Legislature(2003 - 2004)
03/19/2004 04:00 PM House L&C
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 19, 2004
4:00 p.m.
MEMBERS PRESENT
Representative Anderson, Chair
Representative Carl Gatto, Vice Chair
Representative Nancy Dahlstrom
Representative Bob Lynn
Representative Norman Rokeberg
Representative Harry Crawford
MEMBERS ABSENT
Representative David Guttenberg
OTHER LEGISLATORS PRESENT
Representative Bruce Weyhrauch
COMMITTEE CALENDAR
HOUSE BILL NO. 452
"An Act relating to licensing and regulation of sport fishing
services operators and fishing guides; and providing for an
effective date."
- MOVED CSHB 452(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 453
"An Act exempting from regulation under the Alaska Public
Utilities Regulatory Act wholesale agreements for the sale of
power by joint action agencies and contracts related to those
agreements, and joint action agencies composed of public
utilities of political subdivisions and utilities organized
under the Electric and Telephone Cooperative Act."
- HEARD AND HELD
HOUSE BILL NO. 379
"An Act establishing an office of citizenship assistance in the
Department of Labor and Workforce Development."
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 421
"An Act relating to reconveyances of deeds of trust."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 452
SHORT TITLE: GUIDED SPORT FISHING
SPONSOR(S): REPRESENTATIVE(S) HEINZE
02/16/04 (H) READ THE FIRST TIME - REFERRALS
02/16/04 (H) L&C, JUD, FIN
03/17/04 (H) L&C AT 3:15 PM CAPITOL 17
03/17/04 (H) Heard & Held
03/17/04 (H) MINUTE(L&C)
03/19/04 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 453
SHORT TITLE: JOINT ACTION AGENCIES
SPONSOR(S): REPRESENTATIVE(S) HEINZE
02/16/04 (H) READ THE FIRST TIME - REFERRALS
02/16/04 (H) L&C, FIN
02/27/04 (H) L&C AT 3:15 PM CAPITOL 17
02/27/04 (H) Heard & Held
02/27/04 (H) MINUTE(L&C)
03/05/04 (H) L&C AT 3:15 PM CAPITOL 17
03/05/04 (H) -- Meeting Canceled --
03/19/04 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
BEVERLY MINN, Owner
Sitka's Secrets
Sitka, Alaska
POSITION STATEMENT: Testified in opposition to HB 452.
JOEL HANSON
The Boat Company
Sitka, Alaska
POSITION STATEMENT: Voiced concerns with portions of HB 452.
ROB BENTZ, Deputy Director
Division of Sport Fish
Alaska Department of Fish & Game (ADF&G)
Juneau, Alaska
POSITION STATEMENT: Answered questions relating to HB 452.
THERESA WEISER
Sitka, Alaska
POSITION STATEMENT: Testified in opposition to HB 452 in its
present form and suggested changes.
JOHN BELCHER
Sitka, Alaska
POSITION STATEMENT: Testified that he believes the penalties in
HB 452 are harsh.
DWIGHT KRAMER, Chairman
Kenai/Soldotna Fish and Game Advisory Committee
Kenai, Alaska
POSITION STATEMENT: Testified that his organization is in
support of CSHB 452.
KELLY HEPLER, Director
Division of Sport Fish
Department of Fish & Game
Juneau, Alaska
POSITION STATEMENT: Was available to answer questions on HB
452.
REUBEN HANKE, Owner
Harry Gaines Kenai River Fishing
Kenai, Alaska
POSITION STATEMENT: Testified in support of HB 452.
RON RAINEY, Chairman
Kenai River Sportfishing Association
Kenai, Alaska
POSITION STATEMENT: Testified that his association favors HB
452.
ANDREW SZCZESNY, Kenai River Guide
Soldotna, Alaska
POSITION STATEMENT: Concurred with Mr. Hanke's testimony
regarding HB 452.
MARK GLASSMAKER, Vice President
Kenai Professional Guide Association
Kenai, Alaska
POSITION STATEMENT: Testified that CSHB 452 had unanimous
support among their board of directors.
MARK K. JOHNSON, Commissioner, Chair
Regulatory Commission of Alaska (RCA)
Department of Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 453.
DAVE CALVERT, Utilities Manager
City of Seward
Seward, Alaska
POSITION STATEMENT: Testified on HB 453, saying he was opposed
to the JAA's being unregulated and didn't support the bill in
its current form.
WILLARD DUNHAM, Member
City Council
City of Seward
Seward, Alaska
POSITION STATEMENT: Testified that the council was opposed to
HB 453.
RICK BALDWIN, General Counsel
Homer Electric Association (HEA)
Homer, Alaska
POSITION STATEMENT: Testified that HEA is opposed to the
deregulation of wholesale power contracts as proposed by HB 453.
CHRISTINE PIHL, Vice President
Seattle Northwest Securities Corporation
Seattle, Washington
POSITION STATEMENT: Testified as a representative of Chugach
Electric Association in favor or HB 453 and answered questions.
ERIC P. YOULD, Executive Director
Alaska Power Association
Anchorage, Alaska
POSITION STATEMENT: Testified that with the exceptions of Homer
Electric Utility and Seward Electric Utility, his association is
in favor of HB 453.
ACTION NARRATIVE
TAPE 04-29, SIDE A
Number 0001
CHAIR ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 4:00 p.m. Representatives
Anderson, Gatto, Dahlstrom, Lynn, and Crawford were present at
the call to order. Representative Rokeberg arrived as the
meeting was in progress. Also present was Representative
Weyhrauch.
HB 452-GUIDED SPORT FISHING
CHAIR ANDERSON announced that the first order of business would
be HOUSE BILL NO. 452, "An Act relating to licensing and
regulation of sport fishing services operators and fishing
guides; and providing for an effective date." [Before the
committee, adopted as a work draft on 3/17/04, was Version D,
labeled 23-LS1619\D, Utermohle, 2/27/04.]
Number 0188
BEVERLY MINN, Owner, Sitka's Secrets, noted that she has
operated a single charter boat in Sitka since 1986. Testifying
against HB 452, Ms. Minn said she believes the bill is
unnecessary; she and her husband already are overregulated. She
also suggested this bill wouldn't increase safety or aid the
industry, and would be costly and meaningless.
CHAIR ANDERSON asked Ms. Minn if there was any consensus they
could come to or whether she was totally opposed to the bill.
MS. MINN said the bill as currently written is totally adverse
to her business.
Number 0347
JOEL HANSON, The Boat Company, focused on the personal-
possession clause, suggesting there needs to be a standard of
reasonableness. He explained:
We operate small, open skiffs that are auxiliary boats
to our larger vessels. ... The "personally possessed"
clause in House Bill 452 would require our guides to
actually have on them documents that even the Coast
Guard doesn't require to have on them. I just checked
with Juneau MSO [Marine Safety Office] ... and it
turns out that the Coast Guard's requirements is for
certain items to be available for inspection, is their
terminology, which means reasonably available so that
they can make sure that you are licensed. That would
include things like a copy or an original of your
captain's license, the proof of enrollment in a random
drug-testing program, first aid and CPR
[cardiopulmonary resuscitation].
This bill would require all of those items to be
actually carried on your person. And in a small, open
boat that doesn't have a pilot's house, that doesn't
have a place to keep documents, it would make you
basically subject to a criminal fine and penalties if
you didn't actually have those documents on you. So
there needs to be a "reasonable" clause in here, a
"reasonableness" clause of some kind.
