Legislature(1999 - 2000)
10/15/1999 10:10 AM House L&C
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
October 15, 1999
10:10 a.m.
Anchorage, Alaska
MEMBERS PRESENT
Representative Norman Rokeberg, Chairman
Representative Andrew Halcro, Vice Chairman
Representative Tom Brice (via teleconference)
Representative Sharon Cissna
MEMBERS ABSENT
Representative Jerry Sanders
Representative Lisa Murkowski
Representative John Harris
OTHER HOUSE MEMBERS PRESENT
Representative John Davies
COMMITTEE CALENDAR
HOUSE BILL NO. 81
"An Act relating to the provision of electric service in the state;
and providing for an effective date."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 81
SHORT TITLE: ELECTRIC CONSUMER'S BILL OF RIGHTS
SPONSOR(S): REPRESENTATIVES(S) ROKEBERG, Dyson
Jrn-Date Jrn-Page Action
2/05/99 144 (H) READ THE FIRST TIME - REFERRAL(S)
2/05/99 144 (H) URS, L&C
2/16/99 228 (H) COSPONSOR(S): DYSON
4/21/99 (H) URS AT 8:00 AM CAPITOL 120
4/21/99 (H) HEARD AND HELD
4/21/99 (H) MINUTE(URS)
4/23/99 (H) L&C AT 3:15 PM CAPITOL 17
4/23/99 (H) <BILL HEARING POSTPONED TO 4/30>
4/28/99 (H) URS AT 8:00 AM CAPITOL 120
4/28/99 (H) HEARD AND HELD
4/28/99 (H) MINUTE(URS)
4/30/99 (H) L&C AT 3:15 PM CAPITOL 17
4/30/99 (H) <PENDING REFERRAL> <BILL HEARING
CANCELED>
5/05/99 (H) URS AT 8:00 AM CAPITOL 120
5/05/99 (H) MOVED CSHB 81(URS) OUT OF COMMITTEE
5/05/99 (H) MINUTE(URS)
5/06/99 1199 (H) URS RPT CS(URS) NT 3DP 3NR
5/06/99 1199 (H) DP: DAVIES, PORTER, HUDSON;
5/06/99 1199 (H) NR: COWDERY, BERKOWITZ, KOTT
5/06/99 1199 (H) FISCAL NOTE (DCED)
5/06/99 1199 (H) REFERRED TO LABOR & COMMERCE
10/15/99 (H) L&C AT 10:00 AM ANCHORAGE LIO
WITNESS REGISTER
JANET SEITZ, Legislative Assistant
to Representative Norman Rokeberg
Alaska State Legislature
716 West Fourth Avenue, Suite 640
Anchorage, Alaska 99501-2133 (Interim address)
POSITION STATEMENT: Presented CSHB 81(URS) on behalf of prime
sponsor.
ERIC YOULD, Executive Director
Alaska Rural Electric Cooperative Association, Incorporated
211 Fourth Avenue
Juneau, Alaska 99801
POSITION STATEMENT: Testified that although the intent is good and
some form of consumer protection should be put in place, CSHB
81(URS) is premature.
DONALD EDWARDS, General Counsel
Chugach Electric Association
P.O. Box 196300
Anchorage, Alaska 99519-9300
POSITION STATEMENT: Testified on CSHB 81(URS).
STEPHEN CONN, Executive Director
Alaska Public Interest Research Group
P.O. Box 101093
Anchorage, Alaska 99510
POSITION STATEMENT: Testified on CSHB 81(URS).
MIKE KELLY, President and Chief Executive Officer
Golden Valley Electric Association
P.O. Box 71249
Fairbanks, Alaska 99707-1249
POSITION STATEMENT: Testified on CSHB 81(URS). Strongly supported
the legislature, rather than the RCA, retaining control of the
so-called trip wire; generally supported moving the bill forward
but expressed concern about the speed and care with which it is
done.
MEERA KOHLER, General Manager
Municipal Light & Power
1200 East First Avenue
Anchorage, Alaska
POSITION STATEMENT: Supported the legislature, rather than the
RCA, retaining control of the so-called trip wire.
ACTION NARRATIVE
TAPE 99-60, SIDE A
[Due to a tape recorder malfunction, the first 15 minutes of the
meeting were not recorded but were reconstructed from log notes.]
CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce
Standing Committee meeting to order at 10:10 a.m. at the Anchorage
Legislative Information Office (LIO). Members present at the call
to order were Representatives Rokeberg, Halcro, Brice (via
teleconference) and Cissna. Chairman Rokeberg called an at-ease
almost immediately because of a malfunctioning tape recorder. He
called the meeting back to order at 10:13 a.m.
HB 81 - ELECTRIC CONSUMER'S BILL OF RIGHTS
CHAIRMAN ROKEBERG acknowledged that the tape recorder still was not
functioning. He announced that the committee would hear HOUSE BILL
NO. 81, "An Act relating to the provision of electric service in
the state; and providing for an effective date." Before the
committee was version CSHB 81(URS).
JANET SEITZ, Legislative Assistant to Representative Norman
Rokeberg, Alaska State Legislature, gave a brief overview on behalf
of the sponsor. In response to a question from Representative
Halcro regarding bill amendments, she indicated there was little
change.
REPRESENTATIVE HALCRO expressed concerns about the broad title.
[The tape recorder was replaced, and recording began at 10:25 a.m.]
Number 001
CHAIRMAN ROKEBERG mentioned a contract that the Alaska Public
Utilities Commission (APUC) had entered into. He said this bill
resulted from testimony in the House Special Committee on Utility
Restructuring (URS), as well as from conclusions of the court.
CHAIRMAN ROKEBERG next discussed three proposed amendments to be
taken up following testimony. First, 1-LS0181\K.1 (K.1) clarifies
the name change from the APUC to the Regulatory Commission of
Alaska (RCA). Second, l-LS0181\K.2 (K.2) speaks to one of the
bill's more controversial sections. Currently, certain public
utilities can opt out of economic regulation by the RCA; concern
had been heard that this bill would mandate that those utilities be
swept back in under the RCA's regulatory umbrella. However, there
could be no true regulation of the competitive marketplace without
a completely level playing field. As sponsor, Chairman Rokeberg
believes all utilities should be regulated similarly in a
particular realm if there is a competitive environment created,
whether within the entire state, a particular jurisdiction, or a
particular kind of program. Changes in proposed amendment K.2
therefore clarify language or intent.
CHAIRMAN ROKEBERG told members he expected to hear testimony about
this being a de facto deregulation bill. Therefore, amendment
1-LS0181\K.3 (K.3) creates a clearer trip wire, although it may not
go to the degree he would like. His intention is that regulations
would not have to be in place until there is a grant by the RCA,
and/or even action by the legislature, to develop a competitive
environment. He pointed out that the fiscal note for the original
HB 81 - from the then-APUC, dated April 20, 1999 - indicates this
bill will cost $207,000. In his five years in the legislature, he
didn't recall having a fiscal note over $10,000 and he is almost
shocked by this. He hopes RCA personnel will review this matter,
as he doesn't believe the large number of personnel to develop
regulations is entirely justified. He suggested the current
committee discuss it with the RCA in the coming months, and he
hopes to hear from the RCA on a revised fiscal note.
Number 034
ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative
Association, Incorporated (ARECA), testified via teleconference,
specifying that he represents the electric utility industry in
Alaska. Although ARECA's membership had supported HB 81 when it
was in the House URS committee, they currently believe the bill is
premature. That decision follows a number of studies, including
the most recent by CH2M Hill, as well as direct meetings with Karl
Rabago and others who are giving advice about what is happening
with restructuring, primarily in the Lower 48.
