JOINT COMMITTEE ON ELECTRIC UTILITY RESTRUCTURING August 18, 1998 12:00 p.m. COMMITTEE CALENDAR ELECTRIC UTILITY RESTRUCTURING, PUBLIC TESTIMONY TAPE(S) 98-5, SIDES A & B 98-6, SIDES A & B 98-7, SIDES A & B NOTE: These minutes were prepared by Co-Chairman Rokeberg's staff. CALL TO ORDER REPRESENTATIVE NORMAN ROKEBERG, Co-Chairman, convened the Joint Committee on Electric Utility Restructuring meeting at 10:15 a.m. PRESENT Committee members present at the call to order were Representative Dyson, Representative Austerman (via teleconference), Representative Davies (via teleconference), Co-Chairman Rokeberg, Co-Chairman Sharp and Senator Leman. Also present via teleconference was Senator Adams' staff and Senator Taylor's staff. Also present via teleconference was Senator Green and/or staff. Also attending: Sam Cotten, Chairman, Alaska Public Utilities Commission (APUC); Charles McKee; Carol Heyman, Chugach Electric; Randy Cornelius, City and Borough of Sitka, Electric Department; Robert Wilkinson, Copper Valley Electric; M. P. (Bert) Shaw; Hal Borregg, Bethel Utilities; Howard Garner, Alaska Power and Telephone; Ernie Meier, Alaska Regional Hospital; Mary Ann Pease, Aurora Power; Walter Sapp, Kodiak Electric; Donn Wonnell, Counsel, ML&P; Allan Yost; Eric Yould, Alaska Rural Electric Cooperative Association (ARECA); Dr. Peter Fox-Penner, The Brattle Group on behalf of ARECA; Gayle Knepper, Chugach Electric Association; Dave Lappi, Growth Resources; Paul Morrison, APUC; Meera Kohler, ML&P; Dick Barnes, Enstar; Ken Langsford, Southeast Service Corporation; Dwight Ornquist, APUC; Earl Ausman; Bruce Vergason, Alaska Fuel; Robert Hansen, Golden Valley Electric; Glenn Clary, Anchorage Baptist Temple; Mike Kelly, Golden Valley Electric; Mike Berry, Dimond Center; Steve Bushong, Nushagak Electric; Barbara Jewel; Vince Beltrani; Pat Jasper; Ann Robinson, Alaska Sales and Service; Mike Notar (Teleconference Juneau); Robert Wiseman (Teleconference Kenai). SUMMARY OF INFORMATION OPENING REMARKS: CO-CHAIRMAN ROKEBERG: Calls roll welcomes all committee members and people attending meeting either in person or by teleconference. Mentions, ARECA Convention in Wasilla, Thursday morning. Announces revision in program. Would like to request that anyone who has a time constraint please let us know as soon as possible and we will hear your testimony first. Will turn over to my Co-Chairman Sharp for any opening comments, and hear from committee members then will proceed with testimony. Looking forward to hearing the testimony on this very important issue. After hearing all testimony if we have the time, would like to have a short round table discussion. CO-CHAIRMAN SHARP: No comments other than to say the next meeting will be in Fairbanks, September 16, 1998 for public testimony. CO-CHAIRMAN ROKEBERG: Asks if any other committee member has comments. REPRESENTATIVE DYSON: Briefly talks about the Year 2000 Conference he attended before this committee meeting. DICK BARNES, President, Enstar Natural Gas Company: Enstar serves about one hundred thousand customers. Does not have a big stake in the deregulation of electric power, but has a few observations to share with the committee. Please carefully consider the consumer. Please carefully consider this issue. Is concerned about a possible monopoly as a result of deregulation and prices going up for consumers. KEN LANGSFORD, Facility Manager, Southeast Service Corporation, 320 West 5th Avenue, Suite 219, Anchorage, Alaska, (907) 258-4003: States his company is in favor of the restructuring of electric utilities. His company gets a discount on their natural gas bill and wants this same type of arrangement with regards to electric costs. DR. PETER FOX-PENNER, The Brattle Group, on behalf of ARECA, 1133 20th Street, Suite 800, Washington, DC. 20036, (202) 955-5050: See written testimony in committee file. SAM COTTEN, Chairman, Alaska Public Utilities Commission (APUC): Submitted memo on contract time lines. Submitted draft Black and Veatch Report. Is here as a resource to the committee. Goes into pilot programs, and regulatory dockets, touched on what Commissioner Ornquist spoke on at the August 6, 1998, committee meeting. Mentioned case between Chugach Electric and ML&P. States the APUC does have the authority to allow competition, but service areas by law are exclusive. CHARLES MCKEE: See written testimony in committee file. ROBERT WILKINSON, Copper Valley Electric Association: See written testimony in committee file. ERNIE MEIER, President, Chief Executive Office of Alaska Regional Hospital, 2801 DeBarr Road, Anchorage, Alaska (907) 264-1713: Asks the committee to favorably consider deregulation. States hospital could potentially save substantially if they were able to competitively bid. Hospital competitively bids everything from construction to major medical equipment and supplies. Since telecommunications has been deregulated, Alaska Regional Hospital has been able to negotiate with Anchorage Telephone Utility (ATU) and will have an 11.9 percent saving for $23,100 by competitively bidding their long distance carrier alone. Currently served by ML&P; Mr. Meier approached Chugach Electric, received a proposal from Chugach which would save Alaska Regional Hospital 11.3 percent on their electric bill. In 1997, they paid ML&P $662,700 for electricity. We can have a $75,000.00 or 11.3 percent if competition were permitted. That's $6,200 per month over $200 per day just in savings alone. DONN WONNELL, Counsel for ML&P: See written