CHAIR ANDERSON asked Mr. Hanson if he had Version D and could
propose a change to address his concern.
Number 0510
MR. HANSON affirmed that he had [Version D] and referred to
page 5, lines 13-14, subsection (e)(2), which read:
(2) the current licenses, tags and permits that are
required to engage in the sport fishery for which the
sport fishing guide services are being provided;
MR. HANSON said these lines would require that a guide have on
his/her person a sport fishing license and a sport fishing king
salmon tag, even though current regulations don't require these
documents. He pointed out that guides aren't permitted to fish
for king salmon.
CHAIR ANDERSON interjected that he thought Mr. Hanson was
misinterpreting the law. He said, "I don't think it said it's
mandated they carry a king salmon tag." He asked whether
Mr. Hanson thought he could carry a license and a permit in an
open boat.
MR. HANSON admitted this actually was not a problem. He then
referred to page 5, lines 23-26, page 5, paragraph (6), which
requires a guide to carry proof of licensure by the U.S. Coast
Guard to carry passengers for hire. He pointed out that the
Coast Guard requires an original document, not a copy; it also
requires a letter as proof of enrollment in a random drug
program, and first-aid and CPR cards. He recognized these
weren't burdens either.
Number 0720
ROB BENTZ, Deputy Director, Division of Sport Fish, Alaska
Department of Fish & Game, replied to Mr. Hanson's concerns:
Current licenses, tags, permits required to engage in
the sport fishery are requirements for every sport
angler. And one of the provisions of this bill is
that any guide have a current sport fishing license.
They would have to carry [it] just like any other
sport-fishing angler in the state, other than children
under 16. Proof of insurance, proof of licensing by
the Coast Guard: they already have to carry their
Coast Guard license on board, as I understand it.
MR. HANSON noted that the Coast Guard recognizes the
difficulties of carrying original documents in small boats that
are attached to a mother vessel. He said he'd spoken with the
MSO in Juneau, who said the Coast Guard boarding officers
wouldn't require the guide to carry that documentation on his or
her person. He added, "There's a reasonableness that they're
willing to abide by that this legislation does not recognize."
Number 0838
THERESA WEISER, Sitka, agreed with Mr. Hanson's concern about
physical possession of documents. She said, "I think that there
could be a better wording that would just say if it's on the
grounds, so that it's nearby." As for the bill itself, she
said:
I am not in favor of it unless there were some
changes. One of the changes I see is the insurance
line. If anybody in this town is doing charters for
cruise ship passengers, they're required to have
$1 million per incident ... coverage. ... There's a
lot of commercial fishermen out there that are fishing
for a charter boat license, if it should ever go to
limited entry, that are registered as charter boats.
This bill isn't going to stop them from registering,
but it might slow some of them down if that insurance
requirement was up there where it should be anyway.
So, I would propose that the insurance requirements
were raised to at least a minimum of [$1 million]. ...
They don't have near the amount of regulations that we
already face, and I feel that this bill is like
putting more regulations on us.
My last comment is in regards to the penalties. I
think that they are very severe for what possibly
could happen as a minor infraction. I think that
needs to be looked at more closely before I would give
my support to this bill. ... For an example, the part
where it says if we know that a client has committed
some kind of a violation, we would have to report that
violation: there could be a violation the client has
committed that we weren't any way part of. And the
example I will give is that a client comes up and
fishes with some outfit and catches three kings in
May. He's caught his annual limit of kings and he
comes back in August to fish cohos, but he buys a king
stamp ... and he goes out with a different outfit or
he goes out with the same outfit and he catches more
kings.
If we know that, whether we overheard it in a bar ...
or we witnessed it just across the water, are we now
in the position of having to report this violation?
We are not the enforcement officers, and I don't think
we should be put in the position of having to act like
enforcement officers.
Number 1026
REPRESENTATIVE LYNN suggested alternative wording such as "in
close proximity" or "reasonably nearby".
MR. BENTZ said he knows the Department of Public Safety (DPS)
and the Coast Guard have used discretion when they encountered
incidents similar to the example Ms. Weiser had given.
MS. WEISER replied, "That is not our personal experience here
with enforcement in Sitka, and we wish that that would be the
way it would be, but it is not that way."
Number 1096
JOHN BELCHER, Sitka, spoke to the severity of what he called
harsh penalties in HB 452, asking if these same penalties
applied to commercial fishing. He inquired, "If I were to lose
my guide license after three violations, does a commercial
fisherman lose his ability to conduct his fishing for doing the
same thing?"
MR. BENTZ responded:
We did compare the proposed penalties in House Bill
452 with existing penalties for some of the other
natural resource violations. ... The maximum fine for
a class A misdemeanor in this bill is up to $10,000,
one year in jail. Penalties and fines for violations
of big-game guides have fines up to $30,000 and one
year in jail. For commercial fishermen, it's fines up
to $15,000 and one year in jail. So the proposed
fines are somewhat less than those for the other two
groups.
Number 1200
DWIGHT KRAMER, Chairman, Kenai/Soldotna Fish and Game Advisory
Committee, testified in support of HB 452 on behalf of his
organization. He said:
We realize this bill may change throughout the
process, but we support it in principle and feel it
may be an important piece of the puzzle in future
efforts regarding guide industry issues. One
suggestion we might make, where it talks about reports
and says the department shall collect information from
the fishing organizations, perhaps it doesn't need to
be analyzed every year for every place. We're saying
that the implementation costs and costs to collect and
analyze that data, perhaps these costs could be
reduced if data-analyzation needs were identified by
discretionary areas on an annual basis.
Number 1250
KELLY HEPLER, Director, Division of Sport Fish, Alaska
Department of Fish & Game, agreed with Mr. Kramer's comment and
thanked him for the observation.
Number 1265
REUBEN HANKE, Owner, Harry Gaines Kenai River Fishing, testified
in support of HB 452. He stated:
The guides on the Kenai River have been adhering to
standards such as those found in House Bill 452 for
the past 15 years. It's produced a more professional
industry and helped our clientele feel safe about
their Alaskan experience. I hope that you will pass
this bill in order to help standardize and
professionalize the sport fish guiding industry. ...
As far as carrying credentials in open boats, in my
business I have five 20-foot boats, and all of my
guides are required to carry all of their permits and
licenses on their person in the boat, and it's not a
problem.
REPRESENTATIVE ROKEBERG asked what type of insurance Mr. Hanke
has for his business.
MR. HANKE replied that he is required to have liability
insurance with the same limits listed in HB 452. In further
reply, he said his insurance is readily available and reasonably
priced.
Number 1355
RON RAINEY, Chairman, Kenai River Sportfishing Association,
testified that his association favors HB 452 for the same
reasons Mr. Hanke expressed. He felt is was better for the
sport fishing public to have these regulations in place. He
then said:
The lady that said we shouldn't be held responsible
for people breaking the sport fishing laws around us
in our vicinity, I totally disagree with that. I
think we should all take responsibility for making
sure that our fishing laws are adhered to and upheld.
I would take strong exception to [Ms. Weiser's
position on reporting violations]. We should
absolutely get after those people that don't do that.