MR. YOULD pointed out that Alaska's utility industry is connected
with neither those in Canada nor the Lower 48. Furthermore, there
aren't numerous transmission lines to call upon for either consumer
choice or emergency needs. He likened the Railbelt's limited
interconnection to an extension cord from Anchorage to Fairbanks,
saying beyond that, the main interconnected region is the Anchorage
area. In the Railbelt area, the only three providers are Golden
Valley Electric, Chugach Electric and Anchorage Municipal Light and
Power. Hence, there aren't the myriad selections that consumer
choice would require. Mr. Yould recalled previous comments of Karl
Rabago of CH2M Hill indicating that in a robust area, at least
eight providers would be needed.
MR. YOULD characterized Alaska as a "consumer-owned utility state,"
having either a cooperative utility in the area served or a
municipal utility. In fact, 90 percent of the retail electricity
is provided by a consumer-owned utility, with 70 percent from
cooperatives, 20 percent from municipals, and only 10 percent from
investor-owned utilities. This fosters a philosophy of providing
electricity as inexpensively as possible and passing savings on to
consumers, who own the system. In contrast, an investor-owned
utility's overriding objective is to maximize profits for its
shareholders, who aren't served by the system itself. It is
primarily the push of the investor-owned utilities in the Lower 48
that stimulates the desire and need for consumer choice there,
although that is not to say there aren't advantages from consumer
choice, Mr. Yould added, because even Alaskans believe there are
significant potential advantages.
MR. YOULD pointed out that there has been no public outcry for
consumer choice or restructuring of the industry. He stated, "We
had a number of meetings in Juneau, and the previous summer there
were a number of hearings held by a special committee of the
legislature. And, quite frankly, it was very difficult to get the
person off the street to come in and testify, and, as a matter of
fact, I can think of only one or two private individuals that came
in and had anything to say, and I'm not sure that their arm wasn't
bent up behind their back, either." He noted that a recent study
by CH2M Hill basically said restructuring in Alaska - at least as
it is envisioned in the Lower 48 - may be significantly premature.
MR. YOULD explained that with all of these things in mind, the
utility managers had met that summer, concluding the following
about restructuring, if it comes to Alaska. In rural Alaska, it
absolutely won't work. In the Railbelt, it is somewhat
questionable whether it can work as a free, open, and
technologically available system, primarily because of the
transmission line up to Fairbanks and a tenuous transmission line
down to the Kenai Peninsula. In Anchorage, it might work, but even
then, certain things must take place beforehand, not the least of
which is settling the issue of market presence, ensuring there is
wholesale competition prior to retail competition; presently, at
least one utility provides not only its own needs but also the
needs of three other utilities that ostensibly would be trying to
compete with that very utility.
MR. YOULD concluded that for the foregoing reasons, the utility
managers had pretty much directed that although there is value in
a consumer bill of rights, this bill is premature. In particular,
it appears to relegate the responsibility of defining restructuring
for the state to the new RCA rather than to the legislature. This
especially concerns them given that on May 7 the House Special
Committee on Utility Restructuring wrote the then-APUC a letter
indicating they didn't want to see the regulatory body take
responsibility for electric utility restructuring, which they
believe is the legislature's purview and jurisdiction. Likewise,
the utilities believe elected policy makers can best determine
whether electric utility restructuring should come to Alaska, and
in what form.
MR. YOULD noted that furthermore, it isn't known what the
competitive market will look like in Alaska. If it were decided
that only portions of the state should be subject to electric
utility restructuring, then the RCA would find itself trying to fit
the entire state, when in fact the legislature may well decide that
only a portion of the state - the Anchorage area or maybe the
Railbelt - should be subject to restructuring. Although the intent
is good and some form of consumer protection should be put in
place, it should occur only when it is better understood what
electric utility restructuring should look like for Alaska.
Number 113
CHAIRMAN ROKEBERG commented about a general consensus throughout
the industry in Alaska regarding the RCA's authority to undertake
and grant a certificate for a utility that wishes to compete
head-to-head. He asked whether ARECA agrees now that the
commission has the ability to do that without the legislature's
approval.
MR. YOULD replied that he was stepping out on a limb because he
hadn't polled all of the utilities. However, he had seen briefs
from their attorneys and discussed the issue with them, and he
would say that yes, the public utility commission has a certain
amount of authority to bring in some form of utility restructuring
in the form of customer choice. "My comment, however, would be
that the way that it's levied to them, it's a very cumbersome
process, a very awkward process," he added. "And, as a result,
perhaps while they have the legal authority, I'm not sure that they
would find it feasible to actually try and bring it in without some
streamlining of their own statutes by the legislature."
Number 141
CHAIRMAN ROKEBERG asked whether ARECA would be more comfortable if
the legislature removed that authority from the RCA through
statute, in effect giving the legislature the singular, unilateral
authority to create restructuring.
MR. YOULD answered that he doesn't know that it is a necessary
step. Although they would prefer that the policy come from the
legislature, ARECA has generally seen a willingness by the
commission to not move forward in deference to the legislature
itself. If, on the other hand, ARECA saw a general attitude at the
RCA that "by God, they were going to do restructuring because it
worked, say, in the telecommunications industry," then yes, ARECA
would like to see that authority taken away. Mr. Yould added, "But
I think we're dealing with responsible people here, and I think
that if the legislature came up with a policy that sort of outlined
the baffle boards of where restructuring go, I think that they
would work within those limits, and I think that we could live with
that."
Number 159
CHAIRMAN ROKEBERG emphasized that he'd introduced the bill for that
very purpose, understanding that the regulatory authority had the
ability to grant a certificate to allow and create competition.
Without some guidance from the legislature as to what issues and
policies should be taken up in the regulatory scheme, he said, the
legislature would have no input or would be derelict in its duty to
help protect consumers in Alaska.
MR. YOULD agreed with the rationale. However, he believes the
legislature had let it be known, at least through the letter of May
7, that this is the legislature's jurisdiction, he said. As long
as the legislature is moving forward with trying to establish
whether or not there should be restructuring in the state, and in
what capacity, he believes the RCA will take a back seat but, at
the same time, will try to work with the legislature and make sure
they have a lot of input. "But I don't think that they're going to
go off half-cocked, frankly," he added.
Number 180
CHAIRMAN ROKEBERG suggested he wouldn't be unfair by characterizing
the attitude of a number of people from rural Alaska, in
particular, as fearful of any deregulated, restructured type of
environment. He then asked whether there would be a greater level
of comfort in ARECA if the legislature prohibited any kind of
competitive environment in rural Alaska.
MR. YOULD answered that there probably would be, because he
believes they will establish and maintain a pretty strong belief
that restructuring cannot physically come to rural Alaska, in any
form, without harming other consumers. If this bill were to make
that clear, he believes rural residents would like that. On the
other hand, the elements of the bill that would rain down on rural
Alaska would be somewhat obviated, he said, and should be
restricted, then, to the Railbelt area.
CHAIRMAN ROKEBERG responded that he believes it is restricted, at
stage one, to the transmission intertie system in the Railbelt
area. He then asked whether it is fair to characterize ARECA's
change of opinion as a delaying tactic.
MR. YOULD replied no. If anything, the educational process has
allowed ARECA to conclude this won't work in rural Alaska.
Furthermore, the utilities are not as adamantly opposed to
deregulation as they were two years ago. Especially in Fairbanks,
however, they want time to fully position themselves to compete.
He also believes all utilities want to ensure a truly level playing
field for consumers and utilities, when and if restructuring comes
along. Whereas a vote two years ago probably would have been 24-1
against restructuring, today it would probably be 20 against it,
with 3 or 4 "maybes" or abstaining votes, and one adamantly in
favor of it.
MR. YOULD continued, pointing out that larger utilities in the
Railbelt itself are the ones looking at the benefits of
restructuring and truly trying to decide whether benefits could
come to the consumers. He believes they are making a legitimate,
good-faith effort to decide whether restructuring should come to
Alaska. It has been frustrating for him, he added. It would be so
much easier if he could maintain a 24-1 vote and tell the
legislature the utilities don't want restructuring.
