Legislature(1993 - 1994)

09/28/1993 01:30 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
              SENATE LABOR AND COMMERCE COMMITTEE                              
                       September 28, 1993                                      
                           1:30 p.m.                                           
                       Anchorage, Alaska                                       
                                                                               
  MEMBERS PRESENT                                                              
                                                                               
 Senator Tim Kelly, Chairman                                                   
 Senator Steve Rieger, Vice-Chairman                                           
 Senator Bert Sharp                                                            
                                                                               
  MEMBERS ABSENT                                                               
                                                                               
 Senator Judy Salo                                                             
 Senator Georgianna Lincoln                                                    
                                                                               
  COMMITTEE CALENDAR                                                           
                                                                               
 SENATE BILL NO. 213                                                           
 "An Act extending the Alaska Public Utilities Commission and                  
 the regulatory cost charge."                                                  
                                                                               
  PREVIOUS SENATE COMMITTEE ACTION                                             
                                                                               
  SB 213 - No previous action to record.                                       
                                                                               
  WITNESS REGISTER                                                             
                                                                               
 Don Schroer, Commissioner                                                     
 Alaska Public Utilities Commission                                            
 1016 W. 6th Ave., #400                                                        
 Anchorage, AK 99501                                                           
  POSITION STATEMENT:   Supports SB 213                                        
                                                                               
 Bob Lohr, Executive Director                                                  
 Alaska Public Utilities Commission                                            
 1016 W. 6th Ave., #400                                                        
 Anchorage, AK 99501                                                           
  POSITION STATEMENT:   Present to respond to questions                        
                                                                               
 Dave Hutchens                                                                 
 Alaska Regional Electric Cooperative                                          
   Association                                                                 
 703 W. Tudor Road, No. 200                                                    
 Anchorage, AK 99503                                                           
  POSITION STATEMENT:   Testified on SB 213                                    
                                                                               
 Randy Welker, Legislative Auditor                                             
 Legislative Audit Division                                                    
 P.O. Box 113300                                                               
 Juneau, AK 99811-3300                                                         
  POSITION STATEMENT:   Testified on audit recommendations                     
 Jack Rhyner                                                                   
 Alaska Telephone Association                                                  
 2121 Abbott Road                                                              
 Anchorage, AK 99507                                                           
  POSITION STATEMENT:   Testified on SB 213                                    
                                                                               
  ACTION NARRATIVE                                                             
                                                                               
 TAPE 93-32, SIDE A                                                            
 Number 001                                                                    
                                                                               
  CHAIRMAN TIM KELLY  called the Labor and Commerce Committee                  
 meeting to order at approximately 1:30 p.m. in the Anchorage                  
 LIO conference room.  The meeting was teleconferenced to the                  
 Fairbanks, Juneau, Kenai/Soldotna, Kotzebue, and Ketchikan                    
 teleconference sites.                                                         
                                                                               
 In his opening comments on  SB 213  (APUC EXTENSION AND                       
 REGULATORY COST CHARGE), Senator Kelly said there has been a                  
 lot of discussion throughout the state about the role of the                  
 APUC and its rates, as well as complaints about people wanting                
 to opt in or opt out.  He said the purpose of the meeting was                 
 to give the committee a sense of what those complaints are.                   
 He then opened the meeting to public comment.                                 
                                                                               
 Number 015                                                                    
                                                                               
 DON SCHROER, Chairman, Alaska Public Utilities (APUC),                        
 testifying in Anchorage, noted that Bob Lohr, Executive                       
 Director of the Alaska Public Utilities Commisssion, and Susan                
 Knowles, a commissioner, were also present at the meeting.                    
 He stated the commissions' support for SB 213, although they                  
 have several recommended changes to it.                                       
                                                                               
