SB 253-EXTENDING THE REGULATORY COM. OF ALASKA    CHAIRMAN BEN STEVENS called the Senate Labor & Commerce Committee meeting to order at 2:00 p.m. and announced SB 253 to be up for consideration. MS. DEBORAH GRUNDMANN, Staff to Senator Stevens, said that SB 253 extends the termination date of the Regulatory Commission of Alaska (RCA) to June 30, 2006. Page 7 of the audit has three recommendations that Nan Thompson, Chair, RCA, would comment on. MS. NAN THOMPSON, Chair, RCA, supported SB 253. She informed them that this is the agency that was reformed in 1999 by the previous legislature. The APUC was sunset and this is the RCA's first review. She said that they have managed to reduce the case backload by hundreds of cases since they started. "Most importantly, all the new cases we have received are being processed in a timely manner within deadlines." The number of substantive decisions issued by the agency has increased dramatically when compared to previous work of the agency. We are taking the time to work on the hard cases, build records and make decisions. We have spent a lot of time over the last couple of years designing and implementing the MIS system that the legislature asked us to design and work on two years ago and that should be operational by the end of this month. It should allow us to operate more efficiently internally and allow the public to be better informed. MS. THOMPSON said they have been very responsive to consumer complaints and she is proud that the auditor recognized that over 80 - 90 percent of the consumer complaints they receive are handled within 30 days. Their appeal record speaks well for the kind of work they have done. Some utilities are not happy with the RCA's decisions, but noted that she listens carefully. She is concerned if they are not being treated fairly and she tried to make adjustments for that, but if it's about results, the question is whether the RCA is accurately and fairly applying the law as written by the Legislature and Congress. Their track record on appeal shows that they have been doing the right thing there, too. Of the agency decisions since 1999, all four of the ones that have gone to court have been upheld. The auditor had three recommendations and the RCA agrees with all of them and have begun work to implement them. The first one was at the public advocacy section which was a new section formed under the legislation in 1999 - adopt regulations to define procedures. We agree that there should be regulations. It should be clear to all members of the public and to utilities when they will be appointed and what their role is in those cases. We have asked within the agency that the public advocacy section itself propose regulation and they have given me a deadline of next month in March to propose those. They will be put out to comment to the public and to industry and should be adopted by our agency in full by the end of this year. I'm hoping that those regulations do a couple of things - to clarify the role of the public advocacy section within our agency - to clarify when they should be appointed a party and when not and to clarify their right to ask to participate in proceedings where they're not appointed by the commissioners and their rights to appeal. She hoped to have those implemented by the end of this year. Another recommendation identified a large number of uncertificated water and sewer utilities. Under existing statutes, every utility that serves more than 10 customers should be certificated by the commission and the auditor identified about 130 water and sewer utilities. Many of these are paired in communities. We're really talking about 65 communities that don't presently have certificates. She could not say why, because a lot of them existed before the RCA existed and they have begun to address the deficiency. She has identified who these utilities are and within her agency they are in the process of revising their application process to tailor one more appropriate for the small systems and rural utilities that comprise most of the 130 utilities. They made the decision to wait until they had the application process revised, which should be later on this spring, to invite all of those presently uncertificated utilities to join. The other policy issue is whether small systems owned by homeowners associations should be exempt under regulation. We have had a series of cases where privately owned systems owned by homeowners associations - one where ratepayers have direct input into rates because of their participation on a homeowners association board have asked to be exempt. We have granted some of those exemptions by case law. Another issue that we hope to deal with on this is whether or not we should have a regulation exempting that class of utilities to make it easier for utilities in that group going through the process to understand where they'll fit in. The third recommendation dealt with notice. All changes to the terms and conditions under which a utility offers service has to be put out to public notice and under our statute and regulations, some are issued by the utility and some are issued by the agency. What the auditor identified is that our records for proof of publication were not as complete as they should be. Since we received the recommendation, we have internally remedied that situation already and have raised within the agency's mind the bigger question of what's effective public notice and what changes we might consider in order to make consumers more aware of the changes. Now many of the notices go on our web page and we found that to be a more effective way of noticing the public than some of the newspaper publications. That third recommendations is pretty much taken care of and we'll continue to try and work on more effective notice in the future. SENATOR LEMAN said it's his opinion that they make it very easy for small utilities to become certificated. He noted that was one of the auditor's recommendations. MS. THOMPSON agreed saying that complying with another set of regulations can be burdensome. Many of the utilities that are uncertificated are owned by local government and wouldn't be economically regulated. Their concern in looking at any small utility is whether