Legislature(2003 - 2004)
01/30/2003 01:29 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
January 30, 2003
1:29 PM
TAPE HFC 03 - 5, Side A
TAPE HFC 03 - 5, Side B
CALL TO ORDER
Co-Chair Harris called the House Finance Committee meeting
to order at 1:29 PM.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Eric Croft
Representative Richard Foster
Representative Mike Hawker
Representative Reggie Joule
Representative Carl Moses
Representative Gary Stevens
Representative Bill Stoltze
Representative Jim Whitaker
MEMBERS ABSENT
None
ALSO PRESENT
Ernesta Ballard, Commissioner, Department of Environmental
Conservation; Kurt Fredrickson, Acting Deputy Commissioner,
Department of Environmental Conservation; Nan Thompson,
Chair, Regulatory Commission of Alaska.
PRESENT VIA TELECONFERENCE
None
GENERAL SUBJECT(S):
DEPARTMENT OF ENVIRONMENTAL CONSERVATION (DDEC)
REGULATORY COMMISSION OF ALASKA
The following overview was taken in log note format. Tapes
and handouts will be on file with the House Finance
Committee through the 23rd Legislative Session, contact 465-
2156. After the 23rd Legislative Session they will be
available through the Legislative Library at 465-3808.
LOG SPEAKER DISCUSSION
TAPE HFC 03 - 5
SIDE A
000 Co-Chair Harris Convened the meeting of the House Finance
Committee at 1:29 p.m. Roll was called
and a quorum established.
Co-Chair Harris Invited members to bring any outstanding
business forward. Hearing none, he
invited Ms. Ballard to come forward.
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
(DEC)
145 ERNESTA BALLARD, Introduced Mr. Fredrickson who would also
COMMISSIONER, be available to answer questions. Ms.
DEPARTMENT OF Ballard summarized her business
ENVIRONMENTAL background, explaining that she had spent
CONSERVATION half of her career in the private and
half in the public sector. She mentioned
her experience working for universities,
the Federal Government, the Environmental
Protection Agency (EPA) [administrating
for a region which included Alaska], a
bank, the Cape Fox Corporation in
Saksman, and, most recently, her own
consulting business. She noted that she
had worked previously with members of DEC
with her consulting firm, and expressed
her pride in now serving as their leader.
She emphasized her commitment to the
Governor's priority of revitalizing
resource industries, thereby supporting
local economies. She noted that, as a
resident of Ketchikan, she felt
enthusiastic about the future of this
community in view of projected capital
returns.
531 Ms. Ballard Clarified her understanding of DEC's
mission as derived from statues, and
referred to the handout outlining these
statutes (AS 46.03.010 and AS 44.46.020),
listing the policies and duties of the
department (copy on file.) She pointed
out that DEC's primary mission,
established over 30 years ago, was to
further the statutory policy of the
legislature to conserve, improve and
protect the state's natural resources.
643 Ms. Ballard Summarized their duties as being to adopt
and enforce protective standards for the
prevention of pollution and for the
protection of public health. (AS
44.46.020) She noted that those duties
derived by a public interest identified
by the legislature, considered greater
than individual interests. She referred
to statute (AS 46.03.010) identifying the
State as the trustee of the environment
for present and future generations. She
expressed her personal belief in the
legislatures' proposal of balance between
the public interest for environmental
protection and the private right of
citizens to be left alone. She observed
the responsibility of DEC to do no more
in the job than intended by legislature,
but no less than necessary to protect
public interest. She referred to
Administrative Order 202, in which
departments are charged with a
performance audit to determine statutory
and regulatory compliance.
929 Ms. Ballard Explained that, in the process of this
internal audit, she would investigate
what she termed as mission creep - the
natural tendency to allow agendas to
effect policies and compliance. She
noted her commitment to understanding the
regulatory framework, and places where
the department may have over stepped
statutory intent. She emphasized her
commitment to ensure that environmental
and public health standards were fact
based, and that systems were in place to
implement those standards, with logical
permits and accompanying regulations.
