02/16/2005 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB108 | |
| HB33 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 33 | TELECONFERENCED | |
| + | HB 108 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 16, 2005
3:22 p.m.
MEMBERS PRESENT
Representative Tom Anderson, Chair
Representative Pete Kott
Representative Gabrielle LeDoux
Representative Bob Lynn
Representative Norman Rokeberg
Representative Harry Crawford
Representative David Guttenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 108
"An Act relating to the regulation of water and sewer utilities
of political subdivisions that are not in competition with other
water and sewer utilities."
- MOVED HB 108 OUT OF COMMITTEE
HOUSE BILL NO. 33
"An Act relating to the effect of regulations on small
businesses; and providing for an effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 108
SHORT TITLE: WATER & SEWER UTILITIES OF POLIT. SUBDIV.
SPONSOR(s): LABOR & COMMERCE
01/26/05 (H) READ THE FIRST TIME - REFERRALS
01/26/05 (H) CRA, L&C
02/10/05 (H) CRA AT 8:00 AM CAPITOL 124
02/10/05 (H) Moved Out of Committee
02/10/05 (H) MINUTE(CRA)
02/11/05 (H) CRA RPT 2DP 3NR 1AM
02/11/05 (H) DP: CISSNA, THOMAS;
02/11/05 (H) NR: LEDOUX, SALMON, NEUMAN;
02/11/05 (H) AM: KOTT
02/14/05 (H) FIN REFERRAL ADDED AFTER L&C
02/16/05 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 33
SHORT TITLE: EFFECT OF REGULATIONS ON SMALL BUSINESSES
SPONSOR(s): REPRESENTATIVE(s) MEYER
01/10/05 (H) PREFILE RELEASED 12/30/04
01/10/05 (H) READ THE FIRST TIME - REFERRALS
01/10/05 (H) L&C, JUD
02/16/05 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
MARK PREMO, General Manager
Anchorage Water and Wastewater Utility (AWWU)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 108.
KATE GIARD, Chair
Regulatory Commission of Alaska
Anchorage, Alaska
POSITION STATEMENT: Testified that HB 108 should not go into
effect until the Municipality of Anchorage and the AWWU have
shown they are ready to take on regulatory authority.
MICHAEL PAWLOWSKI, Staff
to Representative Kevin Meyer
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 33 on behalf of Representative
Meyer, sponsor.
ACTION NARRATIVE
CHAIR TOM ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 3:23:52 PM. Representatives
Guttenberg, Lynn, LeDoux, and Anderson were present at the call
to order. Representatives Crawford, Rokeberg, and Kott arrived
while the meeting was in progress.
HB 108-WATER & SEWER UTILITIES OF POLIT. SUBDIV.
CHAIR ANDERSON announced that the first order of business would
be HOUSE BILL NO. 108 "An Act relating to the regulation of
water and sewer utilities of political subdivisions that are not
in competition with other water and sewer utilities."
CHAIR ANDERSON said a similar bill, House Bill 515, died last
session due to time. The bill is designed to exempt the
Anchorage Water and Wastewater Utility (AWWU) from the
regulatory purview of the Regulatory Commission of Alaska (RCA).
He said local control is the issue, and in his opinion there is
no evidence showing that state oversight is better for the
consumer. He added that he has worked with the Mayor of
Anchorage, the AWWU, and the Anchorage Assembly to develop a
plan for a local oversight authority for the utility, which will
maintain the level of consumer protection while encouraging
stronger local government and local ownership.
MARK PREMO, General Manager, Anchorage Water and Wastewater
Utility, said he supports HB 108, which specifically exempts
AWWU from economic regulation by the RCA, and places it in the
same status as every other municipally-owned water utility
except Pelican. He said AWWU is two separate utilities: water
utility and sewer utility. The AWWU was formed in 1975 after
the unification of the Municipality of Anchorage. In 1991, the
municipality petitioned for an exemption from regulation, and
the commission split on a two to two vote. The opinion of the
opposing commissioners was that AWWU should be regulated because
of competition.