Number 1418
ANDREW SZCZESNY said he was a Kenai River Guide for 18 years and
agreed with Mr. Hanke's testimony. He said, "Not only do I have
to do a lot of the same things that this bill states, but also I
deal with the [U.S.] Department of the Interior with the same
type of stuff. I've never had a problem in 18 years of dealing
with this stuff." He responded to questions from Representative
Rokeberg, saying that carrying the logbook in a boat isn't a
problem and that typically he fills out the information
regarding the number of clients and their names five minutes
before the trip starts. He didn't think adding information
about the fish that were harvested would present a problem.
MR. BENTZ noted that currently the saltwater charter logbook
policy allows for leaving the book in a vehicle at the boat
launch; guides return from a trip and then fill out the logbook
while the clients are still on site.
REPRESENTATIVE ROKEBERG expressed concern that the language in
the bill was vague with regard to when the logbook had to be
filled out.
MR. BENTZ indicated this is a policy decision and said, "We're
not trying to make this an enforcement tool we beat up people
on. We know people get cited for these type of things." He
said the intention is to get the information, for better
management."
REPRESENTATIVE ROKEBERG suggested adding the following: "The
department shall periodically collect information".
MR. BENTZ replied that the guides record for every trip they
take, usually filling out the reports at the dock afterwards.
MR. RAINEY said he didn't believe the logbooks had been a
problem and that many guides kept detailed records.
REPRESENTATIVE ROKEBERG noted, "The department's comments say
one thing, the bill says another, and then they are saying
another thing. They have the right to make the regulations, so
I want to make sure that this is clear and very well understood
by anybody."
Number 1760
MARK GLASSMAKER, Vice President, Kenai Professional Guide
Association, noting that he'd speak for other members of the
association, testified that HB 452 had unanimous support from
its board of directors. He characterized this legislation as a
necessary first step, and mentioned professionalizing the sport
fish guide industry statewide. He said:
We are very much in favor of the information-
collection portion of the bill, as we feel the
information provided will greatly assist Board of
[Fisheries] and fisheries managers on establishing new
regulations and assessing individual fisheries.
Finally, as you are well aware of, and as many of my
colleagues have already pointed out to you, Kenai
River guides have been abiding by stringent state park
stipulations since 1985, and we are glad to see the
remainder of the state adhere to many of the same
standards of professionalism and safety.
CHAIR ANDERSON closed public testimony. He asked Representative
Rokeberg whether he was still interested in making an amendment.
Number 1834
REPRESENTATIVE ROKEBERG explained, "It needs to be clear when
the report should be done. It says under comments that they
have to be filled out while still on site. It doesn't say that
in the bill. When is it supposed to be done?"
MR. HEPLER responded:
I apologize for the confusion that we caused, because
the response we gave back to the committee at that
time was directed toward one person's comment that
runs big boats. Our comment back focused on big
boats. We didn't address the concern
[Representative] Rokeberg brought, and that's what
about if somebody's in a small boat somewhere on
Prince of Wales Island. That's where Rob [Bentz]
explained the other half is that we don't expect
people to necessarily carry that with them and then,
at the end of the day, before they put their boat on
the trailer and take it back out, we want it filled
out. That's what our intent is.
I understand your concern is that it doesn't say that
clearly in here, so does that leave room, then, if we
get a zealot coming in who's a protection officer, one
of our own, to come in and cite people. That isn't
the intent. We're not meant to harass people. I
guess we can think of some language and tighten it up.
That's what we're looking for: protection of the
people so we don't unnecessarily cause them problems,
while still getting our information.
CHAIR ANDERSON proposed that the suggested change be carried to
the House Judiciary Standing Committee, the next committee of
referral, where he is vice chair. He added that the current
committee would defer to the sponsor and [Mr. Hepler].
MR. HEPLER offered to draw up some draft language.
Number 1986
REPRESENTATIVE LYNN moved to report CSHB 452, Version 23-
LS1619\D, Utermohle, 2/27/04, out of committee with individual
recommendations and the accompanying fiscal notes. There being
no objection, CSHB 452(L&C) was reported from the House Labor
and Commerce Standing Committee.
HB 453-JOINT ACTION AGENCIES
Number 2020
CHAIR ANDERSON announced that the final order of business would
be HOUSE BILL NO. 453, "An Act exempting from regulation under
the Alaska Public Utilities Regulatory Act wholesale agreements
for the sale of power by joint action agencies and contracts
related to those agreements, and joint action agencies composed
of public utilities of political subdivisions and utilities
organized under the Electric and Telephone Cooperative Act."
CHAIR ANDERSON noted that Tuckerman Babcock of Matanuska
Electric Association (MEA) and Jim Posey of Municipal Light and
Power (ML&P)] had testified on 2/27/04 and were present to
answer questions.
Number 2054
MARK K. JOHNSON, Commissioner, Chair, Regulatory Commission of
Alaska (RCA), Department of Community & Economic Development,
testified:
I did give brief comments the last time the committee
considered this bill. The bill is, in our estimation,
fundamentally flawed. It is a flawed response to an
announced and perceived issue. ... We're interested in
working over the long term with the utilities to solve
the fundamental problems that exist with the supply of
electric energy in the Railbelt. Unfortunately, we
believe that the method and the form that has been
embodied in this bill suffers from a number of very,
very large flaws.
In Section 2 of the bill, the amendment to
AS 42.05.711 to provide an exemption from RCA
jurisdiction for proposed joint action agencies [JAA]
amounts to a blank check for entities that might be
involved in such an agency. It removes all forms of
state regulation from such entities. It would set
this state on a path in terms of the provisioning of
electric utility that would be unlike that which
exists anywhere else in the country. In our
estimation, it is not a responsible road to go down,
and we're frankly disappointed in what we believe are
well-run utilities with wise leadership pursuing and
sponsoring and supporting this approach.
The last time that the bill was heard by the
committee, I was a little surprised to hear a
statement made by one of the utility heads that
testified in favor of the bill that suggested that
somehow the RCA did not have jurisdiction over and
provide for review of wholesale power contracts. We
believe that's an inaccurate statement of the law.
AS 42.05.431(b) provides explicitly for that
authority, and we choose to exercise it. I just want
to get that on the record to clarify things.
Number 2182
MR. JOHNSON continued:
There are challenges facing electric utilities in the
Railbelt. The infrastructure, the generation
capacity, the turbines - largely powered by natural
gas - that exist are aging. There will be a need for
substantial investment in new [plants] in the years
ahead.
From our perspective, the establishment of a regime
that does not have any sort of review process in terms
of the reasonableness of expenditures that might be
incurred, or the scope of such projects, is, once
again, just not good public policy. Understand that
it is highly probable, should the bill be passed in
its current form, or ... in amended form that I have
seen, ... that the projects to be undertaken, once
again, without any sort of measure of their size, the
result would be that there would be no ability to
control the largest ... cost component of electric
service to the Railbelt.
Number 2233
MR. JOHNSON continued:
Our ability to review the wholesale electric-
generation costs would be gone, and no entity would
take our place. Once again, we simply don't believe
that's responsible. We don't believe that's
leadership on the part of the legislature. That's
abandonment of what ought to be a reasonable role in
terms of supervision of these very large, very
capital-intensive public utilities.
I want to mention, just in general, I have seen a
proposed amendment. If anything, the revised version
of this legislation is worse than the original. I
have asked the attorneys at the Department of Law to
take a look at it. They believe that fundamental
changes would be accomplished to the existing joint
action agency that deals with the complex and
extremely problematical Four Dam Pool joint action
agency.