CHAIRMAN ROKEBERG asked whether Mr. Yould believes the legislature
should put this bill, and this issue, aside and take up the
"telecom wars" next session.
MR. YOULD replied, "We'd love to see that." [There was laughter.]
CHAIRMAN ROKEBERG mentioned talk that perhaps ARECA members believe
HB 81 is a backdoor way to establish restructuring in Alaska
without sending a signal to the RCA. He asked if that is a
concern.
MR. YOULD affirmed that, explaining their fear that if this bill
passes, it will almost become a fait accompli. It is a de facto
policy direction that perhaps the RCA would view as where the
legislature wants to go. He pointed out that page 1 of the bill,
beginning at line 6, says that as part of any general proceeding to
investigate electric industry restructuring, the commission shall
establish by regulation the following things, many of which are at
the heart of restructuring itself. Mr. Yould expressed concern
that this bill brings them into restructuring without a full
debate, in the legislature, on the merits of restructuring; he
alluded to its being a wolf in sheep's clothing. In contrast, HB
248, filed the last day of the session by Representative Kott, he
would call an up-front restructuring bill.
Number 262
CHAIRMAN ROKEBERG indicated one of his proposed amendments resulted
from previous discussions with Mr. Yould. He asked whether ARECA
members would be more comfortable if the bill were modified to
clarify the trip wire or trigger, and if regulations wouldn't be
taken up until the RCA granted a certificate of authority to
compete.
MR. YOULD replied no, they would rather see a trip wire that
regulations shall not be adopted until such time as the legislature
establishes that they want restructuring, either in part or in
total, throughout Alaska.
CHAIRMAN ROKEBERG asked whether ARECA would get behind this bill
again if those two corrections were made: first, clarifying that
the legislature had to make a positive step and, second, limiting
it to the so-called grid.
MR. YOULD said he doesn't believe it would, because Railbelt
members are the most concerned about the bill. Certainly, he
believes they would like it if the legislature came up with a clear
policy that there would be restructuring, and if this bill, as part
of that more comprehensive bill, tried to establish ground rules.
However, ARECA is nervous about a bill going forward that tries to
establish ground rules when, in fact, it isn't even known what this
competitive market will look like in the future.
CHAIRMAN ROKEBERG asked whether ARECA could support this bill if it
were amended or attached to another bill that created a pilot
program in the Anchorage area, for example.
MR. YOULD answered, "We're adamantly against pilot programs."
CHAIRMAN ROKEBERG asked what would make ARECA happy.
MR. YOULD suggested the whole issue of restructuring will be at the
forefront during this legislative session, and there will be public
debate at that time. The ARECA members are saying they think this
bill is too early.
CHAIRMAN ROKEBERG replied that based on the position of ARECA, he
isn't sure he agrees with the statement that this will be in the
forefront of discussions at the next session.
Number 308
REPRESENTATIVE HALCRO indicated the dialogue with Mr. Yould had
reinforced his own concerns about the broadness of the title. The
bill's intent, as repeated by the sponsor, is to protect consumers,
but they are discussing deregulation. He noted that they are
requiring the RCA to adopt regulations to provide standards of
operation and consumer protection. Next referring to page 4, he
said subsection (g) had jumped out at him; it read, "The commission
shall, by regulation, require reports from electric service
providers who are participating in a competitive electric service
market and establish the contents of the reports." He asked
whether there had been talk within ARECA about specifying the
contents of those reports. For example, are they going to get into
back-office, proprietary information?
MR. YOULD answered that there has been no discussion. One ARECA
member, Matanuska Electric Association, has brought up that
specific paragraph, expressing concern about what would be in those
reports. Mr. Yould pointed out that in the electric industry, a
portion - the transmission lines and service territories - would
probably remain regulated, whereas the generation side would be
unregulated. In the telecommunications industry, there was a
requirement that a "Chinese wall" be built between the regulated
and unregulated parts, meaning separate staff for each portion.
Although not too bad for a larger utility such as Golden Valley or
Chugach Electric Association, that gets very expensive in rural
Alaska, where there is minimal staff to start with. Mr. Yould
concluded that although they don't know what reports will be
required, the reporting requirements will be greater, and costs to
small rural utilities will be much more difficult for them to
shoulder.
CHAIRMAN ROKEBERG thanked Mr. Yould, then called upon Don Edwards.
Number 364
DONALD EDWARDS, General Counsel, Chugach Electric Association
("Chugach"), informed members that generally Chugach supports this
legislation. They support the idea of consumer protection and feel
the bill gives appropriate legislative policy guidance to the
regulators. However, he perhaps would suggest some minor changes
later, and he would talk about perceived significant problems. He
noted that previous testimony that year by Gene Bjornstad, General
Manager of Chugach, made it clear they regard consumer protection
as a key element of restructuring. Therefore, they are pleased to
see progress on what they view as an important part of the package
of developing restructuring. Their concern, however, is with the
Railbelt. They have opinions but not a great deal of expertise on
how things should happen in the Bush, Mr. Edwards noted, nor do
they feel it is their place to speak about that.
MR. EDWARDS said Chugach believes there is a need to start
somewhere, which is why they are supportive of this. However, this
bill is "the sound of one hand clapping," introduced to protect
consumers in a customer-choice environment, when, in fact, they
don't have a choice now. This is called a "consumer bill of
rights," but in their view there is no more fundamental right than
the right to choose from whom to buy services. Chugach's primary
point is to remind everyone that still to come is the main event:
some action, by some entity with authority - the legislature or
possibly even the courts - to allow customers to exercise their
fundamental right. However, they are happy to see these puzzle
pieces begin to fall into place.
Number 440
MR. EDWARDS turned to specific concerns. First, subsection (c)
requires a needs-based rule allowing additional time for payments.
They operate now under a tariff, approved by the commission, that
has what they believe are fair rules; problems don't arise out of
those tariffs in Chugach's situation, nor does he believe many
other utilities have problems. It is legitimate for any consumer
protection bill to be concerned about a level playing field among
all service providers. In addition, there may be some need for
uniform payment and service termination provisions for all
customers in a competitive environment. However, he said, there is
every reason to believe the commission is capable of doing this
kind of rule making, after hearings and due deliberation; in
contrast, it is not the kind of detailed rule making for which the
legislature is well suited. In summary, Chugach would accept a
fair set of rules, which they believe they operate under now. But
they think it would be a mistake to "hard wire" into a statute a
needs-based determination requiring the utility to decide who
deserves a special break and who does not. They believe that is
neither efficient nor required by fairness. They would rather that
it be left to the commission, or that it be adjusted somehow, so it
is not a needs-based determination made by the utility.
CHAIRMAN ROKEBERG asked whether the term "economic hardship" was
what Mr. Edwards was calling "needs-based," even though it might be
a temporary circumstance.
MR. EDWARDS affirmed that.
CHAIRMAN ROKEBERG noted that it would be defined by the rule-making
authority of the commission, not the legislature. He said that is
the whole idea, to make it broad enough and to give them direction.
MR. EDWARDS clarified that the only problem Chugach has with it is
this: Even if developed by the commission under the policy
guidance set out in this draft, the determination would have to be
needs-based. If the legislature simply sent the commission off to
develop fair rules for termination that are uniform for all service
providers, Chugach would have no problem. However, having to
determine whether people meet income guidelines or qualify for
"hardship" status would take a lot of time and effort. Chugach
believes the tariffs contain good and fair provisions for
termination and bill payment. They also believe the commission can
come up with fair standards without the legislature requiring a
needs-based determination.
Number 509
REPRESENTATIVE HALCRO requested confirmation that current
guidelines include provisions for handicapped or elderly customers.
MR. EDWARDS replied:
We have very few special provisions. We do have ... some
special notification of outage provisions, but I'm not
sure that they're actually in our tariffs. I'd have to
go back and research exactly what kinds of special
provisions we have ... that are in the tariffs, that do
pertain to hardship. But we have very few there. But,
like I say, we don't seem to have many problems arising
... from it. We have very few complaints ... on those
grounds.