3:29:36 PM
MR. PREMO said that during the last session House Bill 515 was
passed by the House, but time ran out for the Senate to act.
Current RCA regulation procedures are slow and expensive, he
said, and he estimates that the AWWU will pay over $500,000 in
regulatory costs in 2005. He said the greater cost to AWWU and
its customers is in preparing filings and the regulatory delay.
The RCA scheduled public hearings 15 months after AWWU filed for
rate increases, which substantially increases the jeopardy for
customers in the event that a portion of the requested rates
have to be refunded, he said. He stated that local regulations
are faster, less structured, more economical, and more
responsive to local needs. The RCA process was designed for
private utilities, and it is not accountable to Anchorage
residents. The municipality is accountable because ratepayers
are voters. He asked for support of HB 108 and said that self-
regulation has worked effectively across the nation and the
state. Anchorage has a proven track record of managing other
utilities. Ratepayers have benefited from AWWU's efficiencies
and upgrades, which have been done without assistance from the
RCA, he noted.
3:33:02 PM
MR. PREMO said Anchorage's mayor and assembly have made sound
decisions in the oversight of AWWU. The water and wastewater
advisory commission is currently meeting to develop an authority
structure that will include strong consumer protections and a
ratemaking process similar to standard industry practices. Mr.
Premo concluded that municipal regulation of AWWU will balance
consumer protection with financial soundness.
CHAIR ANDERSON asked him if AWWU is the only municipally owned
water utility that is regulated by the RCA.
MR. PREMO said, "Short of Pelican."
CHAIR ANDERSON asked how many wastewater utilities are in the
state.
MR. PREMO replied that all cities have municipally owned water
and wastewater utilities except Fairbanks, which is privately
owned and under the RCA structure.
CHAIR ANDERSON asked what will be the process when HB 108
passes.
MR. PREMO replied that the process would be the same as in
Juneau, Sitka, Ketchikan, Kenai, Homer, and the vast majority of
cities in Alaska, and it is direct oversight by the local
elected officials.
3:36:29 PM
MR. PREMO said that once the authority is established, the
overview of the utility, less items that are vested in the
charter of Anchorage to the assembly, would be passed on to the
authority.
CHAIR ANDERSON asked if the advisory commission would establish
the authority and then there would be a new group that would
serve as commissioners on that authority.
MR. PREMO answered that Chair Anderson is generally correct.
Right now AWWU is in discussions with the advisory commission,
municipal administration, and the assembly to implement that
authority, he said. He added that the advisory commission would
be empowered to a higher level of responsibility for oversight
of the daily operations of the utility. "It is envisioned that
that authority would have involvement of both the administration
and the assembly in the appointment of the members," he said.
CHAIR ANDERSON asked about the assembly increasing utility rates
without control from outside.
MR. PREMO said AWWU concurs with concern about the control
mechanism. Currently, the rates are determined by a long series
of comparisons and equity questions. The assembly will use a
similar ratemaking methodology, with principles that are
standard in the industry. Comparing the ability of the assembly
to make rates with RCA's ability, he said: "I believe eleven
elected local officials are much more accountable to the rate
payers who are also voters in Anchorage, than a series of five
state-appointed officials from Juneau."
REPRESENTATIVE CRAWFORD said he got lost during the explanation
of the ratemaking process.
MR. PREMO said that the process used today will be the same
after HB 108.
REPRESENTATIVE CRAWFORD asked if the assembly is the one that
makes the rate decision.
MR. PREMO said the utility staff does the rate analysis, the
board approves it, and then the assembly has ultimate approval.
CHAIR ANDERSON opined that it's more complicated and more
intimidating to go through the RCA hearing process than a local
process.
3:42:56 PM
MR. PREMO said he agrees, and, as an example, the current rate
case has over 530 questions of discovery, and it is very time-
consuming and formal--almost like a trial with lawyers.
REPRESENTATIVE LYNN asked about financial savings for the
municipality.
