Legislature(2001 - 2002)
03/05/2002 01:38 PM Senate L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE LABOR & COMMERCE COMMITTEE
March 5, 2002
1:38 p.m.
MEMBERS PRESENT
Senator Ben Stevens, Chair
Senator Loren Leman
Senator John Torgerson
Senator Bettye Davis
MEMBERS ABSENT
Senator Alan Austerman
COMMITTEE CALENDAR
SENATE BILL NO. 280
"An Act permitting grants to certain regulated public utilities
for water quality enhancement projects and water, wastewater, and
solid waste systems."
MOVED CSSB 280(L&C) OUT OF COMMITTEE
SENATE BILL NO. 309
"An Act relating to actions to quiet title to, eject a person
from, or recover real property or the possession of it, and to
acquisition of real property by adverse possession; and providing
for an effective date."
MOVED CSSB 309(L&C) OUT OF COMMITTEE
SENATE BILL NO. 324
"An Act providing that a utility or electric operating entity
owned and operated by a political subdivision of the state
competing directly with a telecommunications utility is not
subject to the Alaska Public Utilities Regulatory Act."
MOVED CSSB 324(L&C) OUT OF COMMITTEE
SENATE BILL NO. 328
"An Act requiring that a nonresident big game hunter be
accompanied by a big game guide who is providing big game hunting
services to the nonresident under a contract with the nonresident
or who is employed by a big game guide who has a contract to
provide big game hunting services to the nonresident."
MOVED SB 328 OUT OF COMMITTEE
SENATE BILL NO. 320
"An Act relating to certain motor vehicle repairs and prohibiting
discrimination in motor vehicle insurance rates based on credit
rating or credit scoring; and providing for an effective date."
SCHEDULED BUT NOT HEARD
PREVIOUS SENATE COMMITTEE ACTION
SB 309 - No previous action.
SB 320 - See Transportation minutes dated 2/28/02.
SB 324 - No previous action.
SB 328 - No previous action.
WITNESS REGISTER
Ms. Wilda Rodman
Staff to Senator Therriault
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Explained the proposed committee substitute
to SB 280 for the sponsor
Mr. Dan Easton
Director, Facility Construction and Operation
Department of Environmental Conservation
410 Willoughby
Juneau, AK 99801-1795
POSITION STATEMENT: Answered questions about CSSB 280(L&C)
Senator Gene Therriault
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Introduced SB 309 to the committee
Mr. Bryan Merrell
First America Title Insurance Co.
Anchorage, AK
POSITION STATEMENT: Opposed to SB 309
Mr. Jon Tillinghast
Simpson, Tillinghast, Sorenson and Longenbaugh
One Sealaska Plaza
Juneau, AK
POSITION STATEMENT: Supports SB 309
Mr. Russell Dick
Sealaska Corporation
One Sealaska Plaza
Juneau, AK
POSITION STATEMENT: Supports SB 309
Mr. Bill Cummings
Assistant Attorney General
Department of Law
PO Box 110300
Juneau, AK 99811-0300
POSITION STATEMENT: Expressed concerns about SB 309
Mr. Jim Voetberg
Ketchikan Public Utilities
2930 Tongass Ave.
Ketchikan, AK
POSITION STATEMENT: Supports SB 324
Ms. Heather Graham
No address provided
Anchorage, AK
POSITION STATEMENT: Counsel to City of Ketchikan Telephone
Utilities Legislative Affairs Agency
Mr. Bill Stoltze
Staff to Senator Halford
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Testified for the sponsor of SB 328
Senator Rick Halford
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Explained the intent of SB 328
Mr. Arthur Andres
PO Box 55878
North Pole, AK 99705
POSITION STATEMENT: Supported SB 328
ACTION NARRATIVE
TAPE 02-10, SIDE A
Number 001
CHAIRMAN BEN STEVENS called the Senate Labor & Commerce Committee
meeting to order at 1:38 p.m. Senators Leman, Torgerson, Davis
and Stevens were present. Chairman Stevens informed members that
SB 320 would be pulled from today's calendar at the request of
the sponsor and would be rescheduled at a later date. He also
announced that today is Debbie Grundmann's birthday. The first
order of business to come before the committee was SB 280.
