Legislature(2005 - 2006)BELTZ 211

04/12/2005 01:30 PM Senate LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
<Pending Introduction & Referral>
Bills Previously Heard/Scheduled
Including But Not Limited to:
Moved CSSB 160(L&C) Out of Committee
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                         April 12, 2005                                                                                         
                           1:41 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Con Bunde, Chair                                                                                                        
Senator Ralph Seekins, Vice Chair                                                                                               
Senator Ben Stevens                                                                                                             
Senator Johnny Ellis                                                                                                            
Senator Bettye Davis                                                                                                            
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 160                                                                                                             
"An Act relating  to a procurement and  electronic commerce tools                                                               
program  for  state  departments  and  instrumentalities  of  the                                                               
state; and providing for an effective date."                                                                                    
     MOVED CSSB 160(L&C) OUT OF COMMITTEE                                                                                       
SENATE BILL NO. 108                                                                                                             
"An  Act  relating  to the  regulation  of  insurance,  insurance                                                               
licensing,  surplus   lines,  insurer  deposits,   motor  vehicle                                                               
service  contracts,  guaranteed automobile  protection  products,                                                               
health  discount plans,  third-party administrators,  self-funded                                                               
multiple   employer   welfare   arrangements,   and   self-funded                                                               
governmental plans; and providing for an effective date."                                                                       
     HEARD AND HELD                                                                                                             
SENATE BILL NO. 157                                                                                                             
"An Act  relating to  the maximum  annual regulatory  cost charge                                                               
collected from  certain regulated  public utilities  and pipeline                                                               
carriers; and providing for an effective date."                                                                                 
     HEARD AND HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB 160                                                                                                                  
SHORT TITLE: STATE PROCUREMENT ELECTRONIC TOOLS                                                                                 
SPONSOR(s): LABOR & COMMERCE                                                                                                    
04/01/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/01/05       (S)       L&C, FIN                                                                                               
04/05/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
04/05/05       (S)       Heard & Held                                                                                           
04/05/05       (S)       MINUTE(L&C)                                                                                            
04/12/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
BILL: SB 108                                                                                                                  
SHORT TITLE: INSURANCE                                                                                                          
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
02/14/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/14/05       (S)       L&C, FIN                                                                                               
03/31/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
03/31/05       (S)       Heard & Held                                                                                           
03/31/05       (S)       MINUTE(L&C)                                                                                            
04/07/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
04/07/05       (S)       Heard & Held                                                                                           
04/07/05       (S)       MINUTE(L&C)                                                                                            
04/12/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
BILL: SB 157                                                                                                                  
SHORT TITLE: REG. COST CHARGES: UTILITIES/PIPELINES                                                                             
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
03/31/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/31/05       (S)       L&C, FIN                                                                                               
04/12/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
WITNESS REGISTER                                                                                                              
PATTY ADY, Supply Technician                                                                                                    
Sitka Pioneer Home                                                                                                              
Sitka AK                                                                                                                        
POSITION STATEMENT: Opposed SB 160.                                                                                           
BRUCE LUDWIG                                                                                                                    
Business Manager, Alaska Public Employees Association (APEA)                                                                    
American Federation of Teachers                                                                                                 
Secretary-Treasurer, Alaska AFL-CIO                                                                                             
POSITION STATEMENT: Opposed SB 160.                                                                                           
VERN JONES, Chief Procurement Officer                                                                                           
Division of General Services                                                                                                    
Department of Administration                                                                                                    
PO Box 110200                                                                                                                   
Juneau, AK  99811-0200                                                                                                          
POSITION STATEMENT: Commented on SB 160.                                                                                      
LINDA HALL, Director                                                                                                            
Division of Insurance                                                                                                           
Department of Community & Economic Development                                                                                  