MR. PREMO said he thinks it will vary from year to year. He
said that the $500,000 that is to go to the RCA "would
immediately go away." Mr. Premo said he believes the cost of
self-regulation is one quarter the cost of RCA regulation.
REPRESENTATIVE LYNN asked if that means a decrease in his
constituents' water bills.
MR. PREMO said barring inflation, that is correct.
REPRESENTATIVE CRAWFORD said he is concerned that the assembly
is faced with a tax cap and budget shortfalls, and it might "try
to backfill with revenues from AWWU."
MR. PREMO replied that local accountability is the strongest
there is. The assembly would be accountable to its voters.
Additionally, the authority structure will prevent that, he
said.
3:47:11 PM
CHAIR ANDERSON said that Mayor Begich claimed that this was a
partisan effort, but this is evolving every year even as mayors
and the assembly changes.
MR. PREMO said he agrees that this is more about local control
than partisanship, and Anchorage is sophisticated enough to
oversee its own utilities.
REPRESENTATIVE GUTTENBERG pointed out that taking a utility from
under the RCA removes the consumer protection aspect, or the
public advocacy section, not in relation to ratepaying. How
would the assembly address those issues, he asked.
MR. PREMO said AWWU has discussed it with the advisory
commission at length. He suggested Representative Guttenberg's
question is: "What is his accountability to the customers?" He
said now it would be more difficult for a customer to get
resolution on complaints than if [AWWU] is directly accountable
at the local level.
3:49:37 PM
MR. PREMO added that under HB 108, he will not have the ability
to say to a customer, "Go see the regulatory commission and see
if we're following our rules."
3:50:46 PM
REPRESENTATIVE GUTTENBERG asked how many non-rate-based consumer
complaints there have been in the RCA for the AWWU.
KATE GIARD, Chair, Regulatory Commission of Alaska, said there
were 29 complaints between 2001 and 2004, and 7 complaints so
far in 2005. As the former chief fiscal officer for the
Municipality of Anchorage, she assured the committee that the
water and wastewater utility is a finely run organization. She
said she has the utmost respect for Mr. Premo and his leadership
in bringing the utility to the good position it is in today.
However, the RCA is constructed in a formalized manner, and it
offers the public the opportunity to come in and complain, she
noted. The RCA becomes a judge at that point and listens to the
case created by the complaint. Alaska's attorney general is
looking at the current AWWU-proposed rate increase of about 20
percent, because the state is concerned about the hike and wants
to investigate. It is a court-like event on a 15-month
timeline, which is long, she said. She noted that the RCA is
going to fix its reputation for poor timeliness, but in this
particular case Mr. Premo's comments trouble her because the
parties established the schedule. She said it is of great
concern to the attorney general that customers throughout
Anchorage will have a 20 percent increase in rates.
3:55:29 PM
MS. GIARD said she thinks local control is a fine idea as long
as there are processes is in place, the RCA can be mimicked, but
she questioned "why you want to go through the cost of mimicking
it." She said, "They're not really ready yet. They have a rate
case going on; they haven't really provided you with a
sufficient degree of comfort in what the form of the oversight
agency is going to be; what powers does it hold? How are you
going to assure your ratepayers, voters, that they won't
increase their rates again, year to year to year to year?"
MS. GIARD said that when she worked for Anchorage, she looked to
the AWWU for money, but she could not access it. The local
government still cannot access that money, but it raised the
property taxes on AWWU three times in two years by 300 percent.
"That's the basis of this particular rate case," she said; the
utility's tax bill went up by $6.4 million, and that is the
essence of a lot of the struggle. Looking at the value RCA
provides, she acknowledged that the municipality can mimic it,
but she warned the committee to ask for it to be:
a little bit more defined so you can say to your
ratepayers, yes, you're going to have a specific
amount of increase in 2005 in your bills, but I can
assure you -- because I know what's going to happen in
the structure and the set up -- it's defined, the
assembly has passed it. They have given us some kind
of assurance that this is the structure. We've looked
at it. We're comfortable with it. We feel that we've
done our fiduciary responsibility to you in letting
regulation go.
