JOINT COMMITTEE ON ELECTRIC UTILITY RESTRUCTURING NOVEMBER 18, 1998 10:00 am Note: These minutes were prepared by Co-Chairman Rokeberg's staff. TAPES 1 Sub-Committee Report, Testimony, Committee Discussion 2 Black & Veatch Report, Committee Discussion CALL TO ORDER CO-CHAIRMAN NORMAN ROKEBERG convened the Joint Committee on Electric Utility Restructuring at 10:12 am. PRESENT Committee members present were Co-Chair(s) Rokeberg, Sharp, Senator Leman, Representative Dyson, Karisse Ackerman for Representative Davies in Fairbanks. ABSENT Committee members absent were Senator Adams, Senator Taylor, Representative Austerman. ALSO ATTENDING Ed Kozak, Kodiak Electric Association; Jim Patras, Homer Electric Association; Ray Kreg, Chugach Electric; Carol Hegman, Chugach Electric; Anne Hays, IBEW; Robert Hansen, Golden Valley Electric; Tom Staudenmaier; Meera Kohler, ML&P; Mary Fisher, ARECA; Vivian Kinnaird, Chugach Electric; Robert Maxwell, Alaska Energy Associates; Hart Hodges, Northern Economics; Mary Ann Pease, Aurora Power; Theresa Jurotich, Black & Veatch; Myron Rollins, Black & Veatch; Paul Morrison, APUC; Joanne Stoop, GVEA; M. Riddle, GVEA. SUMMARY OF INFORMATION OPENING REMARKS CO-CHAIR ROKEBERG: Calls roll and welcomes all committee members and people attending meeting either in person or by teleconference. We do have a quorum to conduct business. Goes over agenda, after report given by Senator Leman, will open up the hearing for additional public testimony, we will conclude the public testimony and will have ample opportunity to have committee discussion before the lunch break and possibly include audience members in this discussion. JOINT COMMITTEE ON ELECTRIC UTILITY RESTR NOVEMBER 18, 1998 CO-CHAIR ROKEBERG: Will reconvene after lunch break for a presentation on the power pooling and central dispatch study at 1:30 pm. After presentation there will be a brief discussion, and hope to be able to adjourn before 3:00 pm if not sooner. With that, I would like to ask Senator Leman to give a brief report and recommendation as to the RFP and his work on the sub- committee with the APUC. SENATOR LEMAN, Chairman of EUR Sub-Committee: Thank you Mr. Chairman. The members will recall that at a meeting in September we went through the draft, scope of work for a proposed study to be done jointly with the APUC. Senator Leman met with the APUC, staff and technical people and together they refined the scope of work, incorporating comments that several members made, particularly Representative Davies, and Representative Dyson, as well as other comments made at the September sub-committee meeting. Senator Leman & APUC also spoke with a representative from NRRI by teleconference to discuss the RFP scope. This review was done without cost. Scope of this report was very thorough, the NRRI representative said committee was asking for so much, "we" agreed with that and he suggested we refine the scope of work to make it more understandable in a request for proposals and we incorporated our guidelines as an appendix to the request for proposal. During this meeting worked toward goal to make this report understandable to anyone reading it for the first time and would be able to understand the background of Alaska. The first priority is the pilot study in the Anchorage area, and identified an earlier delivery of that work product. APUC suggested March 12th; Senator Leman would like it done a little earlier than that. Target date for a draft report due the end of March and a presentation to the Legislature on or about April 19th. This would include special committees or joint committees of the Legislature that would hear the presentation and the contractor would issue a final report by June 30th. The APUC advertised in state and received one or two responses; APUC requested and was given permission to advertise outside the state. They are receiving more calls and requests for the request for proposal packet. The deadline for the proposal is to be due December 9th, interviews have been schedule December 17th. Selection committee will include representation from the Legislative branch and the APUC. The funding has been approved by the commission for up to $200,000.00. Expects to have somebody under contract and (indisc. coughing), and should begin prior to the start of the Legislative session. The committee members discussed the target award date of January 12th. There may be a short delay of a few days, but should have somebody under contract shortly after January 12th. Senator Leman referred to the request for proposal which