The ... changes to the proposed ... [AS] 42.05.431(c),
paragraph (3), ... page 2, line 15, the redesignated
paragraph (2) that would now be paragraph (3), adds,
very quietly, additional language that says, "or (2)"
at the end of that line.
The attorneys at the Department of Law advised me that
that probably opens up a wide potential field of
action for the Four Dam Pool joint action agency under
this legislation that I don't think is intended - or
if it is intended, it's something that the legislature
needs to consider with great deliberation.
Number 2350
MR. JOHNSON continued:
It was enormously complex to put together the agency
and solve some of the problems associated with Four
Dam Pool. And, from my perspective, ... to make
adjustments to that situation at this point in the
game is a very, very dangerous thing to do. I don't
think the committee wants to go there. I'm a little
reluctant to share them too much, in that I have not
asked for a formal opinion from the Department of Law,
but I have communicated with my attorney, who did an
analysis of a proposed CS [committee substitute],
which was provided me by the sponsor.
Number 2358
CHAIR ANDERSON referred to page 2, line 15 [paragraph (2)]. He
asked Mr. Johnson what he thought it meant in regard to the Four
Dam Pool.
MR. JOHNSON replied:
That is what's not certain. Once again, if we're
dealing with a CS and I'm trying to analyze the three
pages of comments which [the sponsor] put together, I
believe that the conclusion is that the proposed new
subsection [paragraph] (2) will make the limited
exception provided to the Four Dam Pool ... [tape ends
mid-speech].
TAPE 04-29, SIDE B
Number 2370
MR. JOHNSON expressed concern that the Four Dam Power Pool
Agency would be exempt from the new AS 42.05.431(c)(2).
CHAIR ANDERSON replied, "So it would debilitate operations of
Four Dam Pool."
MR. JOHNSON agreed and recommended enormous caution. He
continued:
We appreciate that the utilities are trying to develop
an approach to financing and otherwise making
investments in new plant and equipment. One of the
things ... is, we're not necessarily a barrier to that
investment. We do review it, and we do check it for
reasonableness. We ensure that a variety of issues
are reasonable and prudent in the course of those
activities. At the same time, our activities also
provide, in our estimation, a lot of stability to the
marketplace; they provide a lot of certainty to
lenders. I'm sure we could hear arguments that our
actions sometimes generate uncertainty. That is the
nature of regulation, I suggest.
I can only speak for myself on the commission, but my
interest is to provide stability and certainty to
industry to make necessary investment. I don't
believe that simply excising RCA jurisdiction and
doing away with that supervision or regulation is the
way to get there.
I don't believe that the utilities have put a whole
lot of work into this as yet. I indicated when I
testified before the committee two weeks ago that
we're disappointed in this effort. It falls short of
what we think is probably necessary to solve the
problems. I guess ... solutions are out there;
solutions can be achieved. They will not be achieved
through a compressed timeframe. I'd be interested in
establishing a framework so we could work with
utilities.
Number 2255
MR. JOHNSON concluded:
I'm a public employee. ... We regulate - we don't run
- these utilities. We ... also regulate
telecommunications, which is enormously complex in its
own right, as well as setting intrastate pipeline
tariffs. There's a lot of work that could be done.
We don't believe that this legislation ... is at all
"ready for prime time". This is a plane, which if
allowed to take flight, will not fly for very long or
very well.
REPRESENTATIVE ROKEBERG asked if current statutes prohibit
regulation of wholesale power sales.
MR. JOHNSON said no. He paraphrased a portion of
AS 42.05.431(b), which read in part, "A wholesale power
agreement between public utilities is subject to advance
approval of the commission." He said there is no qualification
in that statute. He said RCA examines wholesale power
agreements and, to his understanding, in the Lower 48 the
Federal Energy Regulatory Commission (FERC) reviews such
agreements.
REPRESENTATIVE ROKEBERG pointed out that the statute goes on to
say the commission may not invalidate any portion or sale
obligation of the agreement unless it finds that the rates set
are not just and reasonable.
MR. JOHNSON replied that the RCA may not invalidate such an
agreement, but "if the rates are not just and reasonable,
they're not just and reasonable." He added, "Those costs would
represent an imprudent expenditure for an entity that was
purchasing wholesale power."
REPRESENTATIVE ROKEBERG suggested the statute was ambiguous. He
asked Mr. Johnson if, as commissioner, he had full jurisdiction
for the approval of these agreements.
MR. JOHNSON affirmed that. He said he didn't believe any of
these agreements had come before the RCA during his tenure, so
he could not claim personal experience; however, it was his
understanding that the RCA has jurisdiction.
REPRESENTATIVE ROKEBERG asked if the RCA relied on its
jurisdiction being allowed in contractual agreements or derives
its authority from state statutes.
MR. JOHNSON replied, "I do not believe that the statements that
are being made to the effect that 'allows our review' is an
accurate one. That statement is not what the statute permits."
Number 2130
REPRESENTATIVE ROKEBERG asked if the statute means the RCA must
approve an agreement; or would the RCA "go out and take
jurisdiction" if the utilities entered into a contract, he
further asked.
MR. JOHNSON replied that he'd rely on legal counsel's
interpretation, but his interpretation was that the law gives
the RCA the jurisdiction to review contracts for reasonableness.
REPRESENTATIVE ROKEBERG noted that the statute indicates that
the RCA doesn't set the rates; rather it requests renegotiation.
MR. JOHNSON replied that if the RCA found the proposed rates
weren't just and reasonable, it wouldn't approve the agreement.
REPRESENTATIVE ROKEBERG asked if the RCA allows for rate
adjustment during the course of a contract.
MR. JOHNSON said he believed so; he referred to a docket before
the RCA that recently dealt with this issue, but said he wasn't
sufficiently familiar with it.
REPRESENTATIVE ROKEBERG asked if it was the testimony of Mr.
Johnson that the RCA has jurisdiction for prior approval and
that HB 453 would repeal that jurisdiction.
MR. JOHNSON replied that the proposed amendment to AS 42.05.711
in Section 2 of the bill clearly takes away the RCA's
jurisdiction with regard to JAAs.
Number 2019
REPRESENTATIVE GATTO stated:
When we look at just private industry, we talk about a
willing buyer and a willing seller, and we have a
willing seller and if the buyer doesn't agree, there's
no transaction. We certainly don't want to impose any
obligations on a buyer [so] that the seller is able to
set the price. They have to be a willing buyer,
because, I imagine, had the reverse been true, can you
imagine that a buyer gets to set the price on a
willing seller? ... Unless we have a willing buyer and
a willing seller, there is no agreement.
In the case of utilities, which I refer to sometimes
as monopolies, we give them monopolistic powers for
the sole purpose of keeping the cost to the consumer
down. Our job is mostly to protect the consumer
against excessive costs, because anybody who has
monopolistic power has huge power to simply say, "We
have an unwilling buyer, but we don't have to worry
about that." There's no place where an unwilling
buyer should be forced to accept the price of a
willing seller. In this case, if we don't have a
regulatory commission, we have an unwilling buyer.
