HB 39-RCA UTILITY RATES; REFUND PROCEDURES    4:38:50 PM CO-CHAIR PRUITT made a motion to adopt proposed committee substitute (CS) for HB 39, Version 27-LS0228\D, Kane, 2/9/11, as the working draft. 4:39:21 PM REPRESENTATIVE PETERSEN objected. As the sponsor, he introduced HB 39, which requires that before a utility can collect a refundable rate, it must have an approved refund plan in place. The bill also directs the Regulatory Commission of Alaska (RCA) to devise a standard refund procedure available for all utilities to use in their rate filings. Representative Petersen explained that this issue came to his attention when his constituents questioned the delay in receiving refunds due after litigating against a utility. Although the decision was not appealed by the utility, the refund procedure took over nine months to complete. He opined the bill would allow consumers to receive refunds faster, utilities would save legal costs and interest, and the RCA would not have to adjudicate refund procedures. 4:41:20 PM DAVID DUNSMORE, Staff, Representative Pete Petersen, Alaska State Legislature, informed the committee the bill would only apply to refundable rate cases. Beginning a sectional analysis, he said section 1 explicitly creates the option of having a plan preapproved by the RCA. Section 2 incorporates implementation language, Section 3 directs that the bill, if enacted, would take effect on 7/1/13, and Section 4 directs that the implementation section would take effect immediately. Mr. Dunsmore recognized Anchorage Water and Wastewater Utility (AWWU) and Chugach Electric Association, Inc. for their contributions to the bill. 4:43:27 PM REPRESENTATIVE SADDLER asked whether there are cases in which a rate refund may not be possible. MR. DUNSMORE explained the general procedure is for a utility to request a tariff filing to modify its tariff to a new rate. The RCA has 45 days to accept the change or to open a docket and schedule a hearing for testimony from the attorney general. Utilities can request a nonrefundable option, but if the RCA opens a docket, the utility will usually wish to charge the new rate on an interim basis while awaiting the RCA's decision, but that is not required. 4:45:14 PM REPRESENTATIVE SADDLER clarified that in every request for a rate change, there is the possibility of a refund. MR. DUNSMORE indicated no, because the utility "could choose not to ask for the option of refundable rates." He opined that in most cases the utility will request the contingency that if the rates are not accepted at first, customers will be charged on an interim basis. In further response to Representative Saddler, he confirmed that if the rate is denied, there will be a refund due, although the approved rate is often "somewhere in the middle." 4:46:34 PM CO-CHAIR PRUITT asked whether there is support for the bill from utilities or others. REPRESENTATIVE LYNN inquired as to any opposition. 4:47:04 PM REPRESENTATIVE PETERSEN said he was not aware of any opposition at this time. 4:47:18 PM CO-CHAIR PRUITT referred to the additional staff required by the RCA as indicated on the accompanying fiscal note. He asked for the purpose of this staff. 4:47:51 PM REPRESENTATIVE PETERSEN said that according to the chairman of the RCA, the commission is very short-handed right now. 4:48:29 PM REPRESENTATIVE TUCK reviewed the circumstances of a refund. He observed that the bill would require that a refund plan is in place before the refund process begins, "so everybody knows what is to be expected, and the plan is in place, and that way the ratepayers can be paid sooner." REPRESENTATIVE PETERSEN indicated yes. 4:49:57 PM REPRESENTATIVE SADDLER recalled that the ENSTAR Natural Gas Company (ENSTAR) litigation on a rate refund [RCA docket U-08- 142 ENSTAR] took about two years to resolve. He asked how ratepayers who move out-of-state are reached. MR. DUNSMORE advised that ENSTAR sent notices to its customers' last known addresses. 4:51:13 PM CO-CHAIR PRUITT asked whether the utilities have indicated that enactment of the bill would cause additional cost that they would pass on to their customers. REPRESENTATIVE PETERSEN said the intent of the bill is to lower cost by making refunds simpler and easier for everyone. 4:51:54 PM MR. DUNSMORE added that this issue is addressed by a committee substitute (CS). Chugach Electric Association, Inc. suggested adding language to the bill that specifically states the option that the utility does not have to create a refund plan "from scratch, [but] the RCA will have a preapproved plan in place that utilities can take advantage of when they file their rates." 4:52:43 PM STUART GOERING, Assistant Attorney General, Commercial/Fair Business Section, Civil Division (Anchorage), Department of Law (DOL), disclosed the various functions of the attorney general related to the Regulatory Commission of Alaska (RCA). He clarified that he was now representing the RCA and his duties are to advise the RCA during adjudication processes, and to represent it on appeal. Mr. Goering stated that his testimony was at the request of the RCA's chairman, and that he was primarily available for questions, but advised that the scope of his comments would be limited to technical and procedural matters. If the committee desires testimony from the commission on policy matters, an issue must be raised in a public meeting with the commissioners as a whole to establish the RCA's position. Calling attention to the bill, Mr. Goering noted Section 2 addresses the "procedures and guidelines for an acceptable utility refund plan." He stated that the only way for the RCA, or any state agency, to set policy and to establish enforceable guidelines and procedures is through the regulations process governed by the Alaska Administrative Procedures Act, and that the act "is not actually a, something that's designed for rapid action." These procedures are outside the control of the RCA, and it would be unlikely that the RCA could adopt regulations implementing the concept of the bill by 1/1/2012. He described the regulation procedure. In addition, he pointed out that RCA docket U-08-142 ENSTAR, seems to be the basis for the proposed bill; however, that was a truly unique case involving not a normal rate, but a rate under a special provision in the commission's regulations relating to adjustment clauses. As those rates become effective in a different manner, he stressed that the abovementioned docket was "a really extraordinary situation and it is very unlikely that any refund plan ... in advance could have taken, could have anticipated, there being a refund ...." Mr. Goering opined that refunds in general have to be viewed on a case-by-case basis, and often it is unknown what will be appropriate for the refund procedure. He then addressed an earlier question of when there could be a situation in which a utility would never face a refund obligation. He answered that a utility may file for a rate that is lower than its existing rate thus there would be no refund. Returning to the language in proposed HB 39, he said there are two ways a utility can handle the way money is collected under an interim rate. The first is that the money can be used by the utility for operations, with allowances for the possibility that it may be needed to meet a refund obligation. 5:01:49 PM MR. GOERING continued to explain that the other option is for the utility to put the difference between the previous and interim rates in escrow, thereby preventing a situation where there is a potential refund in the tens of millions of dollars that the utility cannot pay. On the other hand, the administrative costs of issuing a refund could far exceed the amount of a very small refund. He concluded that each refund case is unique and designing a refund plan "that will cover all possible situations would be a lot more difficult than adjudicating them case-by-case." 5:03:37 PM REPRESENTATIVE SADDLER asked the RCA to explain its fiscal note. MR. GOERING deferred to RCA Commissioner Patch. 5:05:04 PM CO-CHAIR PRUITT announced that HB 39 was heard and held.