was sent electronically to each committee member. Co-Chairman Rokeberg asked if anyone was aware of something being removed from the APUC's docket at their last meeting? No one from the APUC was at the morning meeting and question could not be answered at that time. JOINT COMMITTEE ON ELECTRIC UTILITY RESTRUCTURING NOVEMBER 18, 1998 CO-CHAIR ROKEBERG: Thanked Senator Leman and the members of the sub-committee for working on this project. He is aware that a good deal of time and effort was put forward and the committee really appreciates that. It was discussed at the Fairbanks meeting that once the recommendations were put together a poll of members would be conducted, but this has not been formally accomplished. The Chair would entertain a motion that we accept the sub-committee report and make a recommendation to the APUC to move forward with the contract. CO-CHAIR SHARP: So motioned. CO-CHAIR ROKEBERG: Any objections? Seeing none, so ordered. CO-CHAIR ROKEBERG: Opened public testimony. ED KOZAK, Kodiak Electric Association: See written testimony. TOM STAUDENMAIER: See written testimony. CO-CHAIR ROKEBERG: Asks if anyone else would like to testify, as there is no one else who wishes to testify, closes public testimony and begins a committee discussion. COMMITTEE DISCUSSION CO-CHAIR ROKEBERG: Next scheduled meeting is January 6, 1999. The committee will make final recommendations to take back to 21st Legislature. Discussed how much the Legislature needs to be involved in managing these changes or allow the APUC to handle day to day details. CO-CHAIR SHARP: Time frame of the study was brought up and what the study will involve and the scope of the study. Is very interested in hearing the Black & Veatch report and what the APUC has come up with in regards to how to implement study. After hearing this, the committee will have a better understanding of the scope of the pilot program and will be better informed to make the final recommendations to the 21st Legislature. CO-CHAIR ROKEBERG: Agrees with Senator Sharp. Final resolution will include statements regarding the study. States committee will take into consideration all the public testimony that has been heard and pass this along to the 21st Legislature. The House has established a special committee to take up any telecommunications issues as well as electric utility restructuring during the 21st Legislature; this will be under the purview of the Labor & Commerce Committee of both "Houses". JOINT COMMITTEE ON ELECTRIC UTILITY RESTRUCTURING NOVEMBER 18, 1998 CO-CHAIR SHARP: The recommendations of this committee will get the new committees "off ground zero" a good place to start. CO-CHAIR ROKEBERG: The record of this committee is the foundation of the entire policy making process and will expedite it substantially. Thanks all the people who participated in the process. Believes this committee has honed down a lot of the issues and will be of great assistance and an asset to the new committees and the 21st Legislature. Would like to get a sense of the committee as Ms. Seitz & Ms. Kreitzer and everyone else and their staffs will be working on some recommendations for the committee which we can circulate over the holiday season prior to our meeting, to get a sense of the committee. To work on drafts to decide how far we want to go in the issue about Legislature making policy, statues, and how much latitude we want to give the APUC. SENATOR LEMAN: Reiterated his opinion that the Legislature should be involved in broad policy statements and the APUC should be involved in the detail and implementation. States the APUC is reticent in using the power that they have to move to implement some areas of competition. One question that needs to be addressed by the next Legislature is to clarify that competition is the norm unless demonstrated otherwise. This is much like game management or fisheries management, the Legislature does much better by establishing general policy and letting that detail be done by others. Would be willing to support something like that. APUC needs a little guidance on how to implement policy. CO-CHAIR ROKEBERG: Discuss whether to recommend to the next Legislature, stranded cost development, reliability and totality of those issues that we have identified. Doesn't feel the committee should make any statutory recommendations other than in a more general form. SENATOR LEMAN: The committee can offer a number of possibilities, if we don't want to take a side on it now because we have the study ongoing I can understand that. Believes the committee