SB 280-WATER/SEWER/WASTE GRANTS TO UTILITIES
MS. WILDA RODMAN, staff to Senator Therriault, sponsor of the
measure, informed members that she was asked to submit a new
committee substitute (CS) to deal with the following concerns: SB
280 would open up the pool of applicants too wide; and it would
allow utilities to be eligible for solid waste grants, which was
not the intent. The original bill allowed public utilities to
apply if their rates were subject to the Regulatory Commission of
Alaska (RCA). Under the proposed CS, a water and sewer utility is
eligible to apply if it serves as the primary utility for a
municipality and its rates are regulated by the RCA. The field
was not narrowed down in the CS specifically to Fairbanks because
the sponsor wanted to create an incentive to other communities
that want to privatize.
In regard to the solid waste issue, the proposed CS excludes
solid waste grants by restricting eligibility to AS 46.03.030(b)
(1)-(3). On page 1, line 11, of the CS, utilities are no longer
eligible to apply for "(4) a solid waste processing, disposal, or
resource recovery system."
MS. RODMAN explained one last change in the proposed CS bases the
grant match ratios on the population of a municipality. The
original bill based the grant match ratio on the population of
the public utility service area. The change is consistent with
current statute. She pointed out that she worked with the
Department of Environmental Conversation (DEC) to narrow the
scope and used its definition of "primary."
SENATOR LEMAN asked where the definition of "primary" is located
in the proposed CS.
MS. RODMAN said it is not and asked Mr. Easton of DEC to
elaborate. She said the rationale is that "primary" is self-
explanatory in that a primary utility serves the largest number
of people in a service area.
SENATOR LEMAN said it is not obvious to him in looking at Section
1 that the bill is restricted to water and wastewater projects
and not solid waste. He asked for clarification.
MS. RODMAN said that language is in Section 3 on page 2, line 15.
With no further questions or discussion, SENATOR LEMAN moved to
adopt the proposed CS to SB 280 (Craver, 03/04/02).
CHAIRMAN STEVENS announced that with no objection, CSSB 280(L&C)
was adopted.
MR. DAN EASTON, Director of Facility Construction and Operations
for DEC, informed members that he worked with Senator
Therriault's office on the committee substitute. It maintains the
focus of the program on municipal systems, be they private or
publicly owned, as opposed to systems serving private
developments, such as trailer parks or subdivisions. One effect
of the committee substitute is to limit the increase in the size
of the pool of eligible systems so instead of having 50 new
eligible systems, there will be one or two. That means DEC does
not anticipate an effect on its workload and expects to provide a
zero fiscal note to the committee substitute.
SENATOR LEMAN asked Mr. Easton his understanding of a primary
utility, for the record.
MR. EASTON said he is thinking of the Webster's definition, in
other words, the primary utility would be the most significant or
main utility.
SENATOR LEMAN said he could not think of any competing water and
sewer utilities, but both Chugach Electric and Municipal Light
and Power are located in Anchorage and are both significant
electrical utilities. He could argue that both utilities could
meet the definition of primary. He asked Mr. Easton if he could
think of a similar example in the water and sewer business.
MR. EASTON said he could not. He noted there are two utilities in
Fairbanks, but they have a common owner so would not qualify.
SENATOR LEMAN commented that some communities have competing haul
systems but DEC will have to sort out whether those companies
meet the definition of a primary utility and might not even
apply.
CHAIRMAN STEVENS noted there was no further testimony or proposed
amendments.
SENATOR LEMAN moved CSSB 280(L&C) from committee with a zero
fiscal note.
There being no objection, CHAIRMAN STEVENS announced the motion
carried and that the committee would take up SB 309.
SB 309-ADVERSE POSSESSION
SENATOR GENE THERRIAULT, sponsor of SB 309, said he was
approached after the session began about this issue. Adverse
possession is a doctrine under which a person - even a squatter
acting in bad faith - can take another's property without
compensation by simply possessing it. Although the doctrine began
in the Middle Ages under circumstances that do not apply today,
it creates an interesting policy issue so he agreed to introduce
the bill.
SB 309 limits the current statute pertaining to adverse
possession to two narrow circumstances: (1) where a person has,
in good faith, occupied property under color of title for 20
years; and (2) where a property owner occupies property adjacent
to his own land under a reasonable, good-faith error over the
actual boundaries of his property. After reading about the
history of the doctrine, he decided he falls on the side of the
private property owner. Arguably, Alaska has the largest private
property owners in the nation, those being the Native
corporations. The old doctrine that requires a property owner to
keep tabs on who might be squatting on the land might put the
owner at risk of losing a portion of that property. He said some
of his constituents own property in locations that they are
unable to visit regularly. Under current doctrine, they must make
sure their property has not been encroached upon, otherwise risk
losing it.