or not there is some process for in put. The ones owned by local government, the citizens have the opportunity to have an impact on rates and they don't need the RCA to review them. SENATOR LEMAN asked if they were looking for a mechanism to get some public process involved. MS. THOMPSON replied yes and of the 130 identified, about 50 of those are local government owned. The others are generally small utilities of another sort. If there is an opportunity for input by the ratepayers on rates already, they don't need the RCA looking at the rates as well. They are trying to tailor the application process to reflect that. CHAIRMAN STEVENS asked when the regulations would be ready for public comment on the water and sewer. MS. THOMPSON replied that realistically it would happen in May. CHAIRMAN STEVENS asked if she was working with the 50 municipalities to write the regulations. MS. THOMPSON replied when they are put out for public comment, those utilities will have an opportunity to comment. Most of those water systems were built with government funding of one sort or another. So we've worked with DEC and the federal government agencies to help them understand that first those utilities are operating safely now…. CHAIRMAN STEVENS asked if the regulations contain maintenance provisions for the municipality. MS. THOMPSON replied: That issue comes up in the context of the requirement that we determine the utility is fit, willing and able to operate the utility. Management capacity, which is what I understand you to be talking about, is one thing we look at carefully. We ask them to show us that they have set up an accounting system that will allow them to collect the money they need to continue to operate, that they have a qualified management team in place - that they have qualified engineers to run the system. Yes we look at those issue in a context of certification. CHAIRMAN STEVENS asked if "fit, willing and able" has to do more with capacity, not addressing the revenue side. She said that was right. He asked if where additional revenue would come from if it was needed to operate the facility. 2:16 p.m. MS. THOMPSON replied that was a good question and the legislature would be dealing with it over the next few years in the context of the many new rural water and sewer systems that are being put in. She said that they could use grants and perhaps a different type of management structure that would allow them to achieve efficiencies by combining with other utilities in the region or community. CHAIRMAN STEVENS said he assumed the 50 utilities are new and asked if there was a way they could start to get information to understand how much they cost to operate once they have been built. MS. THOMPSON replied that was the kind of information they get in reviewing the certification applications and that is an important thing to look at early on when they are setting up a new utility. CHAIRMAN STEVENS said that the Denali Commission helps fund the construction of a lot of these facilities and asked if it has an operational component. MS. THOMPSON replied no. They have some training money, but generally the money from the Denali Commission is for capital grants, not ongoing operations. MS. DANA TINDELL, Vice President Regulatory Affairs, GCI, said as a regulated utility they interact with the RCA on a daily basis. They were involved in the legislation that constituted the RCA. "I'm pleased to report to you that from our perspective, the Regulatory Commission today is a functional body, as opposed to a dysfunctional body." As a utility, they are not always pleased with the RCA's decisions, but they are free to appeal. There have been a lot of appeals and prior to this commission there was never an order in which appeal. So, they are much happier with that outcome. A lot of times the Regulatory Commission is somehow accused of enacting bad law. I've heard that said. I wanted to clarify from our perspective, in many cases, in telecommunications particularly, what the Regulatory Commission is doing is interpreting federal law and carrying it out as required by the federal agency. So, many of the issues that some of the other utilities in telecommunications industry complain about are not really issues that are up for state question. They are proscribed by federal law. She said that from their perspective it is critical that there be a Regulatory Commission. Without it, it wouldn't be clear where the day-to-day decisions would have to be made, possibly the legislature or the courts. "An expert commission is better able to deal with these issues and is probably more willing than the legislature is." She said as a veteran of eight two-year sunset reviews, it would be great if they would continue the commission for the four-year term. SENATOR LEMAN moved to pass SB 253 from committee with individual recommendations with the accompanying $6 million fiscal note. CHAIRMAN STEVENS said they would hold the motion for further testimony from people on teleconference. MR. STEVE CONN, Executive Director, Alaska Public Interest Research Group, said that consumer involvement is critical in the business of utility regulation and he has seen substantial improvement in that area. "To cast a member of staff as public or to cast a position as public or citizen centered is not the same thing as active involvement by consumers." At meetings he presses for increased outreach and notice of the many things that affect Alaska consumers on a day to day basis in their private and business lives. "All of the advocates who go before the Regulatory Commission benefit from early on and informed consumer involvement." People in Alaska don't want to see brown outs or ideologically or politically driven Enron-type situations he said. "There is more interest on the part of consumers in utility matters than ever before. At this juncture I would hope the legislature would allow the bill to pass…." MS. CRISTI KATLIN, AT&T Alascom, supported SB 253 and asked them to pass it without amendments. "Any efforts to modify or reverse the jurisdiction of rulings of the RCA should be considered separately from the sunset review." SENATOR LEMAN renewed his motion to move SB 253. There were no objections and it was so ordered.