testimony in committee file. DAVE LAPPI, Chairman, Growth Resources: Is the developer of the state's first natural gas development in Houston, Alaska. Has a handle on the technology of open gas production in a fairly populated place like Houston, would like to take that same concept and move it into rural Alaska where electricity prices and energy in general are fairly expensive. Two hundred twenty stand alone electric utilities in rural Alaska. His company would like to participate in supplying the Railbelt with electricity. Mr. Lappi is in favor of deregulation in the electric utility industry. Request the legislature make it possible for small companies to participate in the electrical market. EARL AUSMAN: Competition can take place in the Railbelt. States committee needs input of experts in the field of electrical industry, such as engineers who have worked in the industry. Must put in place rules and regulations to help protect the consumer if the electric utilities are deregulated. GLENN CLARY, Assistant Pastor, Anchorage Baptist Temple on behalf of Dr. Jerry Prevo: See written testimony in committee file. MIKE BARRY, 800 East Dimond Boulevard, Suite 3-500, Dimond Center, Anchorage, Alaska, (907) 344-2581,: Is very much in favor of competition. States deregulation will benefit Alaska, as with competition, there will be lower prices and this will help to attract new business to Alaska. Competition would help the Dimond Center, as it would lower their electric costs. CO-CHAIRMAN ROKEBERG calls for a 15-minute recess will reconvene at 3:05 p.m. CO-CHAIRMAN ROKEBERG calls meeting back to order at approximately 3:15 p.m. BRUCE VERGASON, Plant Manager, Signature Flight: See written testimony in committee file. VINCE BELTRAMI: Chugach Electric consumer, questions survey of 1,400 Anchorage residents, that show 91 percent surveyed felt that they should have the right to choose their power company. What was the make up of the survey? Questions whether people who were surveyed were told of the downside of deregulation. Very satisfied with service and cost of service from Chugach Electric. Feels that business will get a discount on their electric bills but feels like the residential customer will have to make up the difference for this discount given to business owners. BARBARA JEWEL: Chugach Electric consumer also a member of International Brotherhood of Electrical Workers, Ms. Jewel is testifying for herself and not as a representative of IBEW. Has traveled to the Lower 48 where deregulation has occurred in the electric industry. The average consumer is not happy with the results of deregulation. The service has deteriorated; the rates have gone higher. Gave examples of how the service has deteriorated. As a consumer, Ms. Jewel does not want to have her service deteriorate and cost go up because of deregulation. ANN ROBINSON, Alaska Sales and Service: Believes in the free market concept. We provide the best possible product and the best cost for service at the lowest possible price in order to be competitive. Their customers have a choice as to where they purchase and have their cars repaired Alaska Sales and Service feels consumers should have the same choice when it comes to electric service. Alaska Sales and Service is the 17th largest customer that the electric company they are assigned to has; electricity is one of their major costs. They have no real control as electricity is a necessity and it would be more cost effective for them to be able to choose an electric company that gives them the lowest possible price. ERIC YOULD, Executive Director, ARECA: See written testimony in committee file. CO-CHAIRMAN ROKEBERG closes the public hearing portion of the committee meeting after asking if anyone else would like to testify. Committee will discuss what direction they are going in and how to proceed. Engagement with APUC: Senator Leman will Chair, Representative Dyson and Representative Davies will be on this subcommittee. Purpose of this subcommittee is to develop a consensus. Co- Chairman Rokeberg would like a report at the next joint committee meeting which will be September 16, 1998, Fairbanks Legislative Information Office, 10:00 am. Senator Leman requests written statements, comments, suggestions by August 28, 1998. Chugach Electric submits a 4-point letter that is submitted to the committee. Further discussion on how long this process could take to get through the legislative process. CO-CHAIRMAN ROKEBERG: Brings Dr. Fox-Peneer to the table DR. FOX-PENNER: Agrees to make himself available to the committee and sub-committee. He states that his company will not bid for pilot project. CO-CHAIRMAN ROKEBERG: Calls Don Edwards, Chugach Electric to come sit with the committee and give his thoughts. DON EDWARDS, Chugach Electric: Agrees that a consensus is needed and is a good idea. States his concerns about economic dispatch. He is against a pilot program as there is too great a chance for "gaming." CO-CHAIRMAN ROKEBERG adjourned the Joint Electric Utilities Restructuring committee meeting at 4:25 p.m. COMMITTEE ACTION The committee took no action. ADJOURNMENT The meeting adjourned at 4:25 p.m. NOTE: The meeting was recorded and handwritten log notes were taken. A copy of the tape(s) and log notes may be obtained by contacting the House Records Office at 130 Seward Street, Suite 211, Juneau, Alaska 99801-1182, (907) 465-2214, and after adjournment of the second session of the Twentieth Alaska State Legislature, in the Legislative Reference Library.