1038 Ms. Ballard Concluded by stating her priority to cut
costs through efficiency and
effectiveness. Specifically she noted her
own goals and measurements: regulatory
proposals which are easy to understand
and well coordinated with other state
departments and federal agencies; using
regulatory discretion to tailor actions
to match Alaskan circumstances; web pages
which are searchable and interactive;
permit programs which are self
implementing; increased field presence;
enforcement as a predictable consequence
of deceit and equivocation; opportunity
for public comment at convenient times
and places.
1209 Ms. Ballard Proposed that confidence in her
Department could be achieved when its
performance was timely, predictable,
rational, and fact based. She thanked
the Committee Members for this
opportunity and concluded her
presentation.
1308 Ms. Ballard Affirmed a statement by Co Chair Harris
that her philosophy, and that of the
Administration, was to support natural
resource development in an
environmentally sound manner and to
comply with environmental regulations in
the process.
1358 Representative Noted Ms. Ballard's personal goal for a
Whitaker self-implementing permit process.
1427 Ms. Ballard Elaborated by explaining that, by
identifying activities with common
characteristics and likelihood for a
common effluence, it was possible to
write a permit to describe circumstances,
and to file a notice of intent under that
general permit. She mentioned that this
was a commonly used regulatory tool,
allowing more time for staff on
protective standards and in the field
understanding circumstances. She
conceded that there were circumstances
that did not fit general permits, when an
individual permit was necessary.
1552 Representative Asked how DEC interacted with seafood
Stevens industry, as with seafood inspection and
laboratory work paralytic shellfish.
1617 Ms. Ballard Responded that the seafood industry, as a
processor, produced discharges in water.
She emphasized that those discharges must
meet water quality standards. DEC, in
conjunction with the EPA, has a program
in which the EPA is the lead agency. She
noted that the Palmer laboratory facility
must be vacated by the end of 2003 and a
that a modern lab would be built near
Anchorage to ensure that fisheries can be
supported with a quick turnaround for
shellfish poisoning testing.
1801 Ms. Ballard Responded to a question from
Representative Stevens and stated that
the lab design had been funded at over $1
million, but had not yet been built.
1813 Representative Meyer Asked for clarification on when the dept
became involved with local issues. He
noted an instance regarding a subdivision
in Anchorage. He inquired whether Ms.
Ballard preferred that local government
handle issues, and when she thought DEC
should become involved.
1900 Ms. Ballard Responded that DEC would always prefer
for issues pertaining to land use and
development be addressed by local
government. She also noted that public
water systems were the responsibility of
DEC. The agency determines drinking
water standards for resultant water. Ms.
Ballard explained that, if a subdivision
was to be created near a water source,
which might, because of the disturbance
of the land, become impacted, lines might
become blurred. However, she reiterated
that it was still DEC's preference to
have engineering and analysis completed
by the local planning authority. She
noted that with reluctance DEC used
expertise to give general advise. She
pointed out that DEC had no decision-
making or permitting authority with
regard to local subdivisions.
2031 Representative Meyer Asked whether there were plans for the
agency in the way of changes, mergers or
consolidations. He referred to tattooing
and body piercing as listed as under
DEC's purview in regard to public safety.
205 Ms. Ballard Stated that the only plans for
organizational changes would occur around
vacancies or opportunities. She
confirmed that body piercing was DEC's
responsibility under statute.
2124 Co-Chair Williams Noted that Ms. Ballard was a friend and
expressed his pride in her development
since he was a part of her original job
in Alaska. He asked about the
administration of water primacy.
2150 Ms. Ballard Spoke to her viewpoint, being as yet
unaware of the Governor's stance on this
issue. She explained that the national
environmental laws at this moment had
been delegated to states in the majority
of cases. At state level, with statutory
authority, permit writers can use all
regulatory tools available. She
exemplified that when a discharge
occurred in water, if the point of
compliance must be at point of discharge,
then a great deal of treatment would be
needed upstream. If, however, a mixing
zone accommodated the point of
compliance, there would be an opportunity
to engineer the discharge at a lower cost
and higher efficiency. She pointed out
that this type of regulatory discretion
was used by nearly every state in
administrating programs. However, the
Federal Government on behalf of states
did not use that level of discretion.