PO Box 110800                                                                                                                   
Juneau, AK 99811-0800                                                                                                           
POSITION STATEMENT: Supported SB 108.                                                                                         
KATE GIARD, Chairman                                                                                                            
Regulatory Commission of Alaska (RCA)                                                                                           
701 W Eighth Ave Ste 300                                                                                                        
Anchorage, AK  99501                                                                                                            
POSITION STATEMENT:  Supported SB 157.                                                                                        
DAN DICKRAF, Treasurer Manager                                                                                                  
Division of Finance and Rates                                                                                                   
EnStar Natural Gas Company                                                                                                      
3000 Spenard Rd                                                                                                                 
Anchorage AK 99503                                                                                                              
POSITION STATEMENT: Supported SB 157.                                                                                         
ACTION NARRATIVE                                                                                                              
CHAIR CON  BUNDE called  the Senate  Labor and  Commerce Standing                                                             
Committee  meeting  to order  at  1:41:26  PM. Senators  Seekins,                                                             
Davis, Ben  Stevens and Chair  Bunde were present.  Senator Ellis                                                               
arrived at 1:45.                                                                                                                
           SB 160-STATE PROCUREMENT ELECTRONIC TOOLS                                                                        
CHAIR BUNDE announced CSSB 160(L&C) to be up for consideration                                                                  
and that it contains the Alaska bidder preference.                                                                              
PATTY ADY, Supply Technician, Sitka Pioneer Home, opposed SB
160. She said:                                                                                                                  
     The  state  is  nine   months  into  a  two-year  pilot                                                                    
     project. There  is insufficient data  to know  what the                                                                    
     long-term outcome  will be. A private  contractor is in                                                                    
     business  to make  money, not  to provide  for all  the                                                                    
     different needs  of Alaskans. These companies  are more                                                                    
     concerned  with  their  profit margins  than  with  the                                                                    
     quality  of  the products  used  by  frail elders.  Our                                                                    
     resident needs  are different than  the needs  of other                                                                    
     areas of the  state that could suffer  by the decisions                                                                    
     made by people  who do not have the  experience to deal                                                                    
     with  these  frail  elders....   Our  state  will  lose                                                                    
     approximately 200 jobs,  which we can ill  afford to be                                                                    
1:45:32 PM                                                                                                                    
SENATOR ELLIS joined the committee.                                                                                             
1:46:05 PM                                                                                                                    
BRUCE   LUDWIG,  Business   Manager,   Alaska  Public   Employees                                                               
Association (APEA),  American Federation of Teachers,  said he is                                                               
also  Secretary-Treasurer of  the Alaska  State AFL-CIO.  He said                                                               
the pilot  program was rushed  through in  the final days  of the                                                               
2003 session. There were no  measurements of success included nor                                                               
benchmarks  for  comparison.  He  said the  bill  title  is  also                                                               
misleading. Alaska  Supply Chain Integrators (ASCI)  was the only                                                               
responsive bidder.                                                                                                              
MR. LUDWIG said:                                                                                                                
     Since the pilot project began,  only one quarter of the                                                                    
     work has  been audited.  The second  quarter is  in the                                                                    
     process  of the  audit and  the third  quarter is  just                                                                    
     over  and  we  can  presume that  that's  going  to  be                                                                    
     started soon. The  pilot has until June  30, 2006 until                                                                    
     it  expires.   As  the  Department   of  Administration                                                                    
     testified  last week,  the  jury is  still  out on  the                                                                    
     project. It's too  early to extend it.  The bill should                                                                    
     be held  over while a sufficient  record is established                                                                    
     to be able to make a  decision on whether or not it's a                                                                    
MR.  LUDWIG said  he has  heard  many negative  things about  the                                                               
experience. He  heard that the  purchasing of goods  has resulted                                                               
in a  20 percent increase in  the cost. If that  is extended over                                                               
the life  of the project,  it will  actually cost the  state $2.5                                                               
million more  for the same  goods that would have  been purchased                                                               
through the state  purchasing procedure. He has  heard that 1,500                                                               
invoices haven't been  paid because they don't match  up with the                                                               
purchase orders.                                                                                                                
     That's  Alaska firms  that  aren't  getting paid.  It's                                                                    
     going  to  affect  the   state's  reputation  with  its                                                                    