 Mr. Schroer emphasized the importance of timely decisions from                
 the APUC, and he said in spite of the significant increase in                 
 the commission's work load, they are continuing to progress                   
 in this area.  He pointed out that the commission issued 363                  
 or 12.4 percent more substantive orders in FY 93 than in the                  
 previous year, and more than twice as many as five years ago.                 
 At the same time, procedure orders have declined 17 percent                   
 to 58 in one year and by 63 percent over five years.  As a                    
 result, the commission has reduced the number of pending cases                
 at the end of FY 93 by 3.5 percent to 165, which is a 15.8                    
 percent reduction over the past five years.                                   
                                                                               
 Mr. Schroer outlined the following commission recommendations:                
                                                                               
  (1)  SB 106 (the intertie bill) transferred the power                        
 cost equalization responsibilities formerly handled by the                    
 Alaska Energy Authority to the Department of Community &                      
 Regional Affairs.  However, through a drafting error some                     
 references of the commission were inadvertently changed to the                
 department.  The bill, as passed, transferred the PCE                         
 calculations to the DCRA, but that was not the legislative                    
 intent, and a revisor's bill has been prepared to correct this                
 error.                                                                        
                                                                               
  (2)  The commission agrees with the legislative auditor                      
 that refuse collection and disposal should be deregulated at                  
 a statewide level and the municipalities should be authorized                 
 to regulate this area.                                                        
                                                                               
  (3)  The commission is presently applying to the FCC for                     
 authority to regulate the basic tier of cable utilities                       
 currently regulated by the commission by state law.  The City                 
 & Borough of Juneau has increased interest in regulating                      
 cable, but state law does not allow it at this time, and a                    
 change in statute would be necessary to allow local                           
 governments to regulate their cable companies.                                
                                                                               
  (4)  Regulatory cost charge should be made permanent                         
 rather than simply extending the repeal date for four years.                  
 Utilities have expressed concern about a possibility of over                  
 collection of regulatory cost charges beyond the amount of the                
 commission's budget and the APUC has proposed language to                     
 ensure that this does not happen.                                             
                                                                               
  (5)  The commission recommends adding a exemption to the                     
 Procurement Act to allow it to hire its expert witnesses for                  
 cases in a timely manner.  The commission has been unable to                  
 procure professional services for expert witnesses in a timely                
 fashion.                                                                      
                                                                               
 Speaking to recommendations made by the legislative auditor                   
 last fall, Mr. Schroer said the commission concurs with the                   
 auditor's finding that the commission is meeting its public                   
 purposes and supports extension of the sunset date for at                     
 least four years.                                                             
                                                                               
 The commission opposes required adjustment of the regulatory                  
 cost charge on an industry-by-industry basis.  They believe                   
 it should kept simple and uniform.  The administrative expense                
 of making this change would far exceed any value of                           
 individualization of rates.                                                   
                                                                               
 The commission agrees with the need for access for utility                    
 customers to opt in or out of regulations.  Mr. Schroer said                  
 he supports raising the cutoff to either $500,000 or $1                       
 million for economically regulated electric utilities to be                   
 eligible for deregulation.                                                    
                                                                               
 The commission agrees that the time keeping system recommended                
 by the auditor is worthwhile to pursue.  If accomplished for                  
 internal management purposes, the system could be designed                    
 relatively economically, however, if the system is required                   
 to serve as a basis for billings, it would be considerably                    
 more costly.  In either case, a fiscal note would be required                 
 to carry out this recommendation.                                             
                                                                               
 The legislative auditor recommended commission access to                      
 adequate staff support, and Mr. Schroer said he is proposing                  
 in the FY 95 budget to beef up the staff support available to                 
 the commission on regulatory policy issues.  The commission                   
 is proposing to upgrade one position and create one new slot                  
 to serve as the commissioner's policy analyst.                                
                                                                               
 The commission supports the recommendation for staggering                     
 commissioner's terms, but a statutory change would be needed                  
 to correct this.                                                              
                                                                               
