SB 133-COMBINE APUC AND AOGCC  CHAIRMAN HALFORD called the Senate Resources Committee meeting to order at 3:12 p.m. and announced SB 133 to be up for consideration. SENATOR PEARCE, sponsor of SB 133 and SB 134, said she would give an overview of the two together and then speak specifically to SB 134. She said she would speak more specifically to the AOGCC side, since this was the Resources Committee. Her goals and objectives in putting these bills together are numerous. Last summer, she received a call from Ms. Cammy Oechsli, one of the commissioners of AOGCC, who wanted to talk about funding problems the AOGCC is facing. The AOGCC is loosely attached to the Department of Administration. It serves a very important function in terms of conservation in the oil and gas fields throughout the State. AOGCC has a funding mechanism in statute that depends on oil and gas conservation taxes along with a fee for inspection services of wells. The taxes and the inspection fees that have come in to the general fund over past years have exceeded the amount of money the legislature has appropriated to the AOGCC. The number of active wells this agency is supposed to oversee is increasing, which is good, but the number of employees the legislature has allowed for that function has substantially decreased, which is not good. After discussions with Ms. Oechsli, SENATOR PEARCE suggested looking at the APUC funding mechanism, a designated program receipt system, making the entities being overseen directly responsible for paying for that function. AOGCC would not be a profit making entity, but one that pays for itself. This would allow the Commission to have the number of employees it needs. She added that the AOGCC has not been audited since 1991. SENATOR PEARCE said she has also heard concerns about a perception of dysfunction at the APUC. In thinking about both entities, she came up with the idea of putting the two regulatory agencies together in a structure that many other states have. SB 133 combines the AOGCC and the APUC. It repeals both commissions and allows for a reasonable transition period. It requires that all existing regulations and matters pending before both commissions be carried forward. She thought this would improve the long-term function, effectiveness, and efficiency of both commissions in a number of ways. The new entity will be set up as an independent, quasi-judicial agency of the State called the Energy Conservation Commission. It would have seven members appointed by the Governor and confirmed by the Legislature. The Commission would nominate to the Governor one public member of the Commission as the chairperson. The Governor could then choose that person or choose to appoint another person as chair. The chair would serve for a term of four years but could not be appointed for successive terms. This feature is already embodied in the AOGCC statutes because of concerns about a previous chair. The Commission would be composed of five members from the general public, one a petroleum engineer and one a geologist. Currently, the AOGCC has a petroleum engineer, a petroleum geologist, and one public member. The APUC currently has two public members, an accountant, an engineer with electrical experience, and an attorney. The bill addresses a number of other technical matters such as a time management system to maintain a record of time that applies to all staff and the administrative director and commissioners. It adds three junior positions to the AOGCC function: a junior reservoir engineer, a junior petroleum engineer, and a junior petroleum geologist. All three positions would be filled by qualified professionals capable of moving into the senior positions. One problem is that the institutional knowledge is only one person deep at present. The people in the senior positions today are nearing the end of their professional careers and will most likely retire within the next five to 10 years. There is no one backing them up to move into those positions. The joint entity would add one hearing officer, which should help the ongoing time constraints for both commissions. They have added an office manager and eliminated the executive director position of APUC. SENATOR PEARCE said it was not her intent to necessarily save dollars, but she thought over the long term the Commission would be more efficient and provide more effective services. She said she deferred to AOGCC statutes any time there was a question, because of the perception that it is working more efficiently at the moment. The powers and duties of the Commission have been upgraded in that the bill sets up a system to work like an appeal process in a court of appeals. The chairperson would empanel three commissioners to consider decisions before the Commission. Under this bill, the chairperson can assign an individual commissioner to act as a hearing officer, a procedure used by the AOGCC. It contains an appeal process that allows a case to be heard by a larger number of commissioners if the entities