1:52 p.m.
SENATOR LEMAN asked the significance of increasing the timeframe
from seven to 20 years.
SENATOR THERRIAULT told members that 20 years is an arbitrary
timeframe that was suggested to him but that he is willing to
consider shortening that period.
SENATOR LEMAN said he would like to hear testimony on that
question. He believes the other provisions are reasonable and
will help limit the application of adverse possession.
CHAIRMAN STEVENS said he shares Senator Leman's concern.
The committee took a brief at-ease.
SENATOR THERRIAULT informed members, regarding the selection of
20 years, as people from England started to purchase land when
the country was established, it was often difficult to journey
across the ocean to check on the land so the New England states
established a 20 year period of time. With the Manifest Destiny
movement, the nation wanted land to be put into productive use.,
The time period was shortened to allow another to take possession
of the land if the titleholder was not using it. He noted that
circumstances have changed so the shorter time period no longer
makes sense. A 20-year time period still exists in a number of
the New England states.
CHAIRMAN STEVENS suggested basing the timeframe on Henry VIII's
days when it was 60 years.
SENATOR LEMAN expressed concern about copying what the New
England states are doing.
MR. BRYAN MERRELL, state counsel and underwriter for First
America Title Insurance Company, informed members that SB 309 is
a double-edged sword for First America. For certain types of
title insurance policies, title insurers issue coverage against
adverse possession to assure policyholders that no one can claim
adverse possession to their property. First America does a risk
evaluation using surveys and questions directed to the landowners
involved in the transaction. In essence, SB 309 is somewhat
favorable to First America because it will make it more difficult
for someone to raise an issue of adverse possession. However, a
cause for concern is clearing or correcting title defects that
may have occurred in the past. One of First America's better
allies for assisting private landowners who are attempting to
insure titled real property is to suggest, in cases where old
deeds of records exist but the people who may claim those
interests cannot be tracked down or are not interested in
clearing the record, to use the doctrine of adverse possession.
Likewise, there are times when those interests may have been
missed or in which the underwriter decides to take a risk and
provide insurance. If they do come up during a title search, the
underwriter can use adverse possession as a means to clear the
title. The restrictive nature of SB 311 will make that process
harder for people with those concerns. In his experience as a
title examiner, it is a good tool to use to fix some title
problems.
Regarding the timeframe, MR. MERRELL said shortening it from 20
to 10 years would help. Some of the aspects involved in the
codification of the statute would be required by the Alaska
Supreme Court to claim adverse possession, for example, the
concept of having claimed the right in an open and hostile way
and notoriously, which is what the Supreme Court has determined.
Some of the other aspects, particularly the concept of paying for
the property that one is adversely possessing, are unusual. He
has not been able to do a survey to figure out where other states
fall on this issue. But, in his experience, he cannot recall any
other states being this restrictive as to the statute.
MR. MERRELL asked members to consider the need for some folks to
be able to clear title in a state like Alaska where there are a
lot of old interests, errors and flaws in the recording system
that make it difficult to get clear title.
CHAIRMAN STEVENS thanked Mr. Merrell and called Mr. Dick and Mr.
Tillinghast.
MR. RUSSELL DICK, Natural Resources Manager for Sealaska
Corporation, stated strong support of SB 309. Native corporations
established under the Alaska Native Claims Settlement Act (ANCSA)
are the largest private landowners in the state of Alaska.
Sealaska is the largest private property landowner in the
Southeast region. He noted he would address SB 309 from two
fronts: ANCSA conveyed lands and non-ANCSA lands.
MR. DICK said that lands conveyed to Native corporations served
two purposes: (1) to settle Alaska Natives aboriginal claims; and
(2) to meet the social, cultural and economic needs of Natives.
In that sense, these lands are the foundation of existence of
Native peoples and Native corporations. Recognizing that,
Congress imposed a prohibition of adverse claims against Native
lands as long as the lands remained in an undeveloped state.
Although that was effective when ANCSA was first enacted, it is
inadequate now. He does not believe Congress recognized how
expansive these land bases would become. Congress didn't consider
the degree of development on these lands nor the burden created
by having to actively patrol large remote landholdings. Sealaska
Corporation has 290,000 acres of land with an entitlement, which
will total upwards of 350,000 acres spread throughout Southeast
Alaska. If development is minimal or occurs in specific areas,
the cost of patrolling the lands will be burdensome and an
economic waste that serves no valid public policy.