 Number 115                                                                    
                                                                               
 Addressing recommendations made by the Alaska Rural Electric                  
 Cooperative Association (ARECA), Mr. Schroer said the language                
 "liberally construed" in AS 42.05.141, does not confer upon                   
 the APUC any jurisdiction outside of its powers listed in the                 
 statute.  He added the commission has only discussed the issue                
 of liberally construed nine times in all orders they issued                   
 during their first 25 years on the job.  Many times the use                   
 of liberally construed helps aid the utility in matters such                  
 as extensions of time, temporary operating  authority, and                    
 tariff approvals.                                                             
                                                                               
 ARECA's second issue is negotiated rule making.  Mr. Schroer                  
 said he thinks it is an interesting idea from the federal                     
 government that bears close examination.  However, under the                  
 constitution it cannot mean delegation of ruling powers of the                
 commission to another body.  He added that if this becomes an                 
 issue, much more research will be necessary.                                  
                                                                               
 ARECA's third issue is lower RCC rates for electric utilities.                
 Mr. Schroer said the commission expended significant resources                
 in developing regulations and procedures to make the program                  
 work, and the program is in place and is running smoothly.                    
 However, the commission cannot support the recommendation to                  
 require itemization of the rates under the RCC program by a                   
 utility or pipeline carrier.  Although in theory the                          
 recommendation has some merit, it is not clear to the                         
 commission that it would be either practical or cost effective                
 to attempt to implement it at this time.                                      
                                                                               
 Number 200                                                                    
                                                                               
 SENATOR KELLY asked if it is the general procedure that the                   
 administration introduces the legislative recommendations from                
 the APUC.  MR. SCHROER acknowledged that it was the general                   
 procedure.                                                                    
                                                                               
 Number 210                                                                    
                                                                               
 RANDY WELKER, Legislative Auditor, testifying from Ketchikan,                 
 pointed out that this is their fourth sunset audit of APUC,                   
 and their overall report conclusion is that the Alaska Public                 
 Utilities Commission continues to operate in a efficient,                     
 effective manner and they should be reestablished.  The report                
 recommends a 10-year renewal period to June 30, 2003.                         
                                                                               
 Mr. Welker spoke to the following primary recommendations that                
 were addressed in their most recent audit:                                    
                                                                               
  (1)  The repeal date should be deleted on the regulatory                     
 cost charge, and they are recommending that the commission                    
 give consideration to adjusting the RCC based more on where                   
 the cost is originated.                                                       
                                                                               
  (2)  While Mr. Welker is sensitive to the commission's                       
 concern over the cost benefits of implementing a time keeping                 
 system, he thinks that over the long term, the implementation                 
 of a time keeping system would give them an indication of                     
 where their effort and which utilities the efforts of APUC is                 
 focused on.                                                                   
                                                                               
  (3)  The audit report recommends making it easier for                        
 utility customers to either opt in or opt out of economic                     
 regulations.  Mr. Welker said the limitations in statute have                 
 been in place for quite some time without reconsideration and                 
 he believes that it is probably time to reconsider those                      
 dollar limit.  He also thinks it would be better if the opting                
 in or out procedure was modeled after the deregulation                        
 statutes which allow an election to be held if roughly 10                     
 percent of the subscribers sign a petition.                                   
                                                                               
  (4)  The audit report also recommends that the commission                    
 continue to consider ways of providing themselves with                        
 adequate staff support.  Mr. Welker said the legislature                      
 recognizes the extreme demand the utility regulations places                  
 on those individuals.  He agrees with Mr. Schroer that it may                 
 warrant revisting the Procurement Code to find ways of                        
 enhancing their ability to act in a timely manner.                            
                                                                               
  (5)  Finally, the audit report recommends adjusted                           
 language which helps accomplish the staggering of the two                     
 seats on the commission that will expire on October 31.                       
                                                                               