involved want to appeal. That is also patterned after the court of appeals. SENATOR PEARCE said she would like to add to the draft that the entity could ask for an appeal to a larger commission and the commission could decide whether or not to accept that. She is having an amendment drafted that would make the appeal process only available if the opinion of the panel directly conflicts with an existing opinion that was made by an earlier PUC. Appeals would not be granted under any other circumstances. Because it has been requested in every audit of the APUC, she said the only policy change in the bill is that it would deregulate the refuse industry. SENATOR PEARCE said, at the moment, regulated pipelines are under the PUC. The intent of SB 133 is to move the regulation of those to the oil and gas folks in the larger commission so they could use their expertise in the industry to do the regulations for the pipelines. She asked Commissioner Christenson what kind of hours he and the other commissioners work. COMMISSIONER CHRISTENSEN answered that they basically work from 8 to 4:30. SENATOR PEARCE asked if they work longer hours sometimes. COMMISSIONER CHRISTENSON said they are pretty much on schedule on an average, but they are not as timely as they should be sometimes. CHAIRMAN HALFORD asked where he would put oil and gas pipelines if he could put them anywhere he wanted between the PUC and the AOGCC. COMMISSIONER CHRISTENSON answered that engineering would have a good idea of the technical part. The tariffs and accounting sides would have to have people with that expertise which they don't have on staff right now. TAPE 99-24, SIDE B  Number 590 CHAIRMAN HALFORD said he was worried about infecting the new commission with the maladies that run amok in the various battles on public utilities. He didn't know the answer to that. Pipeline regulation will get much bigger as we see less competition and less of the natural tendency to gather information from the competing interests. SENATOR MACKIE asked what Mr. Christenson thought about merging the two commissions. COMMISSIONER CHRISTENSON answered that he understood the AOGCC would move intact. He would not change the daily operations and they would perhaps improve as new folks came in to handle the work. He is less sure of the impact on how the commission would work. SENATOR MACKIE asked if he would be doing utility stuff, too. COMMISSIONER CHRISTENSON responded that he didn't know. SENATOR PEARCE pointed out that there are no utility people on the Commission. It is her intent to empanel three people for any oil and gas or pipeline measure that comes before them. Two of the people have to be the engineer and the geologist. It is not necessarily their intent that it is always the same third person. SENATOR MACKIE asked if the five public members would handle any of the utility questions. SENATOR PEARCE answered that is right. SENATOR MACKIE asked if the two other members of the Commission could participate in those. SENATOR PEARCE answered that the chairman of the Commission could always empanel the full seven person Commission if there was a big enough issue. She thought smaller panels in most cases could get the work done a lot more efficiently. SENATOR MACKIE asked why they are merging the two, if they are not going to be two entities combined into one. SENATOR PEARCE said the two entities will be combined into one. Her original idea was not to specify a geologist or an engineer, but the oil and gas industry thought that was very important. She thought they would find the greatest efficiency within the staffing area - two hearing officers instead of one. She thought they would see actual decisions coming out in a more efficient manner. She expects there is room in the present building where the APUC is for the AOGCC to move in. Number 513 MR. ERIC YOULD, Executive Director, ARECA, said he is also the statewide Association Executive Director of the Electric Utility Industry which provides about 95 percent of the electricity throughout the state. His members recently adopted a resolution supporting the continuation of the APUC primarily because of issues on the horizon that relate to restructuring and deregulation. It is the general consensus of the industry that changes could be made to APUC to streamline the process. Their sole objective is to get APUC to operate better so it can get dockets out more timely, their biggest frustration. Their second biggest frustration is the associated cost but those are basically passed through to the customers. SB 133 addresses many things that are in their own resolution, such as use of limited panels of three commissioners, use of different settlement techniques, better use of hearing officers to hear cases and recommend decisions, and more frequent use of special masters to expedite procedural issues. It will help make the APUC a more responsive entity. Their biggest question is how the two commissions will mesh procedurally and whether they will be compatible. They are concerned