Legislature(1993 - 1994)
09/28/1993 01:30 PM Senate L&C
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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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