     vendors  and  it's going  to  affect  those firms  that                                                                    
     aren't getting their money timely.                                                                                         
1:49:00 PM                                                                                                                    
He  related how  the M/V  Kennicott  had an  engine overhaul  and                                                               
seven  orders were  placed for  engine parts.  Six of  the orders                                                               
were shipped to Juneau, but the  ship was in dry-dock in Portland                                                               
and all the heavy parts had  to be shipped there. Of the original                                                               
$250,000 projected  savings, about half was  from eliminating the                                                               
warehouse,  but  that has  been  reinstated.  ASCI employees  are                                                               
working  overtime   now  and  the  remaining   savings  might  be                                                               
nonexistent.  In  addition,  since   ASCI  does  not  follow  the                                                               
procurement  code,  their  procedures  do not  meet  the  minimum                                                               
requirements  for  federal  purchasing, which  are  very  strict.                                                               
Overhead, contract  oversight and other things  were not budgeted                                                               
for. "In summary, it's too early to extend the project...."                                                                     
1:51:19 PM                                                                                                                    
CHAIR BUNDE asked him about conflict of interest concerns.                                                                      
MR. LUDWIG  explained he had  heard about a conflict  of interest                                                               
between a state official and  someone connected with ASCI, but he                                                               
didn't find any connection and the issue should be dropped.                                                                     
1:52:33 PM                                                                                                                    
SENATOR SEEKINS moved  to pass CSSB 160(L&C)  from committee with                                                               
individual recommendations and fiscal note.                                                                                     
SENATOR  ELLIS  objected to  ask  someone  to discuss  the  audit                                                               
VERN   JONES,   Chief    Procurement   Officer,   Department   of                                                               
Administration,  said the  initial audit  was done  at a  time of                                                               
lots  of transitions  and he  felt  there wasn't  a large  enough                                                               
sample to draw conclusions for the audit.                                                                                       
SENATOR ELLIS asked when the next audit would be available.                                                                     
MR.  JONES replied  at  the end  of  this week  and  he hoped  to                                                               
conclude the third quarter's audit by end of session.                                                                           
SENATOR  ELLIS again  noted the  memo  from Mr.  Barton that  has                                                               
MR.  JONES said  memo  is technically  correct,  but he  believes                                                               
through talking  to professionals at the  Division of Legislative                                                               
Audit  that  the  actual  sample  was  so  small,  they  couldn't                                                               
extrapolate any findings that would hold up.                                                                                    
2:00:36 PM                                                                                                                    
SENATOR  DAVIS  noted  that  the  bill  doesn't  have  any  other                                                               
referrals and asked what the hurry is.                                                                                          
CHAIR BUNDE replied  that he wanted the bill to  move through the                                                               
2:01:30 PM                                                                                                                    
SENATOR ELLIS also asked what's  the hurry. They are barely eight                                                               
months into the pilot program.                                                                                                  
CHAIR  BUNDE said  he  thought progress  was  being made  towards                                                               
better  service  to the  state,  but  the  full body  makes  that                                                               
2:02:56 PM                                                                                                                    
SENATOR ELLIS said state employees could  do a better job if they                                                               
were to  be provided  with the modern  tools and  techniques that                                                               
private  industry  has.  He also  appreciated  the  attention  to                                                               
detail  and  urged  people who  erroneously  made  references  to                                                               
conflicts   of  interest   to  correct   their  comments   in  an                                                               
expeditious manner.                                                                                                             
CHAIR BUNDE said that had been done.                                                                                            
A roll  call vote was  taken. Senators Ben Stevens,  Seekins, and                                                               
Chair Bunde  voted yea; Senators  Davis and Ellis voted  nay; and                                                               
CSSB 160(L&C) moved from committee.                                                                                             
                        SB 108-INSURANCE                                                                                    
CHAIR CON BUNDE announced SB 108 to be up for consideration.                                                                    
SENATOR SEEKINS moved to adopt CSSB 108(L&C), version \F.                                                                       
CHAIR BUNDE objected  for discussion purposes and  asked Ms. Hall                                                               
to explain new language                                                                                                         
LINDA HALL,  Director, Division of Insurance,  explained that new                                                               
section  22 on  page  13  adds language  that  deals with  owner-                                                               
controlled   insurance   programs   and   contractor   controlled                                                               
insurance programs. Today  most of this concept is  in already in                                                               
the Worker's Compensation manual, but it's not part of statute.                                                                 
Owner-controlled Insurance Programs (OCIP)  have been standard in                                                               