MR. JOHNSON replied:
Certainly, the option would remain for the buyer to
construct their own plants, but that, obviously,
requires enormous lead-time and financing and enormous
investment. That's the option: you're either going
to take what's offered to you under a wholesale sale
situation, or you're going to have to go through the
process o putting together your own plants, ... or do
without.
These are problems that are inherent in a capital-
intensive industry such as the generation of electric
power. By and large, these utilities -- and I know
they have their differences, but they are all pretty
well run. I will say that.
Number 1945
REPRESENTATIVE GATTO said:
I know I'm asking the wrong person, but I intend to
ask the question again: Is there any conceivable
reason why a seller, who has all the privileges
they've had for all this time, to insist that "we do
such a good job that we would rather not have
regulation; we're just that good an industry and you
can trust us."
MR. JOHNSON replied that to his knowledge, generation of
electric power is the most capital-intensive industry in the
United States.
REPRESENTATIVE GATTO asked when removing the regulatory
commission would be advantageous to a consumer. Does the RCA
add so much to the cost of electricity that the consumer would
be better off if the RCA's regulation were removed, he further
asked.
MR. JOHNSON admitted that if the projects were constructed
"perfectly" in terms of scaling, location, and construction, the
cost of electricity could be advantageous to the consumer. He
said the point is that these projects would be based on faith,
since there would be no review mechanism in place if this bill
passes.
Number 1804
DAVE CALVERT, Utilities Manager, City of Seward, testified that
he is not opposed to the JAA, but is opposed to the JAA's being
unregulated. Seward buys its wholesale power from Chugach
Electric Company, which he said has provided assurance that this
[legislation] wouldn't affect their contract. He said he
thought Joe Griffith [of Chugach Electric Company], Jim Posey
[of ML&P], and Steve Haagenson [of Golden Valley Electric
Company] were reputable and trustworthy gentlemen. "But people
change and I'd like to have it in writing and I want the
consumers of Seward protected with RCA regulation on anything
that the JAA comes up with for power generation," he remarked.
CHAIR ANDERSON asked if Mr. Calvert supported the three entities
but not the bill in its current form.
MR. CALVERT affirmed that.
Number 1751
WILLARD DUNHAM, Member, City Council, City of Seward, testified
that the council opposes the change that the bill would bring
about. He noted that Seward has its own generation plant
capabilities. The city owns the line to 38 miles out of town;
it services its own customers out 24 miles, and then Chugach
Electric Company "picks them up". He agreed with Mr. Calvert in
that his concern is for the possible effect on the small utility
in Seward from the consortium that would be formed from the
three large utilities. They do have the capability of
generating their own electricity, but it's cost-prohibitive at
the present, which is why they buy a power block from Chugach
Electric Company. Mr. Dunham also voiced opposition to losing
the RCA's oversight and said, "When you talk about utilities ...
you should talk about all the utilities, not just a specialized
group."
Number 1675
RICK BALDWIN, General Counsel, Homer Electric Association (HEA),
noted that HEA is a cooperative of about 25,000 members and
said:
HEA has always supported the notion of cooperative
arrangements. But this bill goes far beyond just
cooperative arrangements, and HEA is opposed to the
deregulation of wholesale power contracts as proposed
by the bill. In fact, wholesale power contracts have
been regulated by the RCA and the [Alaska Public
Utilities Commission (APUC)], its predecessor, for
over 20 year, and they actually assumed jurisdiction
of those contracts about 20 years ago.
There's only one exception to deregulation of
wholesale power rates, and that's the Bradley Lake
project. But the Bradley Lake project had all
Railbelt utilities as participants, and each utility
still has a voice in the operation, management, and
rates on the project.
This really points to the reason HEA is so concerned
that the wholesale power market remain regulated.
Right now, the ownership of generation resources is
concentrated in a small number of utilities, and the
other utilities who lack the market power are really,
or would be, at their mercy, absent a regulation.
Simply amending HB 453 just to allow nonmember
utilities to demand regulation wouldn't solve the
problem.
It might solve the issue of fair rates. There are
issues, circumstances that may not even apply. It
doesn't ensure that power would even be available to
nonmember utilities. Second, it doesn't assure that
any power available after the joint action agency
members "skim the cream," so to say, from the project
would be of the same quality, reliability, and value
as that enjoyed by the dominant members.
Number 1560
MR. BALDWIN continued:
HEA's concern here is not merely academic. We
understand that the three large utilities have met and
negotiated the terms of a joint action agency [JAA]
agreement. They've excluded from that dialog, as we
understand it, the three members of the Railbelt most
dependent upon the purchase of wholesale power to
serve the needs of their retail customers.
The JAA is now uniquely positioned to use the
information garnered from the most recent Railbelt
energy study HEA participated in and actually provided
proprietary information. To use that information now
to move forward with construction with those projects,
potentially to the exclusion of the other utilities,
if that's the case, the other utilities' only
practical resource would be to purchase power from the
joint action agency or its members. If that's the
case, we certainly need regulation.
Number 1533
It's been suggested that in the absence of RCA
regulation, a utility would have [recourse] to the
courts for any unfair treatment. Yes, it's poor
legislation indeed that is enacted with the
expectation that it would generate litigation. The
court system is burdened enough without having to
adjudicate the inevitable antitrust and rate disputes
that might arise from the proposed amendments. ... The
courts are simply not equipped to deal with the
complex rate matters as efficiently and competently as
the RCA.
I don't think I need to explain to the committee how
the RCA is uniquely constituted to adjudicate rate
matters, how the RCA commissioners are appointed, and
what their backgrounds have to be. The RCA also
employs professional staff with expertise in the areas
of management, financial engineering, and ratemaking.
The commissioners have opportunities for specialized
training. RCA has rules that are intended to
streamline the adjudicatory process.
Contrast that with the courts. The judge may not have
any expertise in any area germane to the issue of
utility rates or operation. His staff typically
consists of a secretary and a law clerk fresh out of
law school. Procedural and evidentiary rules are more
cumbersome. It just defies logic to argue that
substituting superior court oversight for RCA
oversight makes for greater competence or improved
efficiencies in dispute resolution. I think just the
opposite would be the case.
There's no reason that the matter has to be resolved
in this session. Reason exists for deferring the
action. ... Inexpensive, reliable power is at the
heart of the present and future economic development
of every area in the Railbelt, not just where the big
utilities reside.
CHAIR ANDERSON asked if Seward, Homer, and Matanuska were the
three power customers excluded [from discussion about organizing
the JAA] that Mr. Baldwin referred to in his testimony.
MR. BALDWIN said that was his understanding.
Number 1393
CHRISTINE PIHL, Vice President, Seattle Northwest Securities
Corporation, representing Chugach Electric Association,
testified that she'd been working in the business for 19 years,
has assisted in the issuance of over $8 billion worth of debt,
and has advised public utilities throughout the West Coast and
Texas on financial matters. She said:
I'm here to give you a perspective and largely,
actually, a rating-agency perspective, so I have a lot
of quotes from them because they are an independent
evaluator of the financial strength of a utility. ...
What's being proposed here is not suggesting that you
let a bunch of wild horses out of the barn. It's
actually very much in keeping with what happens in
public power.
Given the importance, ... reliable and affordable
electricity plays a large role in our lives. It's in
the public interest to want your electric utility to
be of sound health and have access to capital at cost-
effective rates. A utility's credit rating is a proxy
for its cost of borrowing. Electric utilities,
particularly those with generation assets, rely
heavily on long-term borrowing to finance projects,
just as you borrow to fund a large expense like a car
or a home mortgage.