The noted that the Fed Government took a
conservative point to administer a permit
program in a state. States can use
discretion to write permits that achieve
protection while allowing engineering.
She further assured the Committee that
current regulatory language, which
allowed regulatory discretion to DEC, was
similar to that used by other programs
around the country, according to a recent
comparison conducted by State of Alaska
regulatory specialists.
2500 Ms. Ballard Also responded that primacy of the NPDES
(National Pollutant Discharge Elimination
Systems) Program, allowing permits to be
written by the State of Alaska, DEC would
use the same discretion in all other
permitting programs, similar to programs
in many other states. She expressed her
belief that this kind of discretion would
not violate standards or harm water
quality.
2526 Representative Joule Asked Ms. Ballard to elaborate on budget
reductions.
2542 Ms. Ballard Responded that where vacancies occurred,
she would investigate consolidating and
internal streamlining. She also
mentioned the area of some federal grants
that were better suited to larger cities.
She noted a current review of grant
funding, to determine federal funds that
might be passed up in order to reduce
general fund spending in that area.
2707 Representative Joule Observed that these ideas for budget
reductions did not seem to impact
statutory obligations.
2737 Ms. Ballard Confirmed that she was committed to
statutory responsibilities, but that she
may propose to release federally funded
programs that were not consistent with
DEC's central mission.
2759 Representative Croft Asked for clarification on the major
areas of in which the State maintained
primacy.
2818 KURT FREDRICKSON, Confirmed that, of twenty possible areas,
ACTING DEPUTY Alaska had primacy in air and drinking
COMMISSIONER, water primarily. Ms. Ballard offered to
DEPARTMENT OF provide a list of these areas to the
ENVIRONMENTAL Committee.
CONSERVATION
2903 Representative Croft Clarified that the issue previously
discussed was that of water discharge,
noting that this issue had been a costly
one to solve in past experience.
2920 Ms. Ballard Concurred that the Committee had
previously directed the DEC to design a
program, and report the projected costs
and statutory changes it required. She
stated that personnel had been hired
recently in this regard, and that a
report would be forthcoming by the end of
2003.
2945 Representative Croft Expressed his preference to have Alaskan
permit writers with more regulatory
discretion, rather than federal
employees.
3013 Ms. Ballard Stressed that, even when using such
regulatory discretion, that water quality
standards did not change. She noted that
the goal was to make site-specific
determinations, which would be
inappropriate for the EPA.
3108 Representative Croft Reiterated that having primacy also meant
expending funds, and that he hoped Alaska
could afford to do it.
3118 Representative Observed that Alaska's inability to test
Stevens seafood products kept us out of the
market, especially in terms of shellfish.
He asked about a solution to this
problem.
3152 Ms. Ballard Explained that to sell fresh product from
waters that might have been contaminated
by PSP (paralytic shellfish poisoning),
the primary challenge was to find
assurances. She stated that the vehicle
for this was through controlled
laboratories. The agent used is highly
toxic, and should not be distributed to
local complexes. By moving the lab
closer to Anchorage, and by maintaining
professionalism and adequate budget, the
State has been able to support fisheries.
She expressed the need to find a harmless
test, but that one did not exist at this
time.
3325 Representative Referred to a study in the past regarding
Stevens tests to be used on a beach.
3352 Ms. Ballard Responded that tests were underway around
the world, and that DEC was following
their development.
3410 Representative Pointed out that Palmer did have an
Stoltze airport and might be able to support a
laboratory.
3430 Ms. Ballard Noted that the new lab in Anchorage
performed all of the functions of the
previous lab, including agricultural
functions, however in a modern setting.
3441 Co-Chair Harris Asked whether Ms. Ballard was prepared to
tell the Committee whether she had
adequate personnel to fulfill their
mission.
3516 Ms. Ballard Said she would do the best she could with
the resources available.