industry for some time as a way  to put all of the costs together                                                               
- to  provide the safety programs  for the project and  have that                                                               
reflected in the  rate. For large construction  projects it means                                                               
either the owner of the project  or a general contractor will buy                                                               
the   casual  insurance   -  the   general  liability,   workers'                                                               
compensation  for the  entire  project. The  oil  pipeline is  an                                                               
example of that kind of  process. Subcontractors who work on that                                                               
type  of program  have to  take out  of their  own insurance  and                                                               
therefore they don't  have as much of a payroll  with which to be                                                               
able to negotiate as good a deal for themselves.                                                                                
Most of  the subs support  this for large  construction projects,                                                               
which have a cap of $50  million. This concept has expanded since                                                               
1995 into  general maintenance and  projects and  operations, but                                                               
she sees a  detrimental potential affect on  the marketplace. "As                                                               
we contract  further the amount  of premium that's  available for                                                               
insurance companies, I think that  has an overall negative affect                                                               
on our marketplace in general."                                                                                                 
2:09:01 PM                                                                                                                    
MS.  HALL  said this  particular  section  was sponsored  by  the                                                               
independent  insurance  agents  who   worked  directly  with  the                                                               
consumer who are concerned about  markets. The subs are concerned                                                               
about their own  insurance program. If they have  to put $300,000                                                               
worth of payroll  someplace else, then their  own programs suffer                                                               
on an on-going basis - as opposed to a one-time project.                                                                        
2:10:57 PM                                                                                                                    
CHAIR BUNDE asked if the $15 million is a floor or a cap.                                                                       
MS. HALL answered a floor.                                                                                                      
CHAIR BUNDE  added that  sections 28  and 29  remain in  the bill                                                               
after study, although they are acknowledged to be controversial.                                                                
2:12:31 PM At ease 2:12:58 PM                                                                                               
CHAIR BUNDE  said he  would hold  the bill  until Thursday  for a                                                               
potential amendment.                                                                                                            
         SB 157-REG. COST CHARGES: UTILITIES/PIPELINES                                                                      
CHAIR CON BUNDE announced SB 157 to be up for consideration.                                                                    
KATE  GIARD, Chairman,  Regulatory  Commission  of Alaska  (RCA),                                                               
said that  SB 157 is  in response  to complaints about  the RCA's                                                               
lack  of transparency,  its being  non-responsive and  creating a                                                               
burdensome regulatory  environment because  of the time  it takes                                                               
to  make decisions.  She  ran  for the  position  of chairman  to                                                               
resolve that problem.                                                                                                           
2:17:52 PM                                                                                                                    
The reason  dockets sit is  because the  RCA has no  mechanism to                                                               
tell her, as  chair, what her staff  of 56 people are  doing on a                                                               
regular basis.                                                                                                                  
     I don't  know what they  do; I can't account  for their                                                                    
     time, because  we have no  time management  system. The                                                                    
     industries that file with us  don't know whenever we're                                                                    
     going to  get an  answer to their  questions.... People                                                                    
     don't know  what we're doing  and when we're  doing it.                                                                    
     The systems  are developed and  are out there  that can                                                                    
     assist the  RCA in  certainly being more  prompt, being                                                                    
     more transparent, but we' don't have them here.                                                                            
2:21:36 PM                                                                                                                    
CHAIR BUNDE  asked if she  hears general agreement  or opposition                                                               
from the utilities on this bill.                                                                                                
MS. GIARD  replied that  Chugach Electric,  ML&P, ConocoPhillips,                                                               
AT&T Alas COM,  ACS, GCI, Alaska Power  Association, all strongly                                                               
support  it. "They  think that  it's long  overdue." She  has not                                                               
heard from anyone that this is a bad idea.                                                                                      
2:23:11 PM                                                                                                                    
CHAIR BUNDE  said she  indicated in a  letter to  the legislature                                                               
that the bottom line is with  the consumer and if a consumer uses                                                               
three regulated  services -  telephone, gas  and electric  - that                                                               
the total  impact of  this legislation is  estimated to  be $6.48                                                               
for three years; then this rate increase would go away.                                                                         
MS. GIARD  replied that  is correct. She  explained that  she did                                                               
not ask for this money to be  put into a capital plan, because it                                                               