MR. DICK informed members that Sealaska Corporation has also
purchased non-ANSCA lands. These types of lands do not maintain
the same prohibition of adverse claims so that adverse possession
can occur regardless of whether or not they are developed.
Sealaska purchased a piece of property in Cordova on which a
squatter built a house. Sealaska had to spend considerable time
and money to evict the squatter. Had Sealaska not known the
squatter was there, a tackings issue may have arisen. In other
words, if the squatter had lived on the land for six years at the
time of the purchase, that time would apply toward the seven
years required for adverse possession.
MR. DICK stated that the State of Alaska has always respected
private property rights because there is so little private
property here. The doctrine of adverse possession seems to be
inconsistent with the recognition of the importance of protecting
and preserving private property ownership and its associated
rights. The only lands subject to adverse possession in Alaska
are private property lands. He repeated that Sealaska is very
supportive of SB 309 as it goes a long way toward protecting the
rights of private property landowners.
MR. JON TILLINGHAST, legal counsel to Sealaska, told committee
members that New Hampshire is among the New England states that
use or used 20 years. He said in his discussion about adverse
possession, he will put two types of claims to the side - the
first being claims premised on color of title, meaning a person
has a deed with a problem. Those are the claims Mr. Merrell spoke
of and SB 309 preserves those claims. The second type of claims
he would like to put aside are those involving a boundary
dispute, for example when a property owner built a fence in the
wrong location 20 years earlier. SB 309 puts new restrictions on
bringing those kinds of claims. For example, it says a person
must possess the property for 20 years rather than seven.
MR. TILLINGHAST said the heart of the bill is in Section 1, which
is aimed at a person one could only call a squatter; a person
with no claim to title who is simply there with the hope of
staying long enough to acquire the title. He said he will not
review the historical reasons for adverse possession, but
explained the only justification at this time for a squatter law
is that a squatter will make more productive use of the land than
the absentee landowner. He noted that modern courts have upheld
that doctrine. He finds the concept frightening because the state
is saying that if a private landowner is not making a
sufficiently socially valuable use of his or her private
property, it will be given to someone else.
MR. TILLINGHAST said the fact that a person cannot get adverse
possession from the state or federal government is well
established. The state and federal governments have argued that
it would be too burdensome to police property they own. In
Alaska, ANCSA regional corporations own roughly 80 million acres
of land: those corporations have precisely the same problem the
state has yet the state wishes to maintain its immunity from
adverse possession but maintain its right to squat on private
property without paying. That philosophy reflects a different
value judgment than Sealaska, as to the relative sanctity of
public property ownership and private property ownership. He
offered to answer questions.
SENATOR LEMAN asked Mr. Tillinghast to clarify whether there is a
difference between ANCSA and non-ANCSA property in the
application of adverse possession.
MR. TILLINGHAST explained that ANCSA protects ANCSA property from
being divested by adverse possession as long as it remains
undeveloped.
SENATOR LEMAN asked if, "...somebody could put that road in
adversely?"
MR. TILLINGHAST said he does not know the answer to that
question.
MR. DICK said a more likely scenario is that Sealaska might build
an advance logging road which would provide a convenient way for
a squatter to drive in.
SENATOR LEMAN asked if that ANCSA land would not have the same
protection as adjoining state or federal land.
MR. DICK said that is correct.
CHAIRMAN STEVENS asked how many cases of adverse possession have
been claimed against ANCSA land in the past.
MR. DICK said he knows of two cases with Sealaska.
CHAIRMAN STEVENS noted no representation from other Native
corporations in the room and then asked Mr. Dick if he is aware
of positions from any other corporations on this legislation.
MR. DICK said he is not.
CHAIRMAN STEVENS said he would like to get more input from large
landowners and discuss the 20-year issue before taking action on
the bill.
MR. BILL CUMMINGS, assistant attorney general, Department of Law
(DOL), said DOL is not unmindful of the problems with adverse
possession that Sealaska and other ANCSA corporations have with
lands they acquire and might minimally develop. However, DOL is
concerned that SB 309 stands the whole notion of adverse
possession on its head. In some situations, it could work to the
public's detriment and could be used to commit outrages. DOL's
biggest concern is the large number of highway rights-of-way the
state claims under adverse possession. The state is currently
embarking on a program called "gravel to paving" in which the
state is paving many gravel roads in rural areas. The presumption
is that the state has been doing this for 20 to 30 years without
any objections so the state is assuming it has title by adverse
possession. If SB 309 comes to pass, the state will have to re-
examine its presumption and possibly kill the program. Another
example is a state program to build roads and put in drainage
culverts. The culverts are located within the highway right-of-
way and carry water away from the highway. The state has never
acquired any easements below the outfall so, if SB 309 was
enacted, the state would have to go back and redo engineering
decisions that were made up to 50 years ago, render compensation,
all after everyone in the chain of title has acquiesced to what
the state has been doing to carry off the drainage water. Mr.