about the potential for restructuring the electric utility industry itself. On the positive side, he said, this is a good working document with positive things in it. He would like to see SB 133 continue as a working document to see how they can flesh out the best out of it. Number 447 MS. GINNY FAYE, Department of Community and Regional Affairs (DCRA), complimented Senator Pearce for bringing this issue forward. DCRA is always interested in good ideas especially if they offer consolidations and ways of saving money. DCRA's primary concern is that the integrity of these two important agencies be maintained because they have significant oversight of issues that affect the State and almost everyone who lives in Alaska. MS. FAYE said DCRA preferred a five member instead of a seven member commission in the spirit of keeping costs down. They are also reviewing how moving from a three panel field to a five panel field will work. DCRA has not come to a decision about what it would mean to deregulate the refuse industry, although she thought the bill doesn't necessarily deregulate it, but passes it on to local governments, some of which may be more or less capable of doing that. DCRA is also looking at the advocacy function and how it will work to assign staff as opposed to assigning to contract employees. The final issue of how attorneys will be selected to represent the Commission differs from how that is done now in these agencies. She said it is a good bill that offers a lot of opportunities. SENATOR PEARCE said the way the bill is drafted, the Department of Law should provide full-time legal counsel in the same fashion it currently does for the AOGCC. One ongoing fight within the APUC appears to be over how legal counsel gets assigned to it. The AOGCC doesn't have that disagreement. On the question of the advocacy staff, the APUC is the entity that watches over consumer rates. Staff members who work for the APUC are asked to act in an advocacy role to represent the public rate payers, but they many not have that role in another case. They have to play two different functions and there is a question about how effective they can be. CHAIRMAN HALFORD asked who the attorneys are for the APUC. SENATOR PEARCE answered that Ron Zobel is one. Number 375 MR. JIM ARNESON, Commercial Refuse, Inc., said he is concerned about the proposed deregulation of refuse in this bill. If there was ever a time the refuse industry needed to be regulated, it is now. Over the last couple of years, Waste Management, Inc. came to Alaska and "gobbled up 95% of all business up here." MR. JIM ROWE, Director, Alaska Telephone Association (ATA), said ATA is apprehensive about the impact of this legislation because the Telecommunications Act of 1996 has increased the number of issues before the APUC and some of them are new social policy. He thought creating a new Commission would set things back by two years and more for the issues that need to be resolved quicker. He thought there are very good aspects of restructuring in this bill, but it is not a simple thing to do. MS. HEATHER GRAHME said she was available to answer questions on refuse. CHAIRMAN HALFORD asked if the APUC deregulates refuse, whether municipalities will have the authority to pick up refuse regulation under Title 29. MS. GRAHME answered that municipalities have that power under Title 29. She said it is the view of Waste Management that refuse should not be deregulated, but that controlled refuse collection and disposal should be handled at the local level rather than the state level. Number 247 MS. PAM KRIEBER, Valley Refuse, opposed language that removes garbage hauling from statewide regulation. Sections 2,3, and 9 propose to remove it from the jurisdiction of the new Alaska Energy Conservation Commission. She said the committee would not hear from other companies, because 95 percent of the companies in the entire state were bought up by U.S.A. Waste of Alaska, a wholly owned subsidiary of Waste Management, Inc., the largest waste hauling conglomerate in the world. She said that statewide oversight would ensure impartial pricing structures and fair and equitable business practices. Placing the responsibility of regulations on local governments would make them bear the financial and legal responsibilities for regulation. This would equate to higher taxes and user fees for citizens who would end up paying more money for the same services. If local governments choose to not regulate refuse at all, the door is left wide open for Waste Management to charge fees that would provide them the greatest possible profit margin. MS. KRIEBER said that starting a garbage collection company is hard work. It requires a large investment in equipment, working capital, and time to develop a reliable customer base large enough to pay the bills. This is the reason large companies buy smaller ones; it is the most cost effective thing to do. CHAIRMAN HALFORD thanked everyone for their comments and said they would continue to work on this bill.