3530 Co-Chair Harris Observed Ms. Ballard's intent for DEC to
perform those duties which statutes
required, and that perhaps DEC currently
fulfilled duties that were not required.
He asked whether, during a time of
limited resources, the department would
request more employees.
3628 Ms. Ballard Stated that she would balance the
turnaround time and duties in accordance
with the resources available. She
further explained that, within a spectrum
of duties, that time frame would vary
according to funding. She stated a goal
to move with deliberation to resolve
uncertainty surrounding projects. She
admitted that turnaround time has been an
issue in the past.
3740 Representative Croft Asked about implications of the
Governor's request for a five or ten
percent reduction to her department.
3808 Ms. Ballard Could not reveal detail and once again
referred to statutory guidelines, which
would receive top priority in preparing a
budget.
3844 Representative Croft Asked for a frank response to his
question independent of confidentiality
with the Governor's office.
3912 Ms. Ballard Responded that she had not had adequate
time to select items for budgetary cuts.
3940 Co-Chair Harris Pointed out that budgetary information
would become available in a month.
3952 Representative Expressed his confidence that clean air
Stoltze and water and public health were
priorities of the agency.
4031 Co-Chair Harris Concluded the discussion on this topic.
REGULATORY COMMISSION OF ALASKA
4109 NAN THOMPSON, Introduced herself as current Chair of
COMMISSIONER, the Regulatory Commission of Alaska. She
REGULATORY explained that the agency's mission was
COMMISSION OF ALASKA to regulate public utilities and
intrastate pipeline carriers. Their
mission is to provide oversight of
monopoly providers, and promote
competition where appropriate. She
pointed out that, last year, the
legislature gave Regulatory Commission of
Alaska the additional responsibility to
develop small (under five megawatt)
hydroelectric projects. She noted that
the Regulatory Commission of Alaska came
into existence in July of 1999 when the
legislature abolished its predecessor due
to the amount of backlogged cases. She
reported that backlog of cases had
dissipated and that they been meeting
legislative deadlines.
4257 Ms. Thompson Referred to chart illustrating the
consistent decrease of backlog cases.
She noted that the agency had 62
employees who served the State. She
recognized that they were directed by
statute. She noted that the five
commissioners were appointed by the
Governor to six-year terms. She pointed
out that the Governor had appointed two
new Commissioners: Dave Harbor? And Mark
Johnson. She also noted that a new Chair
would then be elected for the next year.
4452 Ms. Thompson Explained that commissioners worked in a
variety of ways. As a panel of three in
ad judicatory dockets, they resolved
complaint filed with the Agency. She
stated that commissioners participated in
a public meeting process. Commissioners
also participate with other states in a
less formal policy making process.
4604 Ms. Thompson Noted that their budget was funded
entirely through the regulatory cost
charge mechanism, and contained no
general funds. Ms. Thompson went on to
explain the role of the Regulatory
Commission of Alaska, which is unique in
state government. She explained that the
budget was allocated depending on how
much time was spent in each sector. She
also stated that the amount collected was
capped by statute at .8 percent of the
total adjusted gross revenues of all
utilities.
TAPE HFC 03 - 5,
Side B
4644 Ms. Thompson Explained that all public utilities that
serve 10 or more customers for
compensation must be certificated by the
RCA; they are all subject to a public
convenience and necessity determination
and a fitness, willingness, and ability
requirement before they can begin
operations. Certificated public utilities
are subject to economic regulation (rate
review) by the RCA if they are privately
owned or do not otherwise meet the
exemption criteria in AS 42.05.711.
4610 Ms. Thompson Generally, the statute exempts very small
utilities, those owned by local
governments and those whose customers
have voted to for exemption from economic
regulation. The Commission regulates
pipelines and utilities to assure
reasonable and just rates to the consumer
with fair rates of return to the
utilities. There are currently 163
telephone utilities, 97 electric
utilities, 63 water utilities, 44
wastewater utilities, 48 refuse
utilities, and 20 pipelines certificated
by the Commission. There are a number of
uncertified small rural water and
wastewater utilities throughout the
state. The Regulatory Commission of
Alaska is developing regulations that
will simplify the certification process
for these utilities.