REPRESENTATIVE HALCRO suggested the concern with economic hardship
could be for only one month, for example. Perhaps a person might
not want to find the money to pay the electric bill. To him, that
represents an economic hardship, whereas to Mr. Edwards that
represents somebody who just doesn't want to pay the electric bill.
MR. EDWARDS affirmed that, then emphasized the more important
point: The utility would rather not have to make that choice and
have to examine a customer regarding the needs-based guideline set
by the commission, which he believes, as this bill is written, the
commission would be compelled to establish. Now, in contrast, if
a customer doesn't pay, the utility must give the customer notice
in specified ways, providing so many days to cure the problem; if
unable to work out terms, the utility then is authorized, after
specified types of notice, to cut off the service. The utility
doesn't have to determine whether a customer meets needs-based
hardship standards. However, Mr. Edwards pointed out, he doesn't
know of a utility that doesn't already work with customers to avoid
cutting off service, which would be hooked up again eventually.
Utilities want to figure out payment plans so customers can make
payments, get caught up, and remain on service.
Number 559
CHAIRMAN ROKEBERG asked whether that is a customary practice or
exists in the tariffs, to not cut off people's power in the
wintertime.
MR. EDWARDS said that is by custom. There was a proceeding in
front of the previous commission to look into it, but that
commission decided it wasn't a problem that needed to be fixed.
Its survey of utility practices found although it isn't something
utilities prefer to publish, as a practical matter no utility
should cut people off when it is extremely cold.
REPRESENTATIVE HALCRO asked whether they couldn't also interpret
hardship as being seasonal or temperature-related, for example, as
opposed to being needs-based.
MR. EDWARDS replied that he'd rather not have to be at the
commission saying the legislature didn't really mean money but
meant temperature.
CHAIRMAN ROKEBERG asked whether Alaska is the only state without
some type of needs-based criteria and help.
MR. EDWARDS said he hadn't researched that.
CHAIRMAN ROKEBERG suggested there is no help for low-income people,
which most states have in the form of a universal service charge.
He said he wasn't advocating that, but it is a bit ironic. He then
asked if Mr. Edwards thinks it is irresponsible of the legislature
to ask that the RCA set standards for hardship, which now are based
only on customary practice.
MR. EDWARDS responded that he wouldn't say it is irresponsible, but
the question is a matter of public policy: What is the best way to
take care of people with a hardship? To him, that is not
necessarily best addressed by the utility commission in a utility
tariff. Ultimately, he believes it comes down to this question:
How should they fund customers who are more expensive to serve?
One way is to put provisions into statute or tariffs that have the
practical effect of saying that customers who pay on time should
pay for the cost of customers who don't. Mr. Edwards suggested
that kind of analysis is needed when wanting to set up a system
like this. They need to figure out who should pay for these
things, and what public policy sends the right signals to customers
to help everyone behave in a way that is fair to all.
CHAIRMAN ROKEBERG acknowledged there could be a heavy debate over
that, but suggested moving on.
Number 636
MR. EDWARDS turned attention to subsection (e), which read: "The
commission shall, by regulation, provide that an electric service
consumer in a competitive electric service market may receive only
one periodic billing for the provision of electric service to a
location." [Beginning comments cut off by tape change.]
TAPE 99-60, SIDE B
Number 001
MR. EDWARDS continued with subsection (e), saying it is an area
where many competitors could, and presumably would, be available to
participate. There is no reason why utility billing services have
to be bundled together with monopoly services. Many local and
"outside" firms can provide the former; in fact, he indicated, some
of Chugach's utility billing services now are contracted out. They
believe customers should be allowed to buy services in the way they
feel is most convenient. He suggested it might be particularly
problematic for regulators to manage and police the mixing of
various competitors' contributions to the utility bill.
MR. EDWARDS pointed out that the legislation now is fairly
wide-open, saying one utility must include a competitor's
information in the bill. He cautioned that it could be even to the
point of advertising. Once it is clear that competition is allowed
in unbundled services - which formerly were bundled as generic
utility service - it even could become illegal under antitrust law
to tie billing services to service in which, as a provider, a
utility might have too much market power. It is a problem area
that deserves a closer look, Mr. Edwards said. These aren't huge
problems, but Chugach isn't comfortable with setting in statute
exactly how the billings are done.
CHAIRMAN ROKEBERG asked whether that isn't the one area where fraud
and other problems come into play, as shown particularly in
telecommunications. He suggested there is great potential for
abuse to consumers if the billing system isn't regulated some way.
MR. EDWARDS specified that he doesn't have a problem with
regulations aimed at consumer protection, including prevention of
fraud, and Chugach is generally supportive of that. As written,
however, this particular provision seems to allow and require that
competitors let anyone else place virtually anything into the
billing packet. It also seems to require that the customer can
only get the bill one way: all together on one bill. However,
some customers may choose to buy from different sources and not
particularly care whether there is more than one bill. It is
simply a matter of principle, Mr. Edwards concluded, indicating
Chugach believes customers should have the choice to buy from
whomever they want, regardless of whether the bill is bundled. It
is not a huge issue, but rather is Chugach's viewpoint.
CHAIRMAN ROKEBERG asked whether there couldn't be a situation,
though, where a customer would have to buy from multiple suppliers.
MR. EDWARDS said he thinks it is conceivable. But if enough
customers want to buy services and see all their utilities bundled
on one bill, Chugach will try to sell that to them. The capability
also exists of bundling together all the utility bills; huge
billing companies in the Lower 48, as well as plenty of companies
in Alaska, have all kinds of billing capabilities. Chugach
believes customers ought to be allowed to choose from whom and how
they get their bills, letting the market take care of it.
CHAIRMAN ROKEBERG agreed, indicating part of the intention was to
allow outsourcing of the billing, which this legislation doesn't
prohibit.
MR. EDWARDS responded that it says the entire electric bill has to
be a single bill.
CHAIRMAN ROKEBERG noted that it says one periodic billing. He
posed a scenario where a "reseller" isn't able to provide power,
then expressed his understanding that a consumer could be charged
for multiple utilities.
MR. EDWARDS suggested that isn't a billing problem, however, but a
consumer protection problem about regulating various service
providers, to prevent fraud and to ensure that customers can
determine whether a bill is the entire bill, for example. He
restated that Chugach agrees with those kinds of consumer
protections and information disclosure provisions. They would be
harmed if fly-by-night operators come in and don't properly
disclose information. They simply are concerned about a hard-wired
requirement that everything must be bundled into one bill and that
says a customer can only get a bill in one way.
Number 063
REPRESENTATIVE CISSNA asked what Mr. Edwards would eliminate, then,
in subsection (e).
MR. EDWARDS said he would want to change it so that it didn't say
the electric service can only be reflected on one periodic bill.
REPRESENTATIVE CISSNA indicated her understanding that the one
periodic bill is the problem.
CHAIRMAN ROKEBERG countered that nobody wants to get more than one
periodic bill. He said he doesn't understand.
MR. EDWARDS responded that he suspects people will want fewer,
rather than more, bills. However, they ought to be allowed to buy
from whomever they want, even if it requires an additional bill.
It is a philosophical issue. Chugach believes establishing a
one-bill rule limits options in ways that might ultimately hurt the
customers.
Number 091
MR. EDWARDS addressed subsection (g), which read: "The commission
shall, by regulation, require reports from electric service
providers who are participating in a competitive electric service
market and establish the contents of the reports." Noting Mr.
Yould's mentioned of this, Mr. Edwards indicated Chugach feels the
language is a little too broad. In principle, the commission
already has tremendous authority to require that information. Mr.
Edwards recommended addressing three questions: What exactly does
the legislature want the commission to be tracking? What authority
does the commission have now? And is there any additional
authority that the commission still needs to accomplish these
purposes?