Credit ratings, like from Standard & Poor's and
Moody's and Fitch, provide an independent opinion on
the financial health and position of a utility,
particularly in comparison to other utilities. So,
you could say it's a free-market checks and balance on
the financial oversight of the utility. The
publications that these folks put out are widely read
by investors, I'd say, on a daily basis. Anybody who
buys public power bonds or invests in public power
credits reads these things. ...
The regulatory environment is a key factor in
evaluating the creditworthiness of a utility. For
example, being regulated is viewed as constraining a
utility's ability to respond to changes and financial
circumstances. If the utility isn't free to respond
quickly and timely, especially in today's power market
- which, as you all know, has been quite volatile and
quite evolving - a rating analyst can't be certain
that a utility's financial goals or policies will come
to fruition. It's really important to have some
certainty in rating the utility, because you want to
know their ability to pay back bonds that are being
issued in the future.
Number 1259
MS. PIHL continued:
When there is a regulatory presence, and if there's a
history of favorable regulatory treatment, the effects
of regulation can be somewhat muted. Standard &
Poor's recently did a survey of state regulators. The
survey revealed significant shifts in regulator
priorities. The responses indicate that utilities'
financial profiles mattered greatly to state
regulators, at least in the short term. Regulators
overwhelmingly said utilities need to maintain strong
financial profiles. That goes directly to their
ability to set rates quickly and respond to the
changing market.
In a situation where the regulatory body has a history
of being neutral, the threat of regulatory
interference may be somewhat lessened, but it's still
acknowledged that it exists.
The most difficult situation is when there's been a
precedent of negative regulatory treatment. This
conveys a great deal of uncertainty to investors and
lenders, and all of this can undermine the regulatory
environment.
MS. PIHL cited an example involving Chugach Electric Company and
gave details. She suggested it illustrated that the "greater
universe out there, the national capital markets community,
lives and dies by what the RCA says" with regard to credit
ratings and so forth.
Number 1090
CHAIR ANDERSON asked whether HB 453 would create superior
ratings or whether the same scrutiny would remain. He surmised
that Mr. Johnson would say, "Well, you do it yourself, and
there's still going to be scrutiny for the rating."
MS. PIHL replied that the rating agencies would always
scrutinize but would also note that with HB 453, Chugach
Electric Company would have better tools to respond to changing
financial conditions. She stated, "If you tie the hands of the
people making the decisions and the people who are closest to
the matter, then they are saying that you're going to constrain
the financial wherewithal of the utility."
Number 1048
REPRESENTATIVE CRAWFORD asked why now is such a critical time,
since very low interest rates apply.
MS. PIHL agreed interest rates are at historical lows, making
the cost of borrowing cheaper than ever before. She also said
the electric utility industry is more volatile now, with talk of
deregulation and alleged market manipulations by Enron
Corporation. Thus, it's a different marketplace for public
power than it was 10 years ago.
REPRESENTATIVE CRAWFORD said he thought the instability was due
to deregulation in the power markets. He recalled more
stability prior to deregulation. He asked, "Aren't we moving in
the wrong direction?"
MS. PIHL agreed with his analysis and added:
Possibly, but I think the genie's out of the lamp. We
are where we are in the power markets, and I don't
know that this issue can address that issue. But I
think you're right. They used to be stable. They're
not stable, and deregulation definitely had a hand in
that.
REPRESENTATIVE CRAWFORD commented:
I've got some real severe qualms here. I think that
because we're not on the grid, the national power
grid, that we don't have the ability to purchase
wholesale power from other entities. We only are able
to purchase power here from our Railbelt entities. ...
I'm not real sure that deregulation is a good thing in
the wholesale power market. You're telling us that it
is because it's the most critical time ever because of
deregulation. I'm just not sure that this is tracking
with me.
Number 0897
MS. PIHL replied that credit-rating agencies feel local control
and responsibility provide sufficient oversight. She added:
Public power is a fundamentally different business
than an investor-owned utility who has to make a
margin for an investor - someone who doesn't live in
the region, someone they're not providing power to.
Public power, around the nation, is viewed as somebody
who is responsible to their constituents, so there is
a different governing board and a different structure
in an IOU [investor owned utility].
CHAIR ANDERSON asked if she was saying, looking at "the
speculation from past," that this change would increase the
rating.
MS. PIHL replied, "It will lower the rating because it's viewed
as a negative constraint. Regulation ... inhibits a utility to
be nimble and respond to whatever changes come about. Also, who
knows better the debt covenants than a utility? ... Because they
are generation-intensive, the cost of capital is a big factor in
their underlying financial results."
Number 0759
REPRESENTATIVE GATTO asked how many utilities were blacked out
on the East Coast recently.
MS. PIHL said it was hundreds.
REPRESENTATIVE GATTO referred to the fact that Alaska has a
handful of utilities and only one major airline operating out of
Juneau, whereas the Pacific Northwest has "thousands of
utilities" and numerous options for buying and selling.
Number 0631
MS. PIHL responded:
Competition hasn't really taken over in the rest of
the nation; in particular, in Washington there's
public utilities and there's investor-owned utilities
but there's not a choice option. If you're served by
your public utility and you have a complaint, your
recourse is to go to your elected public utility
commissioners. ... The difference between a utility
here in Alaska and, say, an airline here in Alaska is
the airline is in business to make a profit, and a
public utility is not. Their basic articles of
incorporation, if you will, or the basic mission
statement is fundamentally different than a profit-
motivated entity, and they are governed by their
customers. That puts them in a different arena.
REPRESENTATIVE GATTO asked Ms. Pihl if she was familiar with the
lawsuit against Chugach Electric Company brought by MEA. He
explained that Chugach Electric Company had apparently
overcharged MEA, and the judgment resulting from the litigation
provided for a refund to MEA. He was one of the people who
received payment as a result of this suit, he noted, and said:
That's a check I could never get, even though I was
entitled to it, because we were overcharged by the big
corporation. So why would I expect ... to give them
the authority to say, "You can raise the rates and we
cannot sue you," and trust them now, after litigation
indicated that we couldn't trust them before?
MS. PIHL replied that she wasn't familiar enough with the
litigation to comment. She went on to say:
Generally speaking, competition hasn't really come to
fruition in the Lower 48. It certainly doesn't exist
in Washington or Oregon. That hasn't really taken
root in Texas. It was a failure in California. I, as
a ratepayer, don't have a choice who I get power from.
Number 0417
REPRESENTATIVE GATTO responded that she may not have a choice,
but the utility she buys from has a choice of whom they buy
power from.
MS. PIHL agreed and continued with her testimony:
It's become more evident that state regulators
elsewhere have an increasing interest in financial
profiles and, to the extent that Alaska's regulatory
environment does not support this thinking, it creates
a big red flag in the capital markets. ... It's
important ... that there's a favorable environment
but, right now, there's an impression to the rest of
the world that there's an unfavorable environment, and
that's definitely costing ratepayers money in Alaska
because it's going to cost more to build generation or
to finance generation.
Everything that I've said here I've attributed to
Standard & Poor's, Fitch ratings would echo. ... They
downgraded Chugach two notches again, citing the
regulatory environment. Clearly, there's some sort of
connection between a lower credit rating, a higher
cost of capital, and an unfavorable regulatory
environment.