MS. GIARD added that "they can do it," but she doesn't feel that
they are ready to.
CHAIR ANDERSON said he has seen an onslaught of entities wanting
to get outside of the RCA, and sometimes there may be merit and
sometimes not. He said there is a need for the RCA, and he
complimented Ms. Giard for her diligent and hard work. He said
this case is a good one to be withdrawn from RCA regulation
because no other similar utility is under the RCA. He said if
the legislature passes this regulation, it will expedite an
authority being created.
MS. GIARD said anytime the legislature feels comfortable that
the Municipality of Anchorage will protect the ratepayers from
paying for more than just a water bill, there is no reason that
the RCA can't stand down. She said the RCA does not need to
regulate AWWU when there are competent means at the municipal
level, and there are a lot of reasons to let it go. She
cautioned that Fairbanks used its utility as a funding source
for the city and the utility value went down.
4:03:51 PM
MS. GIARD told the committee the AWWU is in the middle of a rate
case. She recommended the legislature allow that to finish
before moving forward, and she suggested bill language to that
effect. She opined that in the end HB 108 will probably be a
good thing for the water utility and the city.
REPRESENTATIVE GUTTENBERG asked for a timeline for the rate
case.
MS. GIARD said there is a hearing date for June 14, 2005, and
the RCA issue order date is July 30, 2005.
REPRESENTATIVE GUTTENBERG said if this legislation passed before
then, it could void the rate case.
MS. GIARD said the rate case would just fall away.
REPRESENTATIVE GUTTENBERG asked if she recommends language that
the bill take effect after the rate case decision.
MS. GIARD said she thinks allowing the RCA to continue the
process is a good way of passing the baton of control.
MR. PREMO said he has not requested a legal opinion regarding
such language, and he might look at that. He said he would not
have filed the rate case in June if it hadn't met all the
structural integrity issues required for expenses. He said the
big issue is when the legislature would be comfortable with
self-regulation by the city of Anchorage, and he believes the
House spoke loudly last year that it is comfortable. He said
the board is forming now and expects it to be formalized
conceptually in the next 30 to 45 days. But even without that,
he said, the Municipality of Anchorage has proven that it knows
how to run an enterprise fund. Tying the legislation to a
defined date based on the rate case could get lengthy, and he
said that would be his biggest concern.
4:08:44 PM
CHAIR ANDERSON recalled that last year's legislation wasn't tied
to the rate case. "Is that correct," he asked.
MR. PREMO said, exactly; it is an ongoing issue.
REPRESENTATIVE ROKEBERG expressed concern about the effect of
the bill on the current rate case, which he opined would be a
waste of money. He asked Mr. Premo if he is satisfied with the
interim rate increase that has been granted.
MR. PREMO replied no, because the rate case filed in early 2004
requested a two-stage rate increase. One stage would be for the
2004 interim refundables, and the second stage would happen in
January 2005, he said. "At the time we filed our 2004 request,
we were under the opinion that we could move through 2004 and
get to a permanent rate hearing and review the interim rate
requests for 2004 and make permanent the rates for 2005." He
said the rate case hearing has been moved back, and the AWWU has
not been granted the request for interim refundable rates for
the portion associated with the 2005 cost increases.
REPRESENTATIVE ROKEBERG asked if Mr. Premo was not satisfied
with the interim rates and if the AWWU would like refunds back
to the consumers.
MR. PREMO said it is the other way around. He said the AWWU has
not received the rate increases associated with 2005. "We're
operating without that," he clarified.
CHAIR ANDERSON said there isn't going to be rebate, and related
his understanding that Mr. Premo's point has been that there
will be increased efficiency, local control, and a simplified
process. He said that Mr. Premo has never said on record that
there is an easy way to reduce rates, but that is what he
prefers to do if possible.
