HOUSE BILL NO. 46 An Act permitting grants to certain regulated public utilities for water quality enhancement projects and water supply and wastewater systems. Representative Foster MOVED to ADOPT work draft 24-LS0313\Y, Craver, 2/8/05, as the version of the bill before the Committee. There being NO OBJECTION, it was adopted. Co-Chair Meyer pointed out that two amendments had been incorporated into the draft. The first clarifies that utilities are owned and operated by a political subdivision of the State. That language was amended in the Senate Resource Committee. He noted that Representative Croft presented Amendment #2, which addresses privately, owned utilities not receiving capital gains. TOM WRIGHT, STAFF, SPEAKER JOHN HARRIS, stated that the Speaker has no objections to either amendment or the new language in the version currently before Committee members. Vice-Chair Stoltze inquired if language on Page 2, Lines 26- 28 was new. Mr. Wright advised that language resulted from Representative Croft's amendment, however, was slightly modified. Representative Hawker understood that the intent was to regulate a State or public investment in a utility, regulated by the Regulatory Commission of Alaska (RCA). The language implies that a public utility sold within ten years of receiving a grant, ceases to be regulated and then that grant has to be repaid. He thought that 10-years would be too long of a window, understanding the number was not an issue point. Representative Hawker recommended that the number be changed to 5-years. Representative Kelly agreed and supported the change. He thought it would benefit the public by using matching grants. Representative Hawker MOVED a change to the committee substitute, Page 2, Line 24, deleting "10" and replacing it with "5" years. Co-Chair Meyer OBJECTED for discussion purposes. Representative Croft, (Testifying via Teleconference), asked for an explanation of the proposed change. Representative Hawker repeated that the language provides assurance that public money benefiting a public utility is subject to regulated rates. He questioned if 10-years provides an appropriate restriction, assuming that the grants are to benefit the public. He recommended 5-years. Representative Croft agreed. The number was not determined through any type of study. He commented that there could be practical difficulty keeping it on the books too long. He added that he did not want to see it become a State grant that moved quickly for individual or private gain. Representative Weyhrauch asked what would happen if the public utility was sold to a non-regulated utility within the 5 years. Representative Hawker explained that it would only be affected if a non-regulated utility were sold. Representative Weyhrauch inquired historic precedence for that. JIM STRANDBERG, (TESTIFIED VIA TELECONFERENCE), COMMISSIONER, REGULATORY COMMISSION OF ALASKA, ANCHORAGE, responded to the question. He indicated that in the six years that he had been with RCA, they had processed many ownership changes, however, he could not provide specific data. Mr. Strandberg stated that certificate transfers almost always come before the RCA if it is a public utility. The RCA regulation is a separate concern and they do monitor the current ownership of certificated utilities. 1:55:44 PM Representative Weyhrauch spoke to the transferee and RCA's payment involvement. Mr. Strandberg advised that RCA wants to maintain ownership that is "fit, willing and able", which is the statute definition. For utilities not regulated by the RCA, the rates are not set. He summarized that an acquisition adjustment could only be assured under the utilities economically regulated by the RCA. Representative Croft voiced concern that State grants might end up being solely for private benefit. He addressed RCA's current restrictions, which could prevent that from happening. A private buyer will only pay so much because of regulations by RCA. He questioned if the amendment language would assure that. Mr. Strandberg believed it could be accomplished incorporating that language. Representative Croft suggested that it could affect economics in a limited situation. Mr. Strandberg reflected that the amendment prevents private enrichment as a result of that grant. Vice-Chair Stoltze asked if there is any interest in limiting the utility to State owned rather than foreign owned businesses. Mr. Strandberg replied that he would check the statute for that information. He did not believe that there are utilities foreign owned. Mr. Wright advised that all of the utilities receiving the grants are under the RCA regulations whether they are foreign or not. 2:04:23 PM Mr. Strandberg commented that any private owned investor utility would be subject to current regulations. Unless the Legislature changes that, the likelihood of an investor owned utility going into an unregulated status is unlikely. Vice-Chair Stoltze pointed out that last year, there was legislation that would have removed the utility regulation. He asked the protections in place. Mr. Strandberg explained that bill was a deregulation of a municipality owned utility and was a special case of a large, municipally owned utility. He knew of no other actions to deregulate. Mr. Wright interjected that it was not the intent of Speaker Harris to get HB 46 involved in that legislation and would object to it. Vice-Chair Stoltze appreciated that. Representative Holm thought that the payback provision could have unintended consequences. He offered that the benefits incurred could bail out a municipality. Resulting from that, if the pay back provisions were huge, there could be unintended consequences. He believed that if a municipality were getting money through a program, everyone in the municipality would be benefiting. 2:07:53 PM Co-Chair Meyer WITHDREW his OBJECTION to Amendment #1. There being NO further OBJECTION, the change from "10" to "5" years was adopted. Co-Chair Meyer pointed out that the fiscal note for the Department of Environmental Conservation had been zeroed out. He asked for comments regarding that change. 2:08:53 PM DAN EASTON, DIRECTOR, DIVISION OF WATER, DEPARTMENT OF ENVIRONMENTAL CONSERVATION, explained that there had been an increased workload in developing a small number of grants to the larger amount and that was the base for the fiscal note. The Department of Environmental Conservation anticipates a workload impact and will attempt to do the work with a zero note. Co-Chair Chenault commented on the fiscal note. He pointed out that in the FY03 budget, the Department had 33 matching grants; in FY04, 12 matching grants; and in FY05, 7 matching grants. He pointed out that the number of employees in the Division staffing those projects had not changed. He supported the fiscal note being zeroed out. Representative Foster MOVED to report CS HB 46 (FIN) out of Committee with individual recommendations and with the zero fiscal notes. There being NO OBJECTION, it was so ordered. CS HB 46 (FIN) was reported out of Committee with a "do pass" recommendation and with zero note #1 by the Department of Community & Economic Development and a new zero note by the House Finance Committee for the Department of Environmental Conservation. 2:12:26 PM AT EASE: 2:12 P.M. RECONVENE: 2:18 P.M. 2:18:21 PM