 Number 310                                                                    
                                                                               
 SENATOR KELLY asked Mr. Schroer if staggered terms has been                   
 an issue in the past.  DON SCHROER answered that he doesn't                   
 know of any opposition to the staggered terms.  He added that                 
 it would make it much more convenient being chairman of the                   
 commission.                                                                   
                                                                               
 Number 330                                                                    
                                                                               
 DAVE HUTCHENS, Alaska Rural Electric Cooperative Association,                 
 testifying in Anchorage, referred to an August 2 letter he                    
 sent to the committee outlining the position ARECA has on                     
 three recommendations they've made for provisions to the APUC.                
                                                                               
 Speaking to the "liberally construed" issue, Mr. Hutchens said                
 the commission has identified eight or nine cases in which the                
 term "liberally construed" has been used by the court,                        
 however, they are aware of several others.  He said he agrees                 
 with the commission that most of the time their use of                        
 "liberally construed" is not a matter of great concern,                       
 however, there are times when the issue is extremely important                
 and the use of "liberally construed" could permit them to go                  
 astray into areas that the legislature clearly has not given                  
 them.  He cited a case that has been appealed to the state                    
 courts which basically rests on the interpretation of                         
 "liberally construed."                                                        
                                                                               
 Mr. Hutchens read into the record the following statement:                    
                                                                               
  "We are not concerned that the current commission is                         
 likely to make an outrageous expansion of its powers.  Neither                
 would we contend that expanded powers for the commission                      
 necessarily work to the disadvantage of utilities.  However,                  
 we do strongly believe that when expansions of authority for                  
 the commission are sought by an interested party it should be                 
 the legislature, not the commission or the courts, who makes                  
 that decision."                                                               
                                                                               
 Mr. Hutchens said ARECA's second issue is negotiated rule                     
 making.  In an earlier era the commission followed a practice                 
 of informally communicating with interested parties on                        
 proposed rule making, however, for quite some time, they have                 
 had not any informal meetings to try to define the issues and                 
 learn about how best to do the job before proposing some                      
 regulatory language.  What ARECA is proposing in the                          
 negotiated rule making would not in any way transfer the                      
 regulatory  authority to some non-governmental entity.  The                   
 commission would convene a panel of interested and informed                   
 parties to do some negotiations on the issues involved in that                
 subject area and then come up with a draft of what is would                   
 say in the proposed regulation.                                               
                                                                               
 Speaking to the regulatory cost charge, Mr. Hutchens said                     
 ARECA agrees with the legislative auditor that there is no                    
 present relationship between the way the charges are levied                   
 and the workload of the commission.  Further, ARECA thinks the                
 commission's costs should be paid for out of the general fund,                
 but if the regulatory cost charge is going to be made                         
 permanent, they urge that it be made fair, which will require                 
 some kind of reallocation of those costs among the different                  
 kinds of utilities.                                                           
                                                                               
 Number 500                                                                    
                                                                               
 Turning to the power cost equalization issue, Mr. Hutchens                    
 said ARECA agrees there was a mistake made in the drafting of                 
 the legislation and it is the view of their group that the                    
 most sensible thing to do is divide it.  The utilities who are                
 regulated by the APUC should continue to have their PCE rates                 
 set by the APUC.  Utilities that are not regulated by the APUC                
 should go to the Department of Community & Regional Affairs.                  
 In years past, ARECA has had complaints from its members that                 
 the commission has tended to use control over the PCE rates                   
 as a back door way to reregulate cooperatives whose members                   
 have voted for deregulation, and they would solve that problem                
 by transferring that PCE authority to DCRA.                                   
                                                                               
 Number 555                                                                    
                                                                               
 SENATOR KELLY asked when the regulatory cost charge went into                 
 effect in Alaska and if he has noticed any major increase in                  
 the budget or growth of employees.  DAVE HUTCHENS answered                    
 that it is in the second year and that he has not seen any                    
 increase in the budget.                                                       
                                                                               