Cummings said the state needs some way to address these very
valid public concerns.
MR. CUMMINGS said DOL's final concern is that SB 309 could be
used to the detriment of the public. He cited a case named Veazey
(ph) v. Green, (35 P.3d 14) and said under SB 309, the plaintiff
would have lost. The facts of the case are as follows: a woman
was given a tract of land by her grandmother but the deed was not
transferred; the woman spent 10 years building a house, clearing
the land and planting on it; then the grandmother advanced in age
and lost some of her mental faculties and went into a land
transaction with a developer who acquired the property. The woman
would have lost her 10 years of labor under this bill. He offered
to answer questions.
SENATOR LEMAN asked, regarding the drainage issue, if one goes
back 30 or 40 years when some of the engineering decisions were
made, whether they would be barred from claim by Section 4 of the
bill.
MR. CUMMINGS said it is not clear. The rules that are used now
when one combines the 10 years of use along with the rules of
inverse condemnation, would imply the state took it a long time
ago so nothing can be done about it now. However, under SB 309,
particularly Section 1, anyone could bring an action at any time.
He noted the need for legislation that is much more precise to
protect the state's interests on the culverts.
SENATOR LEMAN suggested that Mr. Cummings work with committee
members and the sponsor on ways to find ways to address the
issues he has raised.
CHAIRMAN STEVENS asked Mr. Cummings his position on SB 309.
MR. CUMMINGS said DOL is opposed to the bill because of what it
does to the state's interests.
CHAIRMAN STEVENS asked about DOL's position on applying adverse
protection requirements to protect private landownership.
MR. CUMMINGS replied there is room for improvement as long as the
changes are not too burdensome or allow for outrages.
TAPE 02-10, SIDE B
CHAIRMAN STEVENS repeated his desire to hold the bill and request
positions from other large landowners.
SENATOR THERRIAULT agreed and said that this is his first time
dealing with this area of the statutes. He said he is willing to
discuss the matter further and find language to address the
issues raised.
SENATOR LEMAN expressed concern that SB 309 not overreach and
create unintended difficulties.
SB 324-PUBLIC UTILITIES EXEMPT FROM REGULATION
CHAIRMAN STEVENS then announced the committee would take up SB
324.
SENATOR ROBIN TAYLOR, District A, gave the following sponsor
statement.
SB 324 would ensure that the City of Ketchikan retains
the ability to set rates for its telephone utility in
the event it faces competition from another utility
company. Alaska law provides that where a municipality
owns and operates a public utility, the municipality
may regulate the terms and conditions governing the
provisions of that public utility and has the power to
set the terms and conditions for the utility services
that they offer. That is probably obvious to everyone
because that is how we all started in Alaska, was with
towns that set up a generating plant or built a little
dam, started building water lines, sewer lines, and
because they had an elected city council and they owned
the utility, there was no need for oversight or
regulation by some state entity.
Alaska law also provides that if a municipal utility
faces competition, all of the municipalities' utilities
become fully subject to economic regulation by the
Regulatory Commission of Alaska [RCA]. The RCA may
grant an exception to this rule. Principles of fairness
and regulatory parity provide that this statute should
be amended when a municipality faces competition from a
telecommunications company. New competitive providers
are subject to less regulation by the RCA. Under
federal law, some new telecommunications companies are
not regulated at all, cellular providers as an example.
