HOUSE BILL NO. 539 "An Act extending the Alaska Public Utilities Commission; and relating to regulation of public utilities and to regulatory cost charges." Representative Brown provided members with AMENDMENT 5 (copy on file). She explained that amendment 5 would address the regulatory cost charge issue and implement recommendations by Randy Welker, Legislative Auditor that all regulatory cost charges be based on the level of effort conducted by 1 the Alaska Public Utilities Commission in addressing the various utility sectors. She noted that current statutes use a gross revenue approach. The legislation proposes to adjust gross revenues for only one utility sector. She quoted Mr Welker's audit, dated April 5, 1994: "It remains our opinion that the only way to remove these inequities is to adjust the rates based on APUC work effort. Any other mechanism is purely coincidental, as would be any `cost charge' based on industry `revenues.'" Representative Brown observed that amendment 5 would provide that the Commission set rates by regulation. She noted that the charge would be spread across electric, telephone, pipeline, gas, water, sewer, refuse and cable. She maintained that the approach outlined in amendment 5 would be preferable to that contained in the legislation. Representative Brown provided members with AMENDMENT 6 (copy on file). She explained that amendment 6 would make it possible for recycling operations to recover, through APUC regulated rates, the value of their equity in recycling equipment. She explained that recyclers usually have little access to debt markets needed to finance purchases of capital equipment. This amendment would allow recyclers to recover some of their cash investment. She observed that APUC statutes say that reasonable net capital and operating costs can be recovered. However, the Commission has interpreted that to exclude equity investment in recycling equipment. TOM TURNER, ANCHORAGE RECYCLING CENTER explained that the amendment would allow a least cost option to rate payers. He clarified that the debt and equity cost of recycling could be recouped by the investor if the amendment is adopted. He stated that the Commission's interpretation of statutes would only allow a return on the debt. He noted that garbage companies are allowed a return on the equity of their equipment, but recyclers are not. ROBERT LOHR, EXECUTIVE DIRECTOR, ALASKA PUBLIC UTILITIES COMMISSION explained that the Commission has not taken an official position on the issue of debt return on recycling equipment investment. He noted that an active case regarding this issue is pending before the Commission. Representative Martin MOVED to ADOPT AMENDMENT 4. Amendment 4 was held from the House Finance Committee meeting of 4/25/94. Co-Chair MacLean OBJECTED. Representative Brown spoke in support of amendment 4. She asserted that the amendment is fair. She observed that the amendment would allow the separation of monopoly regulated activities from entrepreneurial competitive activities. 2 A roll call vote was taken on the motion to adopt AMENDMENT 4. IN FAVOR: Brown, Grussendorf, Hanley, Martin, Parnell, Therriault, Larson OPPOSED: MacLean Representatives Hoffman, Navarre and Foster were absent from the vote. The MOTION PASSED (7-1). Representative Brown MOVED to ADOPT AMENDMENT 5. Representative Hanley expressed concern with the provision to allow the Commission to set rates by regulation without caps on gross revenues. Co-Chair MacLean echoed concerns that the amendment would give too much authority to the Commission to determine rates by regulation. Representative Brown noted that section 13 on page 4 would not be effected by the amendment. She observed that section 13 provides that lapses be identified. She noted that the legislature can reappropriate the lapsed amount in the following year. She suggested that the Commission could reduce their charge for the that year by a comparable amount. She maintained that the cap will be the amount of the budget the legislature authorizes. Mr. Lohr clarified that AS 42.05.253(b) requires the Commission to limit the rate within a cap that proximately equal the operating budget. The current rate is .4 percent of the gross revenues of any regulated utility or pipeline carrier. A roll call vote was taken on the motion to adopt AMENDMENT 5. IN FAVOR: Martin, Navarre, Brown, Larson OPPOSED: Grussendorf, Hanley, Parnell, Therriault, MacLean Representatives Hoffman and Foster were absent from the vote. The MOTION FAILED (4-5). Representative Brown MOVED to ADOPT AMENDMENT 6. Mr. Lohr restated that the Commission has not adopted an official position in regards to the recycling issue. A roll call vote was taken on the motion. 3 IN FAVOR: Brown, Grussendorf, Navarre, Martin, Parnell, MacLean, Larson OPPOSED: Hanley, Therriault Representatives Hoffman and Foster were absent from the vote. The MOTION PASSED (7-2). Representative Brown MOVED to delete "1995 and insert "1996" on page 5, line 16. She noted that the Commission's testimony indicated that they preferred the delayed effective date. Mr. Lohr stressed that the delayed effective date would allow the Commission a full legislature to address issues resulting from new authorization language. He emphasized the need to establish transitional measures to deal with any items that have been based on the liberally construed statutory authority. He noted that the Commission may need to seek further legislative authority or clarification. Co-Chair MacLean OBJECTED. Representative Navarre noted that controversial issues are often delayed until the last session. Representative Martin spoke in opposition to the amendment. LARRY MARKLEY, ALASKA RURAL ELECTRICAL COOPERATIVE ASSOCIATION (ARECA) clarified that the ARECA and the Alaska Telephone Association are not supportive of the delayed fiscal note. A roll call vote was taken on the motion to change the effective date of section 2 to "1996". IN FAVOR: Navarre, Brown OPPOSED: Martin, Parnell, Therriault, Grussendorf, Hanley, Larson, MacLean Representatives Hoffman and Foster were absent from the vote. The MOTION FAILED (2-7). Representative Martin MOVED to report CSHB 539 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. CSHB 539 (FIN) was reported out of Committee with "no recommendation" and with a fiscal impact note by the Department of Commerce and Economic Development and with a zero fiscal note by the Department of Revenue,DATED 4/8/94. 4