MR. EDWARDS turned attention to the proposed amendments. Referring
to 1-LS0181\K.1, Cramer, 10/4/99 (K.1), he said it was fine. It
read:
Page 1, line 1:
Delete "Alaska Public Utilities Commission"
Insert "Regulatory Commission of Alaska"
MR. EDWARDS addressed the second proposed amendment, 1-LS0181\K.2,
Cramer, 10/4/99 (K.2), by saying Chugach generally agrees with the
idea of a level playing field. That amendment read:
Page 4, lines 10 - 12:
Delete "This section may not be applied to result in
a utility that is not otherwise subject to economic
regulation by the commission becoming subject to economic
regulation by the commission."
Insert "This section applies to a utility operating
in a competitive electric service market. If a utility
is exempt from the provisions of this chapter other than
AS 42.05.221-42.05.281, the commission may not apply this
section to make the utility subject to other provisions
of this chapter."
Number 098
MR. EDWARDS pointed out that the third proposed amendment,
1-LS0181\K.3, Cramer, 10/4/99 (K.3), is a serious problem because
it is a big step backwards. It read:
Page 1, line 6 - 8:
Delete "As part of any general proceeding to
investigate electric industry restructuring, the
commission shall establish by regulation"
Insert "After the commission has determined that a
competitive electric service market should be established
by law in the state, the commission shall adopt
regulations for electric consumer protection standards.
The competitive electric service market may not be
implemented until after the regulations take effect. The
regulations must establish"
Mr. Edwards explained that under Chugach's view of the law now, the
legislature never has prohibited competition. From his
understanding, this provision would be interpreted as the following
statement from the legislature: "Well, we may never have said it
before, but starting now we are prohibiting competition." Chugach
urges the legislature not to include any amendment that would say
competition is not allowed. Mr. Edwards suggested consumer
protection is a good (indisc.), but that now they need the whole
opera. They need to allow customers to actually choose, and to
figure out exactly how that will happen. He would just hate to see
amendment K.3, a step backwards, he concluded.
Number 117
REPRESENTATIVE DAVIES asked Mr. Edwards to amplify about how
proposed amendment K.3 would be read to prohibit competition.
MR. EDWARDS noted that there would be an oral argument about it in
front of the judge that very afternoon. He indicated AS 42.05.221
is the only current statute containing a reference to competition,
then explained:
It says that you can prevent competition once it's
started, and once the commission has determined that
there's a problem with it; and at that point, then, the
commission can remedy that problem. Nowhere in the
statutes does it say competition is not allowed. If you
put in a provision such as this, it says, "After the
commission's determined that ... a market should be
established, the commission shall establish protection
measures." That presumes that competition can't occur
until after the commission says it can. And we don't
agree with that. And that's why ... it's in the courts
now. The commission does agree with that. ... They think
it's implied that no competition ... can occur until they
say that it can, and we simply disagree with that, on the
basis, as I said, that the only explicit reference is the
reverse of that: that it can happen until you stop it.
It's not that the commission has no authority. It's just
that the commission's authority is an after-the-fact,
rather than a prior restraint. And that's what the
debate this afternoon will be about, and that's why I
don't want to see anything which supports the idea, in
the statute, that there is a prior restraint, because ...
there's no explicit prior restraint in the statutes now.
I don't want to see anything that lends supports to the
idea that there's a prior restraint.
Number 140
CHAIRMAN ROKEBERG inquired whether that is a docket before the RCA
or is in the courts.
MR. EDWARDS clarified that it is on appeal to the superior court,
to be argued that very afternoon. It had been a docket before the
commission asking them to establish access charges over the
Municipal Light and Power (ML&P) system. The theory and argument
were what he had just laid out. However, the commission had denied
that, believing the commission has an implied authority to prevent
competition unless and until a utility comes before them asking for
an expansion to the certificate of the service territory.
CHAIRMAN ROKEBERG suggested it is a theory of prior restraint, in
a nutshell, because the statutes are silent.
MR. EDWARDS affirmed that. He referred to an antitrust law
interconnection that he'd apparently discussed at length before but
wouldn't address that day. In response to Chairman Rokeberg's
mention of the "Portland Steel case," he noted that it is the
"Columbia Steel case."
Number 155
REPRESENTATIVE HALCRO referred to the language in K.3 that says,
"After the commission has determined that a competitive electric
service market should be established by law ...." He then referred
to the May 7 letter from the URS committee that basically tells the
then-APUC it should remain the domain of the legislature to set
policy with respect to opening up markets. He requested
clarification.
CHAIRMAN ROKEBERG referred to an opinion from the attorney general,
then expressed his understanding that the general legal opinion
indicates the RCA would have the right, as Mr. Edwards had just
said, to grant a competitive service situation. The letter from
the URS committee was a signal to the RCA: "Please don't do that
until we act on it as a matter of public policy." He asked
Representative Davies whether that is a fair characterization.
Number 171
REPRESENTATIVE DAVIES affirmed that, adding that it has no force of
law. It is just a letter, and a political message.
MR. EDWARDS, in response to a comment of Chairman Rokeberg,
clarified:
We're on the side of explicit interpretation of the plain
words of the statute. It's the commission and our
opponents who are saying, "Well, no, no, no. You can't
read just the explicit statement. You have to ... see
that there's some implied authority here, even though the
only reference to competition says that you can't stop it
unless it's started and there's a problem with it."
That's what the words say. The commission's view is,
"Well, but there must be an implied power for us to
prevent it in the first place." And that's what the
argument is about.
CHAIRMAN ROKEBERG suggested that is based upon their certification
process.
MR. EDWARDS affirmed that, adding that it is based upon their
authority to determine "whether you're fit, willing and able to
serve."
REPRESENTATIVE DAVIES commented that there are other explicit words
in the statutes regarding territories, et cetera. Those need to be
read in (indisc.) value, as well.
MR. EDWARDS disagreed, stating that the explicit words regarding
"service area" are in the provision that says it can be limited if
it is occurring and has been determined to be a problem. He
explained:
That's where it says that you can impose service
territory restrictions, and that has, in fact, happened
in Anchorage many years ago. There are service
territories that are established ..., in our view, to
prevent duplication of ... plant. And that's what's
changed, and that's why this has come up. It is now
technologically feasible and practical for people ... to
compete just for the sale of the commodity. It used to
be that ... the sale of the commodity and the service
over the lines [were] so bound together that, ...
practically speaking, you couldn't sell them separately.
So, it didn't come up as an issue. Once the service
territory or distribution plant issue was decided, it
naturally followed that, well, people weren't going to be
competing. Well, that's not true anymore. ... There are
a number of areas, as I said, ... in which you could
possibly compete. And so that's why we're where we are.
MR. EDWARDS restated that Chugach is glad to see this bill brought
forward, and glad to see something get done on an important piece
of the package. If this passes, they can mark this off the list of
reasons why customers aren't allowed to choose, and they are
looking forward to that.
Number 220
CHAIRMAN ROKEBERG expressed his understanding that if K.3 were
redrafted to specify the legislature's authority, Mr. Edwards would
still find it objectionable because it would be even stronger.
MR. EDWARDS affirmed that they would if it applied to the Railbelt.
They have always taken the position that they are happy with a
compromise which deals only with Anchorage, but the Railbelt would
be fine. However, for the reasons he'd stated, he would hate to
see any bolstering of the argument that competition is prevented in
the Railbelt area. Mr. Edwards suggested an acceptable compromise
would be to have the "non-interconnected areas," except the
Railbelt, subject to this kind of provision. After Chairman
Rokeberg questioned the use of the term "non-interconnected area,"
Mr. Edwards indicated he would try to come up with a better phrase
but for now that is the best he can do. He explained, "You have
the Railbelt, and then you have a couple of other areas of the
state that are interconnected by transmission lines. So, you'd
have to be careful to make sure you caught the right fish in your
net."
