  These costs would be allocated                                                                    
to the parties involved.                                                                                                        
                                                                                                                                
Senator Pearce noted that the Commission experienced budget                                                                     
difficulties in the past, even when tax proceeds exceeded                                                                       
annual appropriations.  The AOGCC is currently encountering                                                                     
budget difficulties that are directly related to the decline                                                                    
in oil production.  Some members of the oil and gas industry                                                                    
have raised concerns about the program receipt budgets not                                                                      
being given the same level of scrutiny by the legislation as                                                                    
budgets based on the general funds. She felt that these                                                                         
concerns were unfounded. The AOGCC is strengthened by the                                                                       
addition of four staff. This addition would improve the                                                                         
level of institutional knowledge at the AOGCC. The bill                                                                         
creates a stable funding source that will enable the AOGCC                                                                      
to provide the monitoring services necessary to protect the                                                                     
future of Alaskan interests.                                                                                                    
                                                                                                                                
Co-Chair Therriault asked how the additional new staff would                                                                    
increase the institutional knowledge. Senator Pearce                                                                            
observed that the current Commission is composed of three                                                                       
members. One member is required to be petroleum geologist,                                                                      
one is required to be a petroleum engineer and one is a                                                                         
public member. There is also technical staff. The                                                                               
legislation authorizes the Alaska Oil and Gas Conservation                                                                      
Commission shall to employ, in addition to currently                                                                            
authorized professional staff, one petroleum engineer, one                                                                      
reservoir engineer, one petroleum geologist, and one                                                                            
inspector in FY00 (section 8 page 4, line 30).                                                                                  
                                                                                                                                
Senator Pearce noted that the fiscal note accompanying SB
134 would fund the AOGCC for fiscal year 2000. The AOGCC is                                                                     
not funded in the House or Senate operating budgets.                                                                            
Representative J. Davies questioned why the language is                                                                         
specific to fiscal year 2000. Senator Pearce explained that                                                                     
since the additional personnel are not in the Senate or                                                                         
House operating budgets that the language is needed to carry                                                                    
the fiscal note in the conference committee.                                                                                    
                                                                                                                                
Vice-Chair Bunde recognized the need for increased staff and                                                                    
program receipts, but asked what would be the provision for                                                                     
downsizing. Senator Pearce observed that the regulatory cost                                                                    
charge would be brought to the Office of Management and                                                                         
Budget. The Office of Management and Budget would bring it                                                                      
to the legislature for approval. The budget can be reduced                                                                      
at any point in the process. She noted that the Division of                                                                     
Oil and Gas, Department of Natural Resources are showing                                                                        
increased production coming on line.                                                                                            
                                                                                                                                
Senator Pearce observed that industry came forward with some                                                                    
concerns regarding to the tax rate. Industry was interested                                                                     
in increasing the tax rate. The House Labor and Commerce                                                                        
Committee did not make a change in the tax rate. He                                                                             
maintained that funding should follow the level and type of                                                                     
work as opposed to a straight tax rate. The industry also                                                                       
asked if there could be some step in the process to allow                                                                       
review of the budget in order to prevent complaints about                                                                       
the way the money is being spent. Industry wanted to impanel                                                                    
a group to review the budget prior to submission to the                                                                         
legislation. She recommended that a letter be sent to those                                                                     
paying the RCC prior to the submission of the budget to the                                                                     
Office of Management and Budget. This would give those that                                                                     
pay the RCC an opportunity to make comments before the                                                                          
budget is submitted.                                                                                                            
                                                                                                                                
Co-Chair Therriault reiterated concerns that the monitors on                                                                    
the wells do not lend themselves to the monetary charge.                                                                        
Senator Pearce observed that the Commission monitors the                                                                        
injection of the liquids. There has never been a metering of                                                                    
the cost charges. She observed that they do allow the                                                                           
testing of wells. She referred to the commingling of oil                                                                        
from facilities in Prudhoe Pay. A decision was made and                                                                         
placed in to regulations to allow testing of wells on an                                                                        
interim basis, so that oil would not have to be measured                                                                        
from each site on a daily basis. She maintained that                                                                            
accommodation could be found through averaging testing                                                                          
results. Co-Chair Therriault pointed out that a method was                                                                      
found to resolve the commingling issue. Senator Pearce gave                                                                     
further examples utilizing general testing.                                                                                     
                                                                                                                                
Representative J. Davies questioned what the fees would be                                                                      
and what share of the total cost of the Commission do they                                                                      
represent. Senator Pearce noted that the fee was based on                                                                       
the AOGCC's expectation of costs. A rebate could be given if                                                                    
there is excess or a reduction could occur in the subsequent                                                                    
year. Representative J. Davies noted that the RCC is in                                                                         
addition to the fee. Senator Pearce added that there is also                                                                    
a separate fee for the well permit that is considered as                                                                        
statutory designated program receipts. Co-Chair Therriault                                                                      
added that the fiscal note takes into consideration the                                                                         
statutory designated program receipts.                                                                                          
                                                                                                                                
Representative G. Davis clarified that the Senate did not                                                                       
fund the AOGCC.                                                                                                                 
                                                                                                                                
Representative J. Davies clarified that the fiscal note has                                                                     
$2.454 million dollars in the statutory designated program                                                                      
receipts category. Co-Chair Therriault explained that the                                                                       
funds could be taken out of the operating budget.                                                                               
                                                                                                                                
BOB CHRISTENSON, CHAIRMAN, ALASKA OIL AND GAS CONSERVATION                                                                      
COMMISSION testified via teleconference in support of the                                                                       
legislation. He stressed that it would provide a more stable                                                                    
funding mechanism. He maintained that it is a fair system                                                                       
that takes into account the difference between Cook Inlet                                                                       
and the North Slope.                                                                                                            
                                                                                                                                
In response to a question by Co-Chair Therriault, Mr.                                                                           
Christenson stated that fee system has been working.                                                                            
                                                                                                                                
CSSB 134 (RLS) was HELD in Committee for further                                                                                
consideration.                                                                                                                  
HOUSE BILL NO. 183                                                                                                              
                                                                                                                                
"An Act relating to the powers and duties of the chair                                                                          
of the Alaska Public Utilities Commission; relating to                                                                          
membership on the Alaska Public Utilities Commission;                                                                           
and relating to the annual report of the Alaska Public                                                                          
Utilities Commission."                                                                                                          
                                                                                                                                
WALT WILCOX, STAFF, HOUSE SPECIAL COMMITTEE ON UTILITY                                                                          
RESTURCTURING provided information on HB 183. He noted that                                                                     
HB 183 is similar to SB 133, with the exception of a clause,                                                                    
which placed a limitation of no more than two commissioners                                                                     
from the same political party. He added that HB 183 did not                                                                     
deal with the AOGCC. House Bill 183 would have established                                                                      
ethics standards for members of the APUC. The advocacy issue                                                                    
was not addressed in HB 183. He maintained that the balance                                                                     
of HB 183 fits nicely into SB 133. In response to a question                                                                    
by Representative J. Davies, he also observed that HB 183                                                                       
did not provide a raise for the chair. The general idea of                                                                      
accountability and responsibility is accomplished in SB 133.                                                                    
This was also a goal of the Utility Restructuring Committee.                                                                    
                                                                                                                                
HB 183 was heard and HELD in Committee for further                                                                              
consideration.                                                                                                                  
ADJOURNMENT                                                                                                                     
                                                                                                                                
The meeting adjourned at 4:20 p.m.                                                                                              
House Finance Committee 16 5/11/99 p.m.                                                                                         

Document Name Date/Time Subjects