My conclusions were that regulatory oversight is
viewed as a constraint to financial flexibility,
particularly in these times of evolving markets, when
timely response is important. Negative regulatory
environment casts a long shadow over the credit
quality of the bodies that they regulate, so that's
hoped to be avoided.
A lower credit rating means higher borrowing costs,
and ML&P and Chugach both have very good relationships
with the credit-rating agencies. If they were to fall
below the "A" category into the triple "B" category,
that's going to put them in a whole unfavorable realm
of financing, which is going to be a significant cost.
This notch was a cost, but if they get dropped one
more time, it's going to put them in a whole other
league of basically bad news.
By and large, around the nation, public utilities are
not subject to state regulatory oversight but are left
to the oversight of their members, their customers,
and the people who have a direct vested interest in
the stability of the utility. I think subjecting JAA
to state regulatory oversight will, in the long run,
... cost you more in financing your capital, so it's
going to mean higher rates to the ratepayers
throughout Alaska.
Number 0218
REPRESENTATIVE ROKEBERG asked Ms. Pihl to clarify what she does
professionally.
MS. PIHL replied that she is an underwriter and a financial
advisor for Seattle Northwest Securities Corporation and goes to
the rating agencies with utilities.
REPRESENTATIVE ROKEBERG asked if, as Ms. Pihl had testified, the
regulatory environment was responsible for the downgrading of
Chugach's bond rating, or whether it was a result of the finding
by the RCA that impacted its balance sheet and financial
condition.
MS. PIHL replied that both played a part.
REPRESENTATIVE ROKEBERG said the U.S. is broken down into five
regional grids, and Ms. Pihl is from the western area. He asked
if there is regulation on wholesale sales of power in the
western grid.
MS. PIHL replied that there was no regulation on these sales.
REPRESENTATIVE ROKEBERG asked if this deregulation applied to
both industrial utilities and public co-op utilities.
MS. PIHL replied that it did, and that many utilities had
surplus energy to sell. She said, "Folks freely sell power back
and forth from one utility to another without oversight."
REPRESENTATIVE ROKEBERG pointed out that state utility
commissions regulate the retail sales traditionally.
MS. PIHL added, "Only of investor-run utilities, not public
power or co-ops."
REPRESENTATIVE ROKEBERG noted that all of Alaska's utilities are
publicly owned, with a few exceptions. He went on to say that
one of the problems in the national grid right now is lack of
regulation in wholesale power. One of the biggest problems in
the country is the breakdown and failure of the national
transmission system. He said [blackouts] are a result of, or a
symptom of, the deterioration of the national grid because there
isn't regulation.
TAPE 04-30, SIDE A
Number 0010
REPRESENTATIVE ROKEBERG continued, saying the incentive goes
into generation investment and capacity, not necessarily the
transmission capacity.
Number 0037
REPRESENTATIVE DAHLSTROM asked Ms. Pihl if she had ever worked
as a consultant or advisor for any Alaskan utility.
MS. PIHL replied that she'd worked for Chugach Electric Company
and on a Bradley Lake "refunding".
REPRESENTATIVE DAHLSTROM asked if it was common for Alaska
utilities to go to Wall Street for financing.
MS. PIHL replied that Chugach Electric Company and ML&P had done
so. In order to be able to go to Wall Street for financing, a
company must have the right credit rating and a certain size.
She said smaller utilities have access to capital through the
Rural Utility Service (RUS), under the U.S. Department of
Agriculture, and these smaller utilities are being encouraged to
get credit ratings in order to speed up the process for loan
approval.
REPRESENTATIVE DAHLSTROM asked Ms. Pihl if she was currently
employed by Chugach Electric Company.
MS. PIHL replied, "I do consulting work for them from time to
time."
Number 0275
ERIC P. YOULD, Executive Director, Alaska Power Association,
testified that he represents the majority of the electric
utility industry in Alaska. He said:
The members that I do represent generate about 90
percent of the electricity throughout the state. The
testimony that I've heard today has kind of thrown me
off stride. ... I'm particularly upset and disturbed
with the testimony of Mr. Mark Johnson. I don't think
that he gave you the full picture on what we're
dealing with here in the state of Alaska. I'd hoped
that we could get into some of the issues of, let's
say, monopolies and that sort of thing.
We have taken a position of favoring joint action
agencies in the state of Alaska. We have done that by
resolution. Since that resolution was passed, then
this bill came along, which is a different question of
"do you favor a joint action agency or not." This
particular piece of legislation would actually allow
the utilities to create a JAA without regulatory
oversight of its wholesale contract as it relates to
certain assets in their portfolio.
The trade association itself has taken a position of
being in favor of this bill. I say that, however,
because, for the purpose of full disclosure, I have to
tell you that two of my utilities, both Seward and
Homer Electric, do not favor this bill. Frankly, when
my group got together to discuss this particular bill,
these two utilities, for whatever reason, did not
participate in that discussion. But, nevertheless, we
tried to make sure that the pros and cons of this bill
were properly presented, and, as a result of that, my
body decided that they were in favor of this bill.
Number 0418
MR. YOULD continued:
There is a concern that we get the best financing for
entities such as joint action agencies, as a for
instance, the Four Dam Pool. After they were actually
allowed to go into existence, their attorneys came
back and basically said, "You really need to get out
from underneath the jurisdiction of the Regulatory
Commission of Alaska in order to get the best
financing." So, they came back to the legislature and
the legislature gave them that authority. I've got to
tell you that they're doing a damn good job.
Another example is the Alaska Power Authority, which
was created in the late '70s, early '80s, when their
statutes were first put in place. They are very
similar to a joint action agency; they're basically a
political subdivision of the State of Alaska with
limited authorities. They also were required by their
bond counsel - in this case, Wohlforth and Flynt - to
come back to the legislature and request specific
exemption from regulation by the regulatory body at
the time, which was the Alaska Public Utilities
Commission.
The legislature granted it. And, quite frankly, that
entity went on to develop the Four Dam Pool,
Anchorage-Fairbanks Intertie - which was not publicly
financed, by the way - Bradley Lake, and other
projects. The entity behaved itself very credibly.
The most frustrating thing that I heard in Mr.
Johnson's testimony is the implication that without
regulatory oversight, the utility is going to go out
and gouge the general public. The simple truth of the
matter is, we are a public state. We are a public
power state. Seventy percent of the electricity in
the state is generated by cooperatives; whether it's
Matanuska Electric Association or Chugach Electric
Association or Homer, these are all public bodies.
These are bodies who have a singular purpose: they
have the purpose of providing the lowest-cost power
for the people that own the cooperative itself. They
don't have the policy and desire to go out and charge
as much as they can possibly get away with in a
monopolistic setting so that they can provide
dividends going back to some disparate bondholder or
stockholder in the Lower 48. So 70 percent of the
electricity comes from cooperatives; another 20
percent comes from municipal utilities, also owned by
the general public.
Number 0607
I would agree with Mr. Johnson 100 percent when he
says you'd be handing a blank check to the electric
utility industry if we were investor-owned utilities.
But we are not. We have a specific responsibility on
behalf of those that we serve to provide the lowest-
cost power with the best service to those that we
serve. That's what they put us there for. That's why
we have cooperatives. The reason we don't have more
IOUs in the State of Alaska is because they couldn't
see the profit margins up here that they see in the
more cloistered areas in the Lower 48.
