HB 233-UNCLAIMED PHONE/ELEC COOP DISTRIBUTIONS 3:04:55 PM CHAIR OLSON announced that the first order of business would be HOUSE BILL NO. 233, "An Act relating to giving notice of unclaimed net margin distributions made by electric and telephone cooperatives." 3:05:09 PM DEREK MILLER, Staff to Representative Mike Kelly, Alaska State Legislature, read from the sponsor statement [original punctuation provided]: The purpose of HB 233 addresses the sometimes burdensome and ineffective noticing requirements of unclaimed property law regarding capital credits of electric and telephone cooperatives. Electric and telephone cooperatives from time to time receive excess revenue from members that exceed the expenses of operations. The cooperative keeps these excess revenues in a member-owned capital account called capital credits, on behalf of the member. Cooperatives may refund a portion of accumulated capital credits, but in some cases the cooperative seeking to refund the capital credits no longer has a valid address for the member. As a result, many go unclaimed. Current Alaska unclaimed property law allows the credits to revert back to the cooperative as long as the cooperative, at least six months prior to the reversion 1) mailed a notice to the last known address of the member; 2) publishes a notice of proposed reversion in the same manner required for publishing a service of summons by publication; and 3) publishes a notice of the unclaimed capital credits four times, during four consecutive calendar weeks in a newspaper of local circulation. While mailing to last known address of members sometimes results in finding members, newspaper publication does not result in a significant increase in the number of members who cash their capital credit checks, particularly for rural cooperatives. As a result, cost of compliance with this notice requirement is significant and the effectiveness is questionable. HB 233 allows cooperatives the option of using the internet, instead of newspaper publication, to notify its members of unclaimed capital credits. Alaska is the most "wired" state in the country and this bill allows for cooperatives to notify its members using a method most likely to reach them. MR. MILLER stated that the bill is simple in nature and is supported by the Alaska Village Electric Cooperative, Inc., and the Copper Valley Electric Association, Inc. 3:07:14 PM REPRESENTATIVE GARDNER asked whether the list of unclaimed credits could be posted on the internet site for 6 months instead of 30 days. MR. MILLER said he is not aware of why the 30-day period was chosen, but indicated it might be possible to "bump that up." REPRESENTATIVE BUCH asked if newspaper publication is more effective in urban cooperatives and why this method does not seem to work for rural cooperatives. MR. MILLER opined that the newspapers of general circulation are not reaching the constituent base of the rural cooperatives. However, he went on to say that because Alaska is the "most wired" state in the nation, the internet may be a better vehicle for providing notice. 3:09:31 PM ROBERT A. WILKINSON, Chief Executive Officer, Copper Valley Electric Association, Inc., (CVEA), explained that CVEA is a non-profit organization that serves approximately 3,600 members. He explained that any monies collected over and above the cost of providing electric services belong to members and are held in accounts for each member. He relayed that most cooperatives hold the excess money for 20 years, which makes it very difficult to locate the members. He said that the state's unclaimed property statute speaks directly to unclaimed capital credits, but opined that this well-intended statutory provision is burdensome and out-of-date. Furthermore, the statutory provisions are expensive to comply with and not very effective. He said that HB 233 would give utilities the option of posting notice of capital credits on the internet. In response to a prior question by Representative Gardner, he explained that the 30-day period for posting is likely derived from existing legal notice requirements. He opined that posting on the internet has a higher likelihood of being seen and that CVEA has no objections to posting for longer than 30 days. MR. WILKINSON reminded the committee that internet posting may be more accessible as it is "always on." He said that the CVEA's accounting department has already had some success with notifying people on the internet if it does not have a valid address for the person. He said that CVEA, like other cooperatives, uses unclaimed capital credits to fund scholarship programs. In the past 15 years, CVEA has awarded over $100,000 in scholarships to graduating seniors, he said. He explained that the effectiveness of newspaper advertising is affected by a couple factors. First, his area has a significant temporary population in the summer months. He has done some research and has discovered that only 1 in 5 current members have been members for over 20 years and over 50 percent of the current members have been members for less than 10 years. He opined that these statistics illustrate why it is difficult to find persons who may have excess funds in the system, especially after a number of years. [Due to technical difficulties, there is no sound recording from 3:15:26 to 3:20:51; that segment was reconstructed from Gavel to Gavel's recording.] REPRESENTATIVE GARDNER asked if he had any objection to posting names on the internet for 180 days. MR. WILKINSON stated CVEA would not have any objection. JIM ROWE, Director, Alaska Telephone Association (ATA) explained that ATA has seven rural cooperatives as members. He stated that its members are in favor of the bill as it will provide an effective means of communicating with members. He opined that urban newspapers are not read very much in rural areas, yet the internet is very active and can be more relevant to local issues. He stated that he supports the bill as allowing a more effective way to communicate with members. REPRESENTATIVE GARDNER asked if he had any objection to posting notice on the internet for 180 days. MR. ROWE replied that he had no objection. 3:19:22 PM MARILYN LELAND, Executive Director, Alaska Power Association, (APA), explained that its members provide power to almost 500,000 Alaskans. She stated that APA's membership is in support of HB 233 as the proposed changes will provide a more effective way of locating members who are owed capital credits and will save the utility cooperative thousands of dollars in advertising expenses. She opined that the current method of publishing a long list of names four times is not effective as many of the persons no longer live in the area. In response to an earlier question, she told members that the Department of Revenue (DOR) has been successfully using the internet to provide notices of unclaimed property. RICH GAZAWAY, Administrative Law Judge, Regulatory Commission of Alaska (RCA), responded to a question by stating that the RCA does not take a position on this legislation. 3:22:13 PM REPRESENTATIVE GARDNER offered Conceptual Amendment 1 to page 2, lines 4-6, to lengthen the time period for posting on the cooperative's Internet web site a list of the persons for whom the cooperative has unclaimed distributions from 30 days to 180 days. There being no objection, Conceptual Amendment 1 was adopted. 3:22:37 PM REPRESENTATIVE NEUMAN moved to report HB 233, as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 233(L&C) was reported from committee.