MR. PREMO said the issue is of local control, and the rate case
should not be brought into the discussion.
4:14:09 PM
REPRESENTATIVE ROKEBERG indicated [that he is interested] in
determining whether the effective date of the bill should be now
or after the rate case is over. He noted the lag time of the
rate increase and speculated that if the utility were under
local control there could be incremental, periodic adjustments
in rates. He said he thinks it is bad policy to have a large
jump in rates.
MR. PREMO said between 1992 and 2004 there was not a rate
increase because it wasn't needed, but the Anchorage assembly
recently increased the utility's taxes by 40 percent, which is
the driving factor in the rate increase.
REPRESENTATIVE ROKEBERG said that the legislature did not cause
the tariff increase, the municipality did.
MR. PREMO said the mill rate has stayed the same but it is now
applied to the entire AWWU plant, unlike before.
4:17:50 PM
REPRESENTATIVE CRAWFORD asked for a definition of an interim
refundable rate.
MR. PREMO said it is a temporary rate increase. The RCA can
approve a rate before it fully analyzes the increase, and it
will give the approval for an interim refundable rate which
allows for a refund to the consumer if that rate is not
ultimately approved.
REPRESENTATIVE GUTTENBERG asked how the assembly or other
authority would have the expertise to assess a proposed rate
increase, and if there would be an increased cost to the
municipality.
MR. PREMO said all rate filings go to the assembly for approval
now.
4:20:34 PM
REPRESENTATIVE ROKEBERG asked at what stage the development of
the new authority is, and how quickly it will be in place.
MR. PREMO replied that Anchorage's mayor and senior
administrators agree that the authority is the proper form of
governance for the utility. He added there is an advisory
commission that the AWWU is working with, and in late March
there will be a recommendation regarding the makeup of the
authority and the controlling principles that are embodied in
its bylaws.
4:22:39 PM
CHAIR ANDERSON said he thinks there can be a compromise and then
closed public testimony.
REPRESENTATIVE GUTTENBERG said the committee has not heard from
the public, and he wonders what kind of public process there is.
CHAIR ANDERSON said there is a toll-free number, email access,
and Gavel to Gavel, which allows the public to call in now. He
asked for a motion to move the bill and said that Mr. Premo will
get documentation regarding how the bill will affect the rate
case.
REPRESENTATIVE ROKEBERG said there must be some reference to the
rate case.
CHAIR ANDERSON said Mr. Premo will get documentation before the
first hearing in House Finance.
4:26:28 PM
REPRESENTATIVE ROKEBERG said he would like a message from the
Anchorage Assembly, because it will be picking up the baton. He
said he thinks that it's ludicrous that Anchorage and Pelican
are the only water utilities under the RCA, and it needs to be
resolved.
REPRESENTATIVE ROKEBERG moved to report HB 108 out of committee
with individual recommendations and the accompanying fiscal
notes. Hearing no objection, it was so moved.
The committee took an at-ease from 4:27 p.m. to 4:28 p.m.
HB 33-EFFECT OF REGULATIONS ON SMALL BUSINESSES
CHAIR ANDERSON announced that the next order of business would
be HOUSE BILL NO. 33 "An Act relating to the effect of
regulations on small businesses; and providing for an effective
date."
CHAIR ANDERSON moved to adopt CS for HB 33, Version 24-LS0239\G,
Bannister, 2/9/05, as a work draft. Hearing no objection,
Version G was before the committee.
MICHAEL PAWLOWSKI, Staff to Representative Kevin Meyer, said
that in 1980 the federal government enacted the Regulatory
Flexibility Act (RFA), which directed regulatory agencies to
consider the impact of regulations on small businesses and to
study the effect those regulations have on the economy while
looking at alternative means to effect the regulatory goal. In
1996 the Small Business Regulatory Enforcement Fairness Act was
passed, and that added a judicial review provision to RFA. The
Office of Advocacy was created in the Small Business
Administration, and it estimated that in 2002 the new statutes
saved small businesses $21.1 billion in compliance costs with
federal regulations. Based on the success of the federal
program, the Office of Advocacy drafted model legislation for
states, which is incorporated into HB 33. He added that
versions of this bill have passed in 37 states.