CHAIRMAN ROKEBERG mentioned Southeast Alaska, then referred to his
earlier discussion with Mr. Yould about applying some first-aid to
this bill to generate support. He noted that Mr. Edwards objected
to the legislature's taking back authority, to limiting it to the
Railbelt, and to creating a pilot program. He asked, "If you took
all those things together, would it be more acceptable to you,
then, as a compromise-type of a situation?"
MR. EDWARDS answered yes, restating Chugach's ongoing willingness
to compromise to the point of just letting them begin in Anchorage.
What they propose is simple and not that difficult. It is retail
competition; they haven't proposed to do anything at all about the
competition that may exist at the wholesale or bulk power level.
Retail competition means that customers in one part of town can buy
from a supplier in another part of town. It is neither complicated
nor radical. They don't have to create an independent system
operator, nor any kind of a generation pool or transmission pools.
They just let a customer in Muldoon buy from ML&P or vice versa.
Mr. Edwards suggested potential compromise would allow competition
and customer choice to begin in Anchorage. Again mentioning the
concept of one hand clapping, he emphasized that missing from this
consumer rights bill is the most important right of all: the right
of consumers to choose.
CHAIRMAN ROKEBERG suggested this legislation likely would die
without some compromises.
MR. EDWARDS reaffirmed Chugach's openness to compromises,
specifying that their bottom line is simply that it needs to allow
competition to begin in Anchorage.
Number 269
REPRESENTATIVE HALCRO referred to the analogy of one hand clapping,
then mentioned comments in this committee and the URS committee
that the bill is premature because they are developing guidelines
in spite of not knowing what restructuring will look like. As an
example, he directed attention to page 3, lines 12 through 15,
which read: "(7) refrain from imposing unreasonable terms and
conditions, including service connect or disconnect fees, as a
precondition to providing service that meets generally accepted
industry standards to a consumer in a competitive electric service
market." Representative Halcro pointed out that when the day comes
for restructuring, there must be certain items addressed, including
transition costs. California has transition costs, for instance.
Someone who has gone through a regulated market with one provider,
but decides a second provider offers a lower cost per kilowatt
hour, owes the previous provider a certain amount for transition
costs. Although in certain states that have undergone this
restructuring there are associated costs, Alaskan legislators don't
know if those will come into play. With this legislation they are
already saying, "We're going to exclude certain things," when they
don't know what the whole picture looks like. That is part of his
own concern, he added.
Number 293
MR. EDWARDS noted that there are probably three or four important
basic components to restructuring, including consumer protection
and the stranded investment provision just mentioned. Chugach has
always supported the idea that legislation is a fine way to deal
with stranded investments, at least in providing policy guidance to
allow the commission to exercise judgment about who will be allowed
stranded investment recovery. Although Chugach may have some
stranded investments, they have protected themselves by contracts
with their large wholesale customers, Matanuska Electric
Association, Inc. (MEA) and Homer; the contracts require that those
large customers buy their power from Chugach.
MR. EDWARDS noted that he hadn't planned to comment on this
specific provision today, and indicated he might provide written
comments. He stated that although he believes it could use a bit
of tightening, he doesn't think it really deals with the stranded
investment issue. Rather, it deals simply with creating a level
playing field, ensuring that customers are protected from harm by
"sharp business practices" in the termination process. Noting the
importance of electric service, and that sometimes extraordinary
consumer protections must be provided for such service, he
concluded, "I think this simply says you can't abuse the customer
in the connecting and disconnecting process, and I think that's
where we're trying to go with that, and so we would be supportive
of that idea."
CHAIRMAN ROKEBERG indicated termination fees are a key element that
may have negative impacts. This wasn't intended to pick up the
entire area of stranded costs, he said. He looks at this bill as
an incremental part of the whole puzzle, not the whole thing. He
asked if there were further questions, then thanked Mr. Edwards.
Number 339
STEPHEN CONN, Executive Director, Alaska Public Interest Research
Group (AKPIRG), came forward on behalf of AKPIRG, Alaska's largest
consumer group, with 3,000 members statewide. He praised Chairman
Rokeberg for spotting this early-on as a critical component of the
coming wave of electric deregulation, then educating himself and
the public on the issue. The emerging bill comes from a detailed
consideration of this subject, Mr. Conn pointed out, and is
entirely appropriate as a building block in the process of electric
deregulation. He indicated he has had an ongoing opportunity to
speak with people experiencing electric deregulation in the Lower
48, including California, New York and Pennsylvania. Furthermore,
a great deal has been learned from telephone deregulation, both for
long-distance and local service.
MR. CONN referred to Mr. Edwards' comments, noting that consumer
advocates in this country don't actually believe it is the retail
consumer who is pushing for electric deregulation; that hasn't been
demonstrated in statistics for California and other places. He
indicated AKPIRG's mode tends to be more defensive than offensive,
essentially trying to hang on to what existed under regulation and,
in some cases, building on those. He expressed optimism in that
regard.
MR. CONN expressed concern about so-called cherry picking, however,
to the degree that it will shift costs to the residential rate
payer; he suggested that in some ways reflects the rural utilities.
That competition will not be serious, full-fledged competition,
residence by residence, business by business, he said, but rather
will be partial competition. He indicated he has spoken about that
with various committee chairmen and is still concerned about it.
This falls under the question of what kind of guarantee will be
provided to the consumer in the area.
Number 402
MR. CONN remarked that the language still seems a little "squishy,"
then drew attention to page 2, (b)(2) and (b)(3). He paraphrased
from (b)(2), commenting that it makes sense for the provider.
Paragraph (b)(2) read:
(2) offer electric service to any consumer in the area
served by the electric service provider so long as
providing the service is technically feasible at a
reasonable cost to the provider;
He then read from paragraph (b)(3), which stated:
(3) provide the same electric service choices and pricing
options to all consumers;
He suggested that is still a little off the mark, because he is
thinking they would offer him, in his house, the same rate as they
would offer a large grocery store up the street. His concern is
that rates offered in a competitive marketplace be for everyone in
that marketplace, not just for a favored few; he asked the
committee to look at that. Referring to the phrase "pricing
options" and the word "option," he said maybe the word he is
looking for here is "price." He said he also thinks - although he
doesn't believe the rural electric utilities necessarily agree with
him - that that would be "sort of a poison pill to cherry picking."
MR. CONN also expressed concern on behalf of consumers about the
"ultimate price issue." He reminded members that if all utilities
were known and trusted - as are Chugach or ML&P - maybe the
consumer situation wouldn't be so disconcerting. However, people
are likely to move in who are essentially aggregators, buying up
service and reselling it. A lot of the need for a bill that looks
out for consumers is because of not only existing players but also
new, unknown players; that area of major concern created
unanticipated problems in California, he noted.
MR. CONN turned to the issue of need. He suggested perhaps Mr.
Edwards was correct about isolating the word "economic"
exclusively. Mr. Conn said he would offer, at the end of his
testimony, a copy of New York's Home Energy Fair Practices Act (on
the Internet at www.dps.state.ny.us/p11res.html), which passed some
time ago as a utility consumers' bill of rights. In New York, he
noted, they are trying to hold the line on maintaining that statute
in a competitive marketplace. In examining need, as determined in
New York's legislation, Mr. Conn pointed out that the focus is on
other areas, including elderly and disabled people, as well as
people on life-support systems. There may be a panoply of needs
that aren't exclusively economic but that should be examined.
MR. CONN next addressed billing, especially bundling. This
legislation discusses in some detail the prototype contents of any
utility bill, he noted. In the world, down the road, electric
utilities will sell telephone service or cable service, for
example. As consumer advocates, AKPIRG is concerned that choice be
maintained without consumers being forced to buy bundled services,
of any sort, in order to get the best choice in any discrete area.