is  needed in  the  form of  a  range of  monies.  At first,  she                                                               
estimated  her plan  would  cost $1.5  million.  But upon  seeing                                                               
that,  Chugach Electric  recommended  that she  form an  advisory                                                               
group,  which  she did  in  January  2005.  It was  comprised  of                                                               
Chugach ML&P, AWWU and GCI all  of which dedicated their time and                                                               
IT resources  to help formulate the  budget. They came up  with a                                                               
budget range of  $2 million to $3 million. Because  of the unique                                                               
way the  RCA statute is  written, the  money would come  into the                                                               
operating budget and  if it is not all spent,  it will offset the                                                               
RCC calculation  for the  next year.  If it  went to  the capital                                                               
budget and  wasn't spent, it  would sit  there and the  RCA could                                                               
use it for  something else in the future.  "That's not beneficial                                                               
to rate-payers."                                                                                                                
2:26:04 PM                                                                                                                    
CHAIR  BUNDE referenced  her  letter again  that  says the  money                                                               
would be  spent on creating  a staff and time  management system.                                                               
He asked if she planned to add staff.                                                                                           
MS. GIARD responded.                                                                                                            
     What I  mean is I  don't know  what they do  with their                                                                    
     time. So, I'd  like to know their  time resource, where                                                                    
     they spend it. Do they  spend it on electric utilities?                                                                    
     Do they  spend it  on telephone?  Are they  doing admin                                                                    
     seven  hours  a  day?  It's  not  likely,  but  because                                                                    
     there's  no  real reporting,  I  don't  know where  our                                                                    
     resources  are going.  So  I can't  tell  you what  the                                                                    
     optimal staffing level is...whether  we need more staff                                                                    
     or fewer  staff. I suspect  if we get these  systems in                                                                    
     place, we  should be able  to operate with  fewer staff                                                                    
     and we  actually recently reduced  our staff  size from                                                                    
     62 to  56 -  because our  docket load  is approximately                                                                    
     125 dockets.                                                                                                               
2:27:18 PM                                                                                                                    
CHAIR BUNDE  continue saying that  the second item in  the letter                                                               
says she would use the monies  for a system to receive, store and                                                               
retrieve data filed with the RCA electronically.                                                                                
MS. GIARD  replied yes and  that most utilities are  now computer                                                               
2:28:36 PM                                                                                                                    
DAN  DICKRAF,  Treasurer and  Manager,  Division  of Finance  and                                                               
Rates,  EnStar  Natural  Gas  Company, said  he  has  dealt  with                                                               
regulatory matters  for years and supported  the efficiencies and                                                               
funding mechanism in SB 157.  It would make information available                                                               
easier and  faster for the  commission, utilities  and customers.                                                               
It would save  on paper, storage, filing costs  and is ecological                                                               
in that  respect, as well. Rate  payers will save and  get better                                                               
2:30:34 PM                                                                                                                    
CHAIR BUNDE  said this is  straight-forward, but not  knowing RCA                                                               
issues,  he wanted  to hold  the  bill until  the next  committee                                                               
SENATOR ELLIS asked, "What's the time  frame for some sort of net                                                               
benefit to consumers?"                                                                                                          
MR. DICKRAF replied  that he is not the person  to ask because he                                                               
doesn't  know what  the delivery  times to  the RCA  are for  the                                                               
individual systems. They will create  costs as they come on line.                                                               
Filing costs,  for example, if  that can be  done electronically,                                                               
would  be an  immediate savings  on paper  copies, a  courier, et                                                               
cetera. As  a practical matter,  a utility's rate might  not drop                                                               
until it comes in  for a rate case or it may not  have to ask for                                                               
additional cost at some point  in the future. The timeframe would                                                               
depend on the individual utility.                                                                                               
SENATOR ELLIS  asked if before  the next meeting Ms.  Giard could                                                               
provide the committee  with a better understanding  of the phase-                                                               
in of the new systems and  technologies that will save money down                                                               
the line.  He also  wanted to  know when  the benefits  of paying                                                               
more would catch up to the consumers.                                                                                           
MS. GIARD responded that she would be happy to do that.                                                                         
CHAIR BUNDE  said he would  set SB  157 aside until  Thursday and                                                               
adjourned the meeting at 2:35:41 PM.                                                                                          

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