MR. PAWLOWSKI said HB 33 requires regulatory agencies to
consider the impacts of regulations on small businesses, and it
gives them the freedom and encouragement to look at alternate
methods for meeting the same regulatory goals. He turned to the
committee substitute (CS), which limits the scope of the studies
that are called for by adding the language "using available
information and without conducting new studies that are
extensive." The reason for adding that language is that
Alaskans are "sadly intimately familiar" with the environmental
impact statement process. Agencies were afraid such studies
would take a few years, he said, and it is not the intent of the
sponsor "to hire scores of economists to conduct studies" on
regulations that might cost businesses a few thousand dollars a
year. He said HB 33 is about giving agencies the flexibility to
use available information and common sense.
MR. PAWLOWSKI pointed out a second change in the CS: the
exclusion of the regulations promulgated by the Board of
Fisheries and the Board of Game because the boards make
allocation decisions and automatically have an adverse impact on
small business. The board process is very open and public, and
"can't really be subject to the provisions of HB 33." The third
change removes the judicial review process from the bill,
because opening this up to the courts is burdensome and "not
appropriate to the level of discussion we were having."
4:34:36 PM
REPRESENTATIVE LYNN asked for a definition of "extensive"
regarding the language, "without conducting new studies that are
extensive."
MR. PAWLOWSKI said that when agencies are promulgating
regulations, they have access to a lot of information, but "we
don't want them to be conducting economic analysis to any
significant detail ...."
REPRESENTATIVE LYNN said that language is like finding a grey
ghost in the fog.
MR. PAWLOWSKI agreed.
REPRESENTATIVE LEDOUX said the intent of the bill is laudable,
although she didn't like the phrase "may have an adverse effect
on small businesses," since almost any regulation may have an
adverse affect on someone. So would all regulations have to
have this type of study, she asked.
4:37:46 PM
MR. PAWLOWSKI said probably yes. Many who start small
businesses don't have resources or experience, and they react to
regulations once they have been passed, he stated. "It has a
wide-ranging effect, and ... it is amazing to see some of the
regulations that have been challenged in court."
REPRESENTATIVE LEDOUX asked if there is a fiscal note.
MR. PAWLOWSKI said the administration is still working on it.
REPRESENTATIVE CRAWFORD said that it seems that the bill changes
the definition of small businesses from 50 employees to 100
employees. He said he is concerned that there will need to be a
fiscal statement for each new regulation on how it affects small
businesses.
MR. PAWLOWSKI said, "You are absolutely correct." It is a broad
policy decision at the federal level, he added, and it is a
question of how responsive and considerate the regulatory
process should be on small businesses. He said the definition
of a small business is still being worked on.
4:40:09 PM
REPRESENTATIVE GUTTENBERG noted that regulations are often
directed at businesses, and this bill might completely undermine
the purpose of the regulation. The restriction on only using
current information may preclude agencies from finding out what
they need to know. "You're hampering yourself,"
REPRESENTATIVE ROKEBERG asked if people in small business have
read this.
MR. PAWLOWSKI said he is getting letters of support from small
businesses and would be happy to provide them.
REPRESENTATIVE ROKEBERG asked about occupational licensing,
which must be self-supported. "I see absolutely no net benefit
to small businesses if their licensures and costs of doing
business is going to be increased substantially because of more
regulation--this is more regulation, not de-regulation."
MR. PAWLOWSKI said that is a very important point because the
fiscal impact is outside of the general fund spectrum, and it is
being worked on. He added that the administration will testify
later on that issue.
CHAIR ANDERSON said he thinks people are privy to the meetings
going on, and he characterized it as a work in process.
REPRESENTATIVE ROKEBERG said he has been in small business for
40 years and this scares him.
[HB 33 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:45:01 PM.
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