You'll find in the Lower 48 that the investor-owned
utilities are all cloistered around the large
metropolitan areas because they don't have to build
infrastructure out to the rural parts of the country.
MR. YOULD replied to a question from Chair Anderson:
We have some excellent IOUs in the state of Alaska.
We have AEL&P [Alaska Electric Light and Power] right
here in Juneau. We have Alaska Power and Telephone,
which is actually a Washington-headquartered company
who runs power plants in a number of communities in
rural Alaska; they are an excellent utility. Another
one would be Bethel Utilities. Another one would be
TDX [Tanadgusix Corporation], which provides power to
Saint Paul and to Deadhorse. All four of these are
excellent utilities, but, quite frankly, I would not
suggest to you that they should be out from underneath
economic regulation.
Number 0715
MR. YOULD continued his testimony:
The co-ops and the municipal utilities should. As a
matter of fact, ... there's ... in excess of 1,000 co-
ops across the United States. They're not in every
state of the Union, but they're throughout the Lower
48 as well as the state of Alaska. They don't have
quite the presence in the Lower 48 as they have up
here in Alaska, but of the states that do have
cooperatives, most are not regulated. They are not
subject to economic regulation, primarily because they
are public bodies.
As a matter of fact, 23 of the states do not regulate
their cooperatives; 8 of the states give the co-ops
the option of being regulated or not; 2 are partially
regulated; and 11 of the states regulate their co-ops.
Interestingly enough, one state that does not regulate
their co-ops is the State of California.
California is one where you had both Southern Cal
Edison and PG&E [Pacific Gas and Electrical Company]
spiking the hell out of the cost of electricity.
Their rates went through the roof, but you didn't see
the rates in the municipal utilities nor in the
cooperative utilities following suit. They all stayed
down where they should be, because they were adhering
to the philosophy of those that own them, that is, the
general public, of keeping the cost of electricity
down.
Number 0790
REPRESENTATIVE ROKEBERG commented that one reason for the
spiking was as a result of action by the California legislature
that partially deregulated the utility industry.
MR. YOULD continued:
Understand that the legislation that's before you
today is not a deregulation bill. Deregulation is
where you eliminate the service territories of the
utilities themselves. Every utility in the state of
Alaska has a certain territory in which they can sell
power. Another utility can't come into that service
territory and cherry pick their customers. That's
deregulation. This is not deregulation. This is a
question of whether you are going to economically
regulate or not, at the wholesale level, the contracts
of a joint action agency.
You've heard the previous speaker testify in favor of
exempting joint action agencies from economic
regulation at the wholesale level. Understand, that's
different than retail level. At the present time ...
the Alaska Power Association agrees with that concept.
We also highly respect the dissent provided by both
Homer Electric and Seward [Electric] and we also
understand that Matanuska Electric Association does
not agree as well.
Nevertheless, the testimony of Mr. Johnson, in
addition to discussing the wholesale power agreements,
that somehow they have regulatory authority over,
certainly they have the authority to adjudicate
differences in those wholesale power contracts.
Rarely have I seen a contract come before the
commission in advance of their being executed for
review by the commission itself.
Without getting into reading the written testimony
that's been provided to you by Mr. Johnson, one of the
things that the RCA implies in their written testimony
... [is] that, under the current statutes, a regulated
utility must obtain prior review and approval by the
RCA to install new generation unit, including siting,
size, fuel source, cost analysis, and so forth.
That's patently not true. There's nothing in their
statutes that allow them that sort of authority.
Number 0941
Quite frankly, I've been developing power projects in
the state since 1973. I've been in the electric power
industry that long, and I've developed a number of
projects throughout the state, including the
Anchorage-Fairbanks Intertie, Four Dam Pool, Bradley
Lake, ... and I can say that I have never seen a
project come before either the old APUC or the RCA for
prior approval, siting, anything else.
They certainly have the authority, after the fact, to
make sure that the utilities are properly
administering their business, that their management is
correct, that they're not overcharging, and that sort
of thing, and I'll certainly grant them that authority
and that right and the statutes therefore. But they do
not have, as implied by their testimony, this
authority to give some prior approval to develop our
projects.
Number 0965
MR. YOULD, in response to a question from Chair Anderson, said
MEA isn't a member of his association; most small utilities in
the state aren't. The largest small utility in the association
is AVEC [Alaska Village Electric Cooperative, Inc.], which
provides power to 51 villages, and the smallest single utility
in the association is Levelock [Electric Cooperative, Inc.].
REPRESENTATIVE ROKEBERG asked when the trade association had
changed its name and whether Mr. Johnson believes a wholesale
power agreement is subject to prior approval by the commission.
He asked Mr. Yould if this was his understanding of the current
statute.
MR. YOULD replied that the trade association acquired a new name
about a year ago. He further said no, that was not his
understanding of the current statute.
REPRESENTATIVE ROKEBERG quoted from the statute, "subject to
advanced approval", and asked what the practice had been.
MR. YOULD said he'd never seen a contract go before the
commission for prior approval. He did admit that the commission
has authority to adjudicate differences of opinion by two
consenting utilities that have entered into an agreement.
REPRESENTATIVE ROKEBERG referred to Mr. Baldwin's feeling that
relying on the superior court to adjudicate would be a mistake
because of its lack of expertise. He asked Mr. Yould to
comment.
Number 1145
MR. YOULD answered, "Mr. Baldwin is an attorney. I'm an
engineer. ... He probably makes a valid point."
REPRESENTATIVE ROKEBERG said he'd support the establishment of
some type of integrated authority or responsible party for the
whole Railbelt intertie system from Bradley Lake to North Pole.
He said it was his understanding that the various utilities
maintain the transmission line in the grid, with the exception
of the Anchorage-Fairbanks Intertie.
MR. YOULD agreed that the Anchorage-Fairbanks Intertie extends
from Healy to Willow, and that utilities have lines that
interconnect on either end. He also agreed that it is currently
the responsibility of utilities to maintain the lines in their
area. He said the Alaska Industrial Development and Export
Authority (AIDEA) has contracted with the utilities to maintain
those lines because of a shortage of staff.
Number 1196
REPRESENTATIVE ROKEBERG wondered if a JAA could be established
for the maintenance, repair, upgrade, and investment in the
actual grid and transmission system.
MR. YOULD affirmed that. He said he believes a JAA, if it
received these assets, would assume the responsibility of
maintaining these facilities, either through a third party or
with its own resources.
REPRESENTATIVE ROKEBERG said, "That's not in this bill, though."
MR. YOULD responded, "I think it's implicit in the bill."
REPRESENTATIVE ROKEBERG disagreed and said, "You need to be
explicit if you're going to do that. Are we transferring title
here in statute? ... I thought we were getting deregulation of
wholesale authority here, not establishing the authority to
repair and maintain the grid."
MR. YOULD replied, "If the state wanted to transfer their assets
to a joint action agency, they would have to come to the
legislature for approval in the first place. I believe that
those sort of details would be included in any kind of transfer
of authority."
REPRESENTATIVE ROKEBERG said he thought that was an excellent
idea.
MR. YOULD said essentially this was what occurred when the Four
Dam Pool JAA was given authority to maintain its own facilities.
[HB 453 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
6:00 p.m.
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