By contrast, if the municipality owned a telephone
utility becomes subject to economic regulation by RCA,
it will be more heavily regulated than the new entrant
that is competing with it because we cannot regulate
those folks under federal law. So, a guy comes into
your town and wants to set up a cellular system - a
wireless system - he's not regulated because of federal
law but, because he's competing with the local
telephone company, he would now be subjected to
regulation by RCA. And we've all been here long enough
to go through various telephone wars and utility wars
and so on, that have been created and caused by
decisions made by the RCA or decisions that are pending
before the RCA or haven't been made by them, and then
we end up seeing - there's always an attempt it seems
like every year for the 18 I've been here - somebody
always wants to reach out and touch you. In the way
they draft their legislation, they're going to reach
out and all of a sudden, all of the municipalities that
had been running their own utilities for years get
pulled into this regulatory scheme. Well, the
regulatory scheme can cost hundreds and hundreds of
thousands of dollars for a utility to comply with, just
on a rate change. We've seen a lot of examples of that
even recently. I think many of us had hoped, when we
restructured the RCA, that we would not be running into
these huge costs for utility rate changes but they are
still ongoing and are still a major problem. It's a
tremendous burden to cast upon a small community merely
because somebody wants to show up and start cherry-
picking a telephone company on you.
By economically regulating the municipally-owned
utility, while allowing the new entrant to set prices
without regulatory oversight, the marketplace is unable
to provide the benefits of competition to the public.
The new entrant will be able to set its rates based on
market forces and competitive need while the
municipality which owns the utility will be required to
set its rates based on its costs through rate cases.
These cases could be expensive and time consuming, and
sometimes attract input from other interveners. The
unregulated entity has only to price its service
slightly under the regulated rates of its competitor to
gain market share. Such prices are not necessarily the
lowest possible rates and are not necessarily as low as
the rates that would be given during unfettered
competition. And that's in essence what we're facing
right now in Ketchikan. That's the only reason this
bill was brought is to make certain that not only
Ketchikan but other municipally-owned utilities that
may face some form of competition don't get drug into
this entire AKPIRG affected regulatory scheme that can
take months and months.
2:40 p.m.
SENATOR LEMAN said he agrees it doesn't make sense that because
one utility becomes regulated, all others should be unless the
concern is that funds are being shifted from one utility to
another in the case of common ownership. He said he also agrees
the rate cases are expensive. He then asked, since a utility is
not regulated until it has market power, if it would do a
disservice to the bill to insert the word "unregulated," on page
2, line 4, language so that it reads:
operated by a political subdivision that competes with an
unregulated telecommunications utility.
He asked if a circumstance might occur where a competing utility
would become regulated.
SENATOR TAYLOR said he believes that would take a change in
federal law.
SENATOR LEMAN said he is wondering if a company that is regulated
would come in to compete even though they may not be regulated in
that marketplace.
SENATOR TAYLOR said he did not know.
SENATOR TORGERSON asked why the phrase "electric company" is
included in the bill.
SENATOR TAYLOR said he believes that is what some utilities call
themselves. He said it does not include telecommunications and
speaks to not reaching out to cover all of the other utilities.
SENATOR TORGERSON pointed out the qualifier is "that competes
with telecommunications" and he said he is not aware of any
electric companies that do compete with them.
SENATOR TAYLOR hoped that answer would become clear in later
testimony.
MR. JIM VOETBERG, Assistant City Manager of the City of
Ketchikan, stated support for SB 324. He informed members that he
submitted written testimony and would touch on the main points.
The City of Ketchikan and the City of Ketchikan doing
business as Ketchikan Public Utilities owns and
operates several utilities including
telecommunications, electric, water, solid waste
collection and disposal, and wastewater collection and
treatment. This legislation is important to the city
because it allows the city to operate its utility in a
cost-effective manner and allows the city to utilize
its utilities to assist in the economic development of
Ketchikan. Should the city become regulated under the
RCA, the cost to the rate payers is estimated at around
$700,000 annually, which does not include the cost of a
rate study that, for each utility, could be in the
range of $250,000. These costs include annual fees paid
to the RCA plus additional staff to perform the
increased workload under a regulated utility. These
costs would be directly passed on to our customers
resulting in higher utility bills. Given the economic
situation in Ketchikan, this is not the time to
increase costs to its residents and businesses.
By transferring regulatory control from a local city
council to the state RCA eliminates the local decision
making process that has worked for over 50 years and it
takes away a tool to assist in economic development.
Finally, given the advancement of telecommunication
technology and the varying levels of regulation placed
on telecommunication companies, this proposed
legislation creates a level playing field. Under
current regulations, should a cable company such as GCI
use its cable plant to provide telephone service in
Ketchikan, GCI would not be regulated while Ketchikan
would be fully rate regulated. If a wireless company,
such as APT, were to compete in Ketchikan, APT would be
lightly regulated and, again, Ketchikan would be fully
rate regulated. And should a company compete as a
competitive local exchange carrier - a CLEC- again, the
CLEC would be lightly regulated while Ketchikan would
be fully regulated. In any case, under the current
regulation, the playing field would not be level.