An affirmative right of a consumer, in a consumer-choice-driven
market, is the ability to buy unbundled services without one being
conditioned upon the purchase of another; furthermore, consumers
should not have to buy, unwittingly, a bundled service for which
multiple bills are issued.
MR. CONN referred to pages 21 and 22 of New York's Home Energy Fair
Practices Act. He told the committee a possibility, not reflected
in the current legislation, is an annual notification to consumers
of their rights, which would include the following: a description
of complaint-handling procedures at the utility and the commission;
the rights and obligations of residential customers regarding
payment of bills, termination of service and reconnection of
service; a description of special protections afforded people who
are elderly, blind, disabled or experiencing medical emergencies,
or those receiving public assistance, Supplemental Security Income
(SSI) benefits, or additional state payments (also, perhaps persons
in two-family dwellings, which Mr. Conn said he wouldn't address
that day); a request that residential customers who qualify for
some of those considerations inform the utility; notification of a
person's right to designate a third party to receive copies of
notices related to termination; and a few others, including billing
information in a language other than English where it applies. Mr.
Conn said it is not a bad idea to keep complexity to a minimum.
MR. CONN indicated he would share a book on how to compare prices
and shop for electric suppliers, produced by the Pennsylvania
Office of Consumer Affairs; he suggested either the RCA or some
division of the Department of Law might think about doing that. He
noted that the current bill's provisions addressing clarity and
billing are aimed at what he believes the utilities would like to
see too, which is an ability of the consumer and rate payer to do
head-to-head comparisons. This would conceivably take a certain
financial burden off of the private utilities. If information were
sent to the RCA, and if the RCA were given appropriations to
generate a book of this sort for availability to the public, there
would be one-stop shopping that Mr. Conn believes would enhance
competition.
Number 566
REPRESENTATIVE HALCRO agreed such a book might help a few, but
expressed doubts that anybody would actually call to request one,
then read it before making a decision to switch. He recalled that
during the so-called telecom wars, a person could almost count on
the telephone ringing nightly, with a salesperson trying to pitch
a deal. He referred to page 4 of the bill, subsection (f), which
read:
The commission shall, by regulation, require that, in a
competitive electric service market, a customer's
electric service provider may only be changed with the
written authorization of the customer.
REPRESENTATIVE HALCRO said he supports that, because a person might
receive a telephone call that sounds too good to be true, for
example, and then sign up, only to discover the bill doesn't seem
to add up correctly because of what it includes. His thought is
not only for the utility to have to send the customer a form or
card to sign and submit. The utility would also have to show the
comparison between what the consumer currently gets and what the
utility offers. Whether the next day or week after the initial
sales call, the potential customer could then compare utilities to
see what the savings, as represented by the utility, would be. He
asked whether Mr. Conn believes that would be helpful.
[MR. CONN appeared to answer in the affirmative, but his answer was
cut off by the tape change.]
TAPE 99-61, SIDE A
Number 007
[Unusually long blank tape at beginning]
MR. CONN continued, mentioning extremely deceptive advertisements
regarding telephone service. Possible ideas include the book
mentioned earlier or a site on the World Wide Web. He said he is
scouting for "wheels that have already been invented," rather than
trying to come up with something new. It would be an improvement
- over what is being seen in New York and elsewhere - to have
utilities conform to a standardized approach, comparing incumbent
service with proposed service, for example, which would be worked
out through regulatory hearings with the RCA. "This is good
thinking on your part, sir," Mr. Conn concluded.
CHAIRMAN ROKEBERG asked if there were further questions, noting
that his own could be discussed later. He thanked Mr. Conn, then
called upon Mr. Kelly in Fairbanks.
Number 068
MIKE KELLY, President and Chief Executive Officer, Golden Valley
Electric Association (GVEA), spoke via teleconference from
Fairbanks. He referred to comments before the URS committee,
indicating that committee had set no clear course. He voiced
strong support for the legislature rather than the RCA having
control of the so-called trip wire. Because of "the ex parte
problem and their vary quasi-judicial constitution," he said it is
difficult to have the kind of dialogue with the RCA that is
possible with legislators. Furthermore, GVEA wouldn't consider it
bad news if the legislature determined a two-year moratorium should
occur. On the other hand, he hopes legislators still have copies
- which GVEA can furnish - of the "competitive 'we believes'" that
state GVEA's board's position on that.
MR. KELLY suggested the committee might spend time in the future
determining exactly what they want to do. He believes creating
opportunities for new players shouldn't get much attention because
there are probably no more than ten new players out there.
Instead, the focus should be on the consumer. He noted that Mr.
Edwards had seen one real consumer at a hearing, whereas he himself
hadn't seen any. "We've not had a clamor for this," he added.
MR. KELLY mentioned other approaches. If the legislature wants to
create more consumer protection, he said, he submits that it is
already well in place with the commission, and he agrees with Mr.
Edwards that the RCA's system works; he suggested letting the RCA
handle that if the legislation moves forward. Mr. Kelly continued:
If you want to let the big guys feed, that will probably
work pretty well too. Turn them loose in Anchorage if
you want. You could say that you turned them loose in
Fairbanks. There used to be two of them; now there's
one. Do we have more competition or less? That's a good
question for you to ponder sometime when you wake up
early in the morning.
If you really want savings for the consumer as your
overall bottom line, then why don't you ... consider to
take Seward, Homer, Matanuska, Chugach and ML&P, and
eliminate all the separateness of them, and create one
utility? I can guarantee a savings that would dwarf most
other considerations. However, I've never heard that
that's what the people want. And every time somebody
tries to pick off the other guy down there, the consumers
seem to rise up. ... If you're trying to save money, it
might lead you in a different direction.
The thought about having the members choose: Since, for
example, everybody north of the range up here belongs to
a cooperative, and they elect the directors, maybe a
thought is that they ought to choose whether they want to
open their territory up or not. That might lead to some
interesting discussion.
The question about whether the elements of competition
are ... present: Eric [Yould] mentioned that the CH2M
Hill report talked about eight providers being the basic
minimum. One wouldn't argue that it takes at least two.
We think that the basic elements of competition in Alaska
are something that has to be carefully considered. So,
we want you to hold on to the reins on this thing, and if
this old horse goes slowly, we smile.
Number 069
CHAIRMAN ROKEBERG asked if Mr. Kelly believes the legislature's
time would be better spent investigating such concepts as "economic
dispatch and power pooling."
MR. KELLY answered no, that CH2M Hill and Black and Veatch had
shown "there's a scrawny little one-and-a-half percent in there."
He added, "We're doing it pretty well and improving it all the
time, without a lot of help from anybody. So, no, I think that
isn't where I would put much of your time."
CHAIRMAN ROKEBERG asked about some type of distribution authority
in the state to ensure that the intertie lines are properly managed
and operated.
MR. KELLY responded that it isn't broken, and no help is needed
there either. In response to a question by Representative Halcro,
he said slowing this down is certainly among the options that make
sense. Roughly half of the states have had real opportunities to
look at this, and Pennsylvania is doing some interesting things;
however, Alaska is unique. Mr. Kelly expressed appreciation for
Chairman Rokeberg's and the committee's sensitivity that acting too
hastily could be a real problem in the state. He concluded by
stating general support for moving the legislation forward.
However, he voiced concern that the legislature hold on to the
reins and take it carefully. He also expressed hope that his other
comments were helpful and not taken as critical.
Number 100
MEERA KOHLER, General Manager, Anchorage Municipal Light & Power in
Anchorage, noted support for the concept of consumer protection.
She indicated the importance of consumer protection with any
utility restructuring that occurs, in that no consumer should be
harmed. She believed that the bill sets out to do just that. She
also believed that the proposed amendments are good, which we
[Municipal Light & Power] support generally. Ms. Kohler concurred
with regard to the prior comments that the trip wire should be
retained by the legislature rather than the utility commission.