4455 Ms. Thompson Observed that the Regulatory Commission
of Alaska opens an average of 160 new
dockets a year. The current docket
caseload is 214. Of these, 158 are
utility cases, 42 are pipeline cases, and
14 are regulations cases. She pointed out
that 214 was a significant improvement
from 1999, when the Regulatory Commission
of Alaska inherited more than twice that
many dockets from their predecessor
agency.
4434 Ms. Thompson Explained that the Regulatory Commission
of Alaska also handles consumer
complaints. In FY02, they received 664
consumer complaints about utility
services. As noted in the 2002
Legislative Audit Report on the RCA, the
number of consumer complaints increased
by 13 percent since the 2001 Audit.
Despite this increase, all complaints
received in FY02, save one were closed by
October 15, 2002.
4418 Ms. Thompson Clarified that each regulated utility and
pipeline carrier is required to keep a
current tariff on file with the
Commission. The tariff includes all the
rules, rates, terms, and conditions of
service under which the utility operates.
Revisions to tariffs are formally
submitted for public notice and comment
and then Commission review and action. Of
536 tariff revision filings received
during FY02, 455 were approved within 30-
45 days of receipt. Fifty filings were
matters requiring hearings or more
detailed investigation.
4342 Ms. Thompson Explained that a rate increase request is
an example of a proposed tariff change
that normally takes more than 45 days to
process. These more complex filings are
suspended for further investigation; a
formal docket case is opened to build a
record for decision. The Commission may
reject tariff filings if they do not
provide sufficient information to support
the requested change.
4251 Ms. Thompson Observed that their major work product is
written Orders. Commission orders
describe our decision and the reasoning
and record supporting it. Clearly written
orders would provide a more stable
environment within which utilities and
pipelines can operate. The Regulatory
Commission of Alaska produces an average
of 608 substantive decisions each year.
4239 Ms. Thompson Emphasized that the RCA's approach to
decision-making has been successful.
Since July 1, 1999 when the RCA started,
only 16 of nearly 2,000 substantive
orders have been appealed. Federal and
state courts have issued decisions in 13
of those cases, and the agency has not
been reversed once. Two appeals were
dismissed by stipulation. One case was
remanded to the agency with a finding
that the Regulatory Commission of Alaska
erred by not holding a hearing before
rendering a decision and an instruction
to conduct one.
4142 Ms. Thompson Observed that there are 9 pending appeals
from agency decisions. Reviewing courts
have consistently held that they are
correctly applying the law.
4115 Ms. Thompson Reviewed the U.S.D.A. Grant: During FY02,
the agency submitted a successful
application to the U.S. Department of
Agriculture for a $7.5 million grant
program to spread broadband Internet
access to Alaskan communities not yet
connected to the Internet.
4054 Ms. Thompson Explained that the RCA will work with the
Denali Commission, DCED/RUBA, and other
agencies to implement this program during
FY03.
4032 Ms. Thompson Discussed the Small Water-Power
Development Project Regulation: The 2002
Legislature enacted statutes, which
require the RCA to establish a regulatory
program for small waterpower development
projects. She observed that FERC
currently has jurisdiction over these
projects. The approved program will
require coordination with the Alaska
Department of Natural Resources and the
Department of Fish and Game.
3957 Ms. Thompson Reviewed Sustainable Rural Utilities: The
RCA participates in a federal state
working group that is trying to insure
that the water and sewer systems being
constructed in rural Alaska with federal
grant monies will continue to offer
affordable, reliable service in the
future.
3901 Ms. Thompson Noted that Regulatory Commission of
Alaska is looking at possible changes to
PCE regulations in order to create
incentives for efficiency in the program
and insure that funds are distributed
equitably. Utilities are an important
infrastructure for the future of rural
Alaska.