In closing I want to stress the importance of this
relatively small change to AS 42.05.711(b)(2), to the
community of Ketchikan, and to point out that it only
affects the City of Ketchikan because we are the only
municipally owned telephone company in the state, and
actually we're only one of three, we think, nationwide.
The city looks to the state to allow it to preserve
local control as it has for over 50 years and to ensure
that local government has the tools it needs to better
serve our community and better assist in turning
Ketchikan's economy around. Thank you for allowing me
to testify and I'll address any questions you may have.
MR. VOETBERG said, in response to Senator Torgerson's question,
Section 1(b) follows the language in current [statute].
SENATOR LEMAN said he noticed that "electric operating entity"
was used everywhere else in the subsections and that perhaps the
drafters decided to use "electric company." He suggested making
the phrase consistent throughout. He then asked Mr. Voetberg
whether inserting the word "unregulated" before
"telecommunications company" would do any disservice to what he
is trying to accomplish. He commented that Mr. Voetberg expressed
concerned about an unregulated company coming in and competing
with the Ketchikan utility. However, once they get market share
they would become a regulated utility.
MR. VOETBERG said he was not certain about the market share
issue. He noted there are various levels of regulation, for
example, a wireless company is looking at providing telephone
service to Ketchikan customers through a wireless system. The
wireless company is regulated but not fully rate regulated. To
his understanding, "fully rate regulated" means that costs and
revenues have to match. If not fully rate regulated, one can set
and submit rates to the RCA, which does not make sure the costs
and revenues balance each other. He suggested inserting the word
"unregulated" will not address the issue in Ketchikan. He asked
that Heather Graham address this issue on the City of Ketchikan's
behalf.
SENATOR LEMAN said the goal is a level playing field and that
there might be a more artful way to get there.
MR. VOETBERG said the City of Ketchikan has considered several
versions of this and found SB 324 to be the closest to the level
playing field that it can come.
MS. HEATHER GRAHAM, legal counsel to the City of Ketchikan
telephone utilities division, said that when a new telecom
company seeks to provide service and market, it is never fully
rate regulated. Therefore, at most, it would be required to post
a tariff of its prices. It is not subject to full rate
regulation, which means the RCA would carefully evaluate and
review all of the new entrants and require them to charge a
certain rate based on their costs. The new entrant can charge
whatever it wishes and can raise and lower its rates at will. By
contrast, if the existing law is applied to Ketchikan without an
exemption, the City of Ketchikan would be required to go through
an exhaustive rate setting process that takes a lot of time and
is very expensive. The city would not be able to raise and lower
its rates at will. In effect, it would be hamstrung and would be
unable to compete effectively with a new entrant because the new
entrant will either be unregulated or lightly regulated. She
explained that lightly regulated means the new entrant would have
to get a certificate from the RCA, a minor matter, and agree to
post tariffs. She maintained that Mr. Voetberg has accurately
reflected why the City of Ketchikan supports SB 324.
SENATOR LEMAN asked at what stage a new entrant would become rate
regulated and whether it is related to market share.
MS. GRAHAM said there is no threshold at which point a new
entrant would become fully rate regulated. She noted the best
example in Anchorage is GCI. GCI has acquired 40 percent or more
of the local exchange market in Anchorage but is not fully rate
regulated. The incumbent, ACS, is fully rate regulated.
SENATOR LEMAN asked Ms. Graham if she could suggest language that
would provide a level playing field.
MS. GRAHAM said she does not believe a change is necessary.
MR. HOWARD GARNER, Executive Vice President of Alaska Power and
Telephone (APT) Company, and an officer of the Alaska Telephone
Company, a subsidiary, informed members that APT owns the
wireless company in Ketchikan. APT has been a member of the
Ketchikan community for a substantial amount of time and has a
large investment there. APT opposes SB 324 for several reasons,
the primary one being that there is a ready solution available to
the City of Ketchikan. A mechanism is available to the City to
apply for an exemption from the RCA. He has worked with the RCA
for over 10 years as APT has extensive regulated operations on
both the electric and telephone side. He does not believe the
process to be as difficult as earlier testimony indicated. The
RCA does a reasonable job of protecting the public interest. He
maintained that some of the previous comments made were "quite
out of line" with his actual experience. APT's second concern is
that SB 324 would place the State of Alaska in a difficult
position regarding the federal Telecom Act of 1996, specifically
under Section 254(k), which is entitled, "Subsidy of Competitive
Services Prohibited." He read a paragraph from that section:
A telecommunication carrier may not use services that
are not competitive to subsidize services that are
subject to competition. The commission [Federal
Communications Commission] with respect to interstate
services, and the states, with respect to intrastate
services, shall establish any necessary cause [indisc.]
allocation rules, accounting safeguards, and guidelines
to ensure that services included in the definition of
universal service bear no more than a reasonable share
of the joint and common cost of facilities used to
provide those services.