She said that it is in the realm of the legislature to determine
if, when, and how any restructuring should occur. Therefore, that
should be the trip wire to stimulate some form of consumer
protection. She also believed that the ARECA utilities would
generally support the concept of carving out the noninterconnected
utilities early on. Ms. Kohler stated that the committee may want
to consider proposing this consumer protection bill as a general
utility consumer protection bill. The electric utility industry is
not the only industry nor the only utility in this state that is an
essential service. She provided examples of other essential
services such as water, sewer, basic telephone service, et cetera.
Ms. Kohler believed that a consumer's bill of rights would
potentially receive broad acceptance if such contained underlying
elements that should be included in any consumer protection
process. In conclusion, Ms. Kohler said that we [Municipal Light
& Power] continue to support [the legislature's] efforts to promote
consumer protection laws.
CHAIRMAN ROKEBERG expressed concern with the fiscal note that would
result from applying this legislation to all utilities, although it
did sound intriguing. He informed the committee that although
there would be a fiscal note, the general fund would not be
assessed as it comes from the regulatory cost charge (RCC). The
consumer actually pays for the RCC.
REPRESENTATIVE HALCRO inquired as to the percentage of energy
dollars spent on electricity. He clarified that he was interested
in a household's expenditure on energy.
MS. KOHLER pointed out that, obviously, it would depend upon one's
location in the state. She informed the committee that a homeowner
in the Railbelt spends, on average, about $200 per month on energy.
Of course, that expenditure would probably be significantly higher
in Fairbanks. Therefore, Ms. Kohler estimated that one spends
about 5 percent of his/her household expenditures on energy per
month.
MR. CONN informed the committee that the Governor's Commission on
Power Cost Equalization did a report, and therefore would know how
much people are spending in rural and urban Alaska. The commission
also included average household incomes in the report. He directed
the committee to the Department of Commerce.
MS. KOHLER commented that, in her experience in Naknek, those in
Bush Alaska spend 15-20 percent of the household's monthly
disposable income on energy. Therefore, the Railbelt spends a much
smaller component.
CHAIRMAN ROKEBERG turned to the hardship issue. He asked if each
utility's tariff reflects how that utility handles the hardship or
is that a uniform rule.
MS. KOHLER replied that there is no uniform rule. She explained
that some utility tariffs address specific scenarios under which
hardship is triggered. Typically, each utility is left to construe
the internal regulations in order to deal with the issue of
hardships. She pointed out that the hardship issue consumes an
inordinate percentage of time. She noted that the utilities are
very responsive and only with the greatest reluctance will a
utility disconnect a consumer for nonpayment. Ms. Kohler
interpreted the intent of the bill to ensure that a hardship
customer will always be provided a basic human service, which is
electricity. When there are utilities that are no longer the
sole-serving utility, there could be very little incentive to serve
those customers. As noted earlier, the commission did perform a
comprehensive survey of all the utilities in the state in order to
determine whether the commission should institute regulations in
statute which would require certain hardship non-disconnects. Ms.
Kohler felt such would be remiss. She posed an example in which
the commission dictated that if the ambient temperature is below 32
degrees or 20 degrees Fahrenheit, the utility shall not disconnect
consumers. One size does not fit all. There are many consumers
that would take advantage of such a dictate and cause hardship to
the utility. Therefore, [the cost of those taking advantage of the
system] would be spread throughout those who do not take advantage
of the system.
CHAIRMAN ROKEBERG surmised then that the problem is the lack of a
uniform rule. However, if a criteria is established then there is
more of an opportunity to take advantage of the system.
MS. KOHLER indicated agreement.
CHAIRMAN ROKEBERG commented that having the legislature dictate
this seems to be a common sense approach. However, the legislature
runs the risk of having people use the dictate as a loophole to
escape their responsibility.
MS. KOHLER suggested that the legislature could essentially dictate
that each utility must develop internal rules to address those
issues without specifying the parameters.
CHAIRMAN ROKEBERG noted that some states have a differential tariff
for disabled elderly people or lower income people. Chairman
Rokeberg asked Ms. Kohler if she was aware of the legislation
introduced by Senator Murkowski [U.S. Senator Frank Murkowski].
MS. KOHLER informed the chair that Senator Murkowski had not yet
introduced the legislation, which is currently in draft. She noted
that the draft legislation is on the Senate Energy & Resources
Committee website. Compared with Representative Joe Barton's [U.S.
Representative Joe Barton] legislation which was introduced a
couple of weeks ago, Senator Murkowski's legislation is more
streamlined. Senator Murkowski's legislation supports state's
rights with regard to restructuring and proposes to repeal the
Public Utilities Holding Companies Act (PUHCA) and the Public
Utility Regulatory Policies Act of 1978 (PURPA).
CHAIRMAN ROKEBERG pointed out that Senator Murkowski's bill would
delete the requirement under PURPA to take any power generated.
MS. KOHLER explained that PUHCA would basically allow companies to
merge. With regard to PURPA contracts, some utilities are paying
providers of co-generated power or power generated by alternative
means two to three times what it would cost the utility to purchase
or generate that utility elsewhere. Therefore, Senator Murkowski's
legislation would lighten that requirement.
CHAIRMAN ROKEBERG asked if, under PURPA, utilities have to take the
power at the cost at which it was generated.
MS. KOHLER interjected, "The utilities avoided cost. In some cases
that would include avoided new generation capacity that would have
to develop at some stage down the road."
CHAIRMAN ROKEBERG surmised then that it would have a higher rate
potential.
MS. KOHLER replied, "Yes or the most expensive alternative form of
generation, for example." She explained that one would take the
most expensive generation plant and project that...
CHAIRMAN ROKEBERG understood then, "So even if they had a surplus
of power, they would even have to shut in their own generation
(indisc.)"
MS. KOHLER interjected, "They would have to buy the co-generated
power first."
CHAIRMAN ROKEBERG commented that the co-generated power would have
to be purchased first even if it is at a higher tariff. Chairman
Rokeberg mentioned that is overcome for some folks with the
separate green power tariff. In other words, those that want green
power pay a higher rate.
MS. KOHLER noted that the alternative power is offered as an option
by specific utilities, especially in the deregulated states. Under
President Clinton's proposed bill, it was proposed that about five
percent of generation, nationally, would be through renewable
resources such as wind. One issue with that proposed bill was that
hydropower was excluded from being considered green power. Ms.
Kohler felt that ridiculous because hydropower is the most viable
green power that Alaska has.
MS. KOHLER informed the committee that Senator Murkowski's draft
bill also specifically excludes Alaska from having to be covered by
the Federal Energy Regulatory Commission (FERC) jurisdiction with
regard to reliability standards. She said that Alaska was
concerned because the "one size fits all" reliability standards
that apply to the large interconnected systems in the Lower 48
could simply not apply in Alaska.
MS. KOHLER said, "There is no question that there is not going to
be a federal restructuring bill this year." In response to
Chairman Rokeberg, Ms. Kohler reiterated that both Senator
Murkowski and Representative Barton have introduced legislation.
Representative Barton's legislation is HR 2944.
Number 301
CHAIRMAN ROKEBERG asked if there were any questions. There being
none, he thanked Ms. Kohler and commented that he was intrigued by
her suggestion of a uniform bill. He announced that this would
conclude this portion of public testimony and HB 81 would be held
over. Chairman Rokeberg was concerned about the third amendment,
and therefore was uncertain with regard to taking action to create
a committee substitute. After determining that Representative
Brice was no longer present, he announced that there was not a
quorum and the amendment would not be taken up.
CHAIRMAN ROKEBERG announced that the committee would be taking up
HB 207 on October 21, 1999, at 10:00 a.m. and at 1:30 p.m. on the
same day the committee will hear HB 190. The committee will also
meet on October 22, 1999, at 10:00 a.m. in order to take up HB 211.
ADJOURNMENT
There being no further business before the committee, the House
Labor & Commerce Committee meeting was adjourned at 12:15 p.m.
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