 SENATOR KELLY inquired as to how many people are currently                    
 employed by the APUC.  DON SCHROER responded there are 41                     
 employees, including the five commissioners.  They are all                    
 classified employees except the five commissioners, the                       
 hearing officer and the executive director.  Additionally,                    
 they have three people that they contract with in the                         
 Department of Law.                                                            
                                                                               
 Number 635                                                                    
                                                                               
 SENATOR SHARP stated his concern with the "liberally                          
 construed" language and the commission's comment that it has                  
 only happened eight or nine times in 25 years.  Each time it                  
 has happened the consumer pays both sides of the legal                        
 challenges through rates on the utility's legal costs when                    
 fighting that challenge and also through increased budgeting                  
 of the APUC for the assistant attorney general assigned to                    
 that.  He said he thinks it is something that requires a look                 
 at in the future because everybody pays no matter what the                    
 outcome.                                                                      
                                                                               
 SENATOR SHARP asked what the current RCC rate is.  DON SCHROER                
 answered that it will be established at .4 this year.  SENATOR                
 SHARP stated he continues to have a concern on the                            
 discriminatory impact on utilities that have very high costs                  
 of power.                                                                     
                                                                               
 TAPE 93-32, SIDE B                                                            
                                                                               
 Number 001                                                                    
                                                                               
 JACK RHYNER, President & General Manager of Tel-Alaska,                       
 testifying in Anchorage said that he was testifying in his                    
 capacity as chairman of the Legislative Affairs Committee for                 
 the Alaska Telephone Association.                                             
                                                                               
 Mr. Rhyner said because of the ongoing upheaval in the field                  
 of telecommunications it may well be critical for the people                  
 of Alaska to reorganize the Alaska Public Utilities Commission                
 at this time.  The commission must become able to respond to                  
 change within the industry on a more timely and efficient                     
 basis.                                                                        
                                                                               
 The innovation provided by personal communication systems                     
 (PCS) will bring with it an ever increasing pressure for                      
 competition at the local loop level.  Recent court decisions                  
 with regards to cross ownership of cable television systems                   
 and telephone companies could well produce situations where                   
 telephone companies and cable companies will be competing by                  
 providing both services.                                                      
                                                                               
 Mr. Rhyner related that a federal joint board is at this time                 
 addressing changes in the Universal Service Fund.  This is a                  
 mechanism which provides support to local exchange companies                  
 (LECs) to help keep monthly reoccurring rates for service                     
 affordable.  The USF provides $30 million a year to the Alaska                
 LEC, and the loss or even the reduction of these funds would                  
 put upward pressure on local rates which would then force the                 
 LEC into rate cases.                                                          
                                                                               
 Mr. Rhyner said the FCC's common carrier bureau believes that                 
 many elements of the intrastate access charge system are                      
 obsolete and they are planning to make changes.  He said the                  
 Alaskan  intrastate access charge system created by the APUC                  
 must be revamped.  The process has developed into an annual                   
 rate case for every LEC in the state which costs millions of                  
 dollars annually and produces nothing but higher regulatory                   
 costs, he said.                                                               
                                                                               
 Mr. Rhyner, speaking to the structure and operation of the                    
 APUC, said the Alaska Telephone Association believes that the                 
 staff should be separated from the commission, so that it                     
 would not be directed or influenced by commissioners.                         
                                                                               
 MR. Rhyner said their association also has some problems with                 
 the "liberally construed" language, which the commission has                  
 historically used to be able to say that it does not set a                    
 precedent.  Both utility management and the general public are                
 placed in a precarious situation when they are unable to rely                 
 on past decisions of the commission to determine proper                       
 conduct in relationship to any particular issue, because the                  
 commission feels free to develop differing interpretations to                 
 similar conditions on a case-by-case basis.                                   
                                                                               
 There being no further witnesses wishing to testify on SB 213,                
 SENATOR KELLY closed the public hearing and adjourned the                     
 meeting at approximately 2:30 p.m.                                            
                                                                               

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