3858 Ms. Thompson Reviewed Improved Public Access: The
agency is working to function better and
faster. The Regulatory Commission of
Alaska website has been redesigned to
make processes and orders accessible to
the public. They have instituted
automatic email notification of orders,
notices, and filings, saving time, paper,
and postage. Internally they have cut
down on paper processes by scanning
filings and instituting electronic
document retrieval. Electronic filing
procedures are being developed for use by
the utilities.
3808 Ms. Thompson Maintained that the RCA will play a vital
role in the natural gas pipeline approval
process; the continuing transition to
communications competition; and the
development of sustainable rural
utilities - all matters of great
legislative interest as well.
3729 Representative Concern about backlog in decisions. Noted
Stoltze that a request for a change within
balloting has been delayed.
3710 Ms. Thompson Stated that she would like to identify
the case in question.
3553 Representative Meyer Referred to consumer complaints. He
observed that as new subdivisions are
developed, property owners would like to
have choice in companies. Unfortunately
consumers are caught between competing
companies and might go 30 - 60 days
before their phones can be hooked up.
3410 Ms. Thompson Stated that the Regulatory Commission of
Alaska opened a docket to discuss the
issue in Anchorage to resolve the phone
competition issue. The docket is still
open and the Commission is still working
on the issue. She emphasized that
consumers need an advocate to protect
them.
3253 Representative Croft Spoke to the competition issue in
Anchorage. He questioned how it is
possible to know when there is enough
competition.
3208 Ms. Thompson Pointed out that there are no federal or
state regulations to determine when
competition is optimized. The Commission
is examining all their competition
markets to research the issue.
3107 Representative Croft Questioned the market share position in
Anchorage.
3053 Ms. Thompson More than 40 percent of the local market
has gone to the competitive carrier.
3031 Representative Croft Stressed that the issue is balance: too
little or too much competition can create
problems. He questioned if affects of too
much competition through a slowing of
expansion has been seen.
2939 Ms. Thompson The Commission has observed that there
are many more opportunities for
consumers. Investment and innovation has
continued to come to the consumer. It is
a market in transition. The entombment
has made significant investments in
broadband and wireless.
2758 Representative Croft Referred to unbundled networks.
2745 Ms. Thompson Explained that under the federal 1996
Telecommunications Act, incumbents are
required to lease portions of their
network to competitors. The FCC came up
with a methodology that has been upheld
in the courts.
2609 Ms. Thompson Observed that the question is whether
competitors will be allowed to come into
a market without any infrastructure. The
loop is currently being leased, which is
not a big issue in Alaska.
2524 Representative Croft The question is whether the state of
competition has been meet in Anchorage.
2454 Ms. Thompson Clarified that there is a maximum of two
years to conclude review.
2431 Representative Croft Questioned if there is more competition
in the Anchorage market than other areas
in the nation.
2403 Ms. Thompson Acknowledged that Alaska is at the head
of the curve because the state of Alaska
did not start with a Bell company.
2340 Representative Referred to efficiencies in Power Cost
Stevens Equalization.
2324 Ms. Thompson Noted that the Regulatory Commission of
Alaska has statutory direction to make
sure that compensations occur within
guidelines. Efficiency criteria in
Regulatory Commission of Alaska's
regulation are being modified with public
discussion. They are also working to make
the administration of the program fair
and more efficient. Efficiencies apply to
fuel consumption. Utilities aren't paying
for employees of other departments.
2057 Representative Joule Asked for further discussion on
sustainable rural utilities.
2026 Ms. Thompson Explained that funding to build rural
utilities is being reviewed.
1937 Ms. Thompson Rural utility subsidies may be needed if
there is not enough economy to support
them.
1844 Ms. Thompson In response to a question by
Representative Joule, Ms. Thompson stated
that the Commission had not been involved
in the selection of the type of operating
systems used by rural communities.
1749 Representative Discussed the Chugiak market.
Stoltze
1722 Ms. Thompson Explained that under the federal act, the
district is considered rural. A finding
would have to be made that competition is
needed in the area.
ADJOURNMENT The meeting was adjourned at 2:59 PM
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