SENATE BILL NO. 54 An Act relating to exclusive service areas for utilities certificated to provide electric utility service and to the definition of 'general public' for utilities furnishing electric service. Co-chairman Halford directed that SB 54 be brought on for discussion and noted prior (4-12-95) adoption of Amendments 1 and 2 to CSSB 54 (L&C). He further noted a request for exemption of APUC expert witnesses from the Procurement Code. DAVE HUTCHENS, Alaska Rural Electric Cooperative Association, came before committee. Co-chairman Halford noted that the requested exemption is similar to one provided to the Dept. of Law for similar experts. Senator Sharp MOVED to amend the bill to allow APUC to hire expert witnesses without Procurement Code restrictions. Senator Rieger asked if the cost of the expert witness would be borne by the regulated utility. Senator Sharp voiced his understanding that the utility is assigned the total cost of regulatory hearings. Senator Rieger suggested that the commission already has authority to declare that the service is unique and will thus not be put out to bid. He noted that budget detail indicates that expert witness fees are "really high," and he expressed concern that the exemption might create a blank check. Senator Phillips concurred in that concern. Senator Zharoff voiced his understanding that the procurement code has caused problems in securing expert witnesses in a timely manner. Similar problems have been noted by ASMI in association with advertising contracts. He then voiced support for the judgment of the commission, stating that failure to do so may result in undue costs to utilities and consumers. Senator Sharp advised that tariff cases in which he was involved had a substantial amount of lead time from the time the tariff was filed and a hearing was set by the commission. These cases continue for six months to a year. Procurement under the code can be obtained within a shorter period of time. BOB LOHR, Executive Director, Alaska Public Utilities Commission, spoke via teleconference from Anchorage. He explained that the commission has run into problems procuring expert witnesses in a timely manner. Docket deadlines often do not allow sufficient time for a successful bidder to be put in place unless the proceeding is delayed 90 to 120 days to allow for the normal procurement process. The choice is delay of regulatory decisions while complying with procurement requirements or an expedited means of getting consultants in place. It is only in this special instance, rather than day-to-day procurement, that the commission seeks an exemption. Senator Sharp inquired concerning the normal time lag for setting a docket on a tariff filing, giving public notice, hearing, etc. Mr. Lohr said it would vary with the complexity of the proceeding. The commission generally issues a notice and allows 30 days for public comment. While that is happening, the commission is preparing a procedural order to set a schedule for the hearing. Actual deadlines in the schedule vary with the complexity of the proceeding and the time needed by the utility to prepare. Once the utility deadline is set, the commission must file its reply testimony 30 days thereafter. That is the time when the work result from expert witnesses is needed. Contractors cannot be performing the necessary work while the procurement process is ongoing. Senator Rieger asked who pays for expert witnesses. Mr. Lohr explained that the regulatory cost charge is collected from utilities and passed through to customers. That includes the cost of expert witnesses. There is, however, a provision that would allow the commission to assign those costs to other parties to a proceeding that might not be paying the regulatory cost charge. Senator Rieger asked if billings from most expert witnesses total less than $25.0. Mr. Lohr responded negatively, saying that the typical expert witness contract is considerably higher, ranging from $35.0 up to a maximum of $150.0. Senator Rieger acknowledged that small procurements could not be used for those amounts but asked why the commission does not utilize 36.33.010, emergency procurements. Mr. Lohr answered that the situation does not constitute an emergency, although it can be a major inconvenience to both the utility and conduct of the case. The commission is placed in a difficult position in wanting to expedite the proceeding and "get the decision made." That in itself does not constitute impracticability in the eyes of state procurement officers. Senator Rieger advised that he was unsure whether he would be comfortable with a blanket release from the procurement act. Mr. Lohr said that the commission had discussed emergency procurement provisions with the chief procurement officer and the Dept. of Administration and considered various options that might be available to achieve temporary relief in order to secure witnesses more timely. Impracticability was not one of the options suggested. Senator Zharoff asked if exemption from the procurement code would result in a cost savings. Mr. Lohr advised that there may be a financial incentive. He described the current method which requires expert witnesses to work quickly and expedite their work once they are hired. That means that commission staff and the project director have to do the same. That type of crunch would be much more manageable if there was more time. The primary purpose of the exemption is to get the job done right and place the best possible evidence before the commission. Co-chairman Halford called for a show of hands on the amendment to exempt commission hire of expert witnesses from the procurement code. The motion failed on a vote of 2 to 3. Co-chairman Frank MOVED to remove Sec. 3, the prohibition on garbage deregulation. That would maintain the status quo. The Co-chairman advised that he saw no reason for a special exception for refuse collection. Co-chairman Halford voiced concern regarding what municipalities might do in light thereof. Co-chairman Frank advised of his belief that problems would be handled at the local level. JERRY REINWAND, representing the Alaska Refuse Utilities Association, came before committee. He explained that the amendment was added in Senate Labor and Commerce. He voiced a preference for repeal of 07.11 (d) entirely, "for everybody." That portion of the statute says that the commission can do whatever it wants in the way of exemptions at any time, if it deems the action to be in the public interest. The public policy issue on deregulation should be decided by the legislature rather than the commission. The above-cited statute, in effect, gives the commission legislative authority. That is wrong. The only reason language in Sec. 3 was narrowed to refuse utilities was that the commission opposed total repeal of 07.11(d). Mr. Reinwand explained that while the commission has taken no stance on the exception for refuse, Chairman Schroer said it was personally acceptable to him. DON SCHROER, Chairman, Alaska Public Utilities Commission, next spoke via teleconference from Anchorage. He voiced a preference for retaining 07.11(d) within statutes. Were it to be eliminated, it would greatly impact commission ability to function. He agreed that if solid waste collection is to be deregulated, it should be done legislatively. Senator Randy Phillips referenced page 1 of CSSB 54 (L&C) and inquired concerning lack of a definition for "public interest." Mr. Schroer said that he had not raised that as an issue of concern. The commission was opposed to the initial bill as introduced. Co-chairman Halford called for a show of hands on the motion to delete Sec. 3 (the prohibition on a regulatory exception for refuse utilities). The motion failed on a vote of 2 to 4. Senator Sharp MOVED that CSSB 54 (Fin) pass from committee with individual recommendations and the accompanying fiscal note. No objection having been raised, CSSB 54 (Fin) was REPORTED OUT of committee with a zero fiscal note from the Dept. of Commerce & Economic Development (APUC). Co- chairman Halford and Senator Sharp signed the committee report with a "do pass" recommendation. Senators Phillips, Rieger, and Zharoff signed "no recommendation." Co-chairman Frank signed "Do not pass without amendments." ADJOURNMENT The meeting was adjourned at approximately 3:30 p.m.