MR. GARNER requested that the commission thoroughly investigate
the Telecommunication Act of 1996 and compliance with it. APT's
application has been made to the RCA for a certificate to provide
service and APT believes that process contains adequate
safeguards.
SENATOR LEMAN asked if the City of Ketchikan would be subject to
those same conditions in the federal law, and "they couldn't
cross subsidize or else they would be in violation."
MR. GARNER said that is correct.
SENATOR LEMAN said in the setting of rates, they would have to
demonstrate that they are not cross subsidizing but the City of
Ketchikan, as a utility company, would have to meet the same law
and would probably have to make a statement to that effect.
MR. GARNER said they would have to make that statement. He said
to his understanding, the RCA can consider Ketchikan's request
that they not be required to be fully regulated because that
would not be in the public's interest.
SENATOR TORGERSON asked if APT would oppose or support a waiver
if the City of Ketchikan was to include one.
MR. GARDINER said APT would oppose that. During the history of
municipally owned telephone companies in Alaska, there was
one-time substantial ownership in Anchorage and Fairbanks and
those communities got along without that requirement. He sees no
reason for special treatment.
MR. REED STOOPS informed members that Dana Tindall was called to
an RCA hearing so he would ask her to submit written testimony.
There being no further testimony, SENATOR TORGERSON moved to
delete the word "company" on page 2, line 3, and insert the
words, "operating entity" to make that language consistent with
the rest of the bill [Amendment 1].
There being no objection to the motion, CHAIRMAN STEVENS
announced that Amendment 1 was adopted.
CHAIRMAN DAVIS asked for the will of the committee.
SENATOR DAVIS asked that the committee wait for testimony from
the individual who was unable to testify today [Ms. Tindall].
MR. STOOPS said he assumes Ms. Tindall would have some of the
same concerns as the APT but since this is a relatively new
issue, they are still trying to learn from the RCA.
CHAIRMAN STEVENS said the bill could be moved to the Senate
Judiciary Committee where more public testimony will be taken.
SENATOR TORGERSON moved CSSB 324(L&C) from committee with
individual recommendations and its accompanying fiscal notes.
CHAIRMAN STEVENS announced that with no objection, the motion
carried.
The committee took up SB 328.
SB 328-BIG GAME HUNTERS ACCOMPANIED BY GUIDE
MR. BILL STOLTZE, staff to Senator Halford, sponsor of SB 328,
explained that SB 328 was introduced to close a loophole in the
1996 guide bill. That loophole allowed a nonresident assistant to
be exempt from the requirements to obtain the services of a
registered guide of big game species in Alaska.
SENATOR RICK HALFORD said this problem was brought to his
attention by a person from Elfin Cove. He explained that non-
residents can get a guide license because a guide license is a
commercial license, which is protected by the commerce clause of
the U.S. Constitution. A non-resident is required to have a guide
to hunt sheep, goat, grizzlies and brown bear. The individual
from Elfin Cove ran into two non-resident hunters hunting on the
outside [coast]. Both hunters had assistant guide licenses and
were guiding each other for no compensation. A loophole in
Alaska's law allows a non-resident to be guided by a resident
relative (within the second degree of kin), or by a guide, but it
does not say the guide must be employed by anyone or paid by
anyone. As a result, the two hunters held licenses as assistant
guides for a guide who wasn't contracting and was not involved.
SB 328 requires the assistant guide to be operating for a
registered guide. He noted that Senator Elton also discussed this
problem with him. Senator Halford maintained that SB 328 is a
small fix for a very narrow problem.
MR. ARTHUR ANDRES, testifying from Fairbanks, stated support for
SB 328.
There being no further testimony, SENATOR TORGERSON moved SB 328
from committee with individual recommendations and its
accompanying fiscal note.
CHAIRMAN STEVENS announced that with no objection, the motion
carried. He then announced the next meeting would be held on
March 14 and adjourned the meeting at 3:10 p.m.
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