does have the capacity to lay out some options which may help the contractor responding to us, give different approaches. REPRESENTATIVE DYSON: Reluctant to speak on this. States he may be out of step with the committee. Recommends fundamental questions the committee needs to deal with, such as policy level. Is not sure if competition is the norm for electric power. Doesn't believe competition is the norm for water distribution or sewage. Need to ask the fundamental question is there a public responsibility for universal service for power distribution. Touches on clean air, water, waste disposal in rural Alaska; for this we need electric power. JOINT COMMITTEE ON ELECTRIC UTILITY RESTRUCTURING NOVEMBER 18, 1998 REPRESENTATIVE DYSON: Electric power is important to schools, medical facilities and communications. Thinks we need to consider the question is providing electric power a basic human service that the state has a responsibly to see is available. Touches on the communications industry and problems that were faced. Also brings up the huge markets down in the lower 48, electric competition has not demonstrated that we know how to do it and manage it well. Touches on a few of the horror stories that the committee has heard. Doesn't feel Alaska needs to lead or be in the forefront of deciding how this is done in North America. States we can learn from the lower 48's mistakes. Mentions power pooling, economic dispatch and wholesale competition and retail competition. CO-CHAIR SHARP: Let's wait and see what the APUC presents this afternoon and entertain questions to them on other peripheral topics regarding competition that may be on some of our minds. How would this work, they must have some kind of perception of what they feel would have to be done if we come out with a mandate or perimeters legislatively that puts them in a position basically of not having to approve rate tariffs anymore because condominium associations can come in and negotiate or other small groups deciding how much each sub-division should pay. REPRESENTATIVE DYSON: Wants APUC to be more pro-active and not reactive. Doesn't feel like it is in the consumers' best interest in forcing the utilities to do the very best job they are capable of, this should have been done voluntarily. CO-CHAIRMAN ROKEBERG: Recessed for lunch at 11:30 am. Committee will reconvene at 1:30 pm CO-CHAIRMAN ROKEBERG: Reconvened the meeting at 1:46 pm. Called roll, quorum to conduct business. MYRON ROLLINS, Black & Veatch: See written testimony. CO-CHAIR ROKEBERG: Senator Sharp will you be able to attend the next meeting? CO-CHAIR SHARP: No, I'm not sure I can be here, I will probably attend by teleconference. CO-CHAIR ROKEBERG: In that case, I'm going to take this opportunity to .since this may be your last chance to get a gavel in your hand, turn the gavel over to you. CO-CHAIR SHARP: I'm good at adjourning, is that what you want me to do? (laughter) JOINT COMMITTEE ON ELECTRIC UTILITY RESTRUCTURING NOVEMBER 18, 1998 CO-CHAIR ROKEBERG: It may be your last opportunity after an illustrious decade long period in the Legislature to do so, and I will turn the meeting over to you, we were discussing some various things about the direction of this committee. Would you like to discuss this further? CO-CHAIR SHARP: Thank you Mr. Co-Chair. Doesn't have anything to add at this time, you have allowed us to participate quite frequently in the discussion. Looks forward to keeping in contact between now and the January meeting to have some additional information filtered down from the APUC and we can get some information on what the actual prospectus was or the (indisc.) or what the draft may be. Has nothing further to add, asks for comments from other committee members. SENATOR LEMAN: Applauds the Co-Chairs on their leadership of the committee. Doesn't sound like we have come to anymore consensus then when we started, except for the fact that we are moving ahead. I would suggest that we make a positive statement to the next Legislature about competition, or we at least make a statement would somehow be positive to the APUC about pilot study (a well-crafted study) in the Anchorage area. States this is a positive step and if well designed it may give us the information we need to move on. Mr. Chairman would you like to take that up at our January meeting? CO-CHAIR ROKEBERG: I would hope that we can reach a general outline and general consensus points that we could present a document and discuss that document at the January 6th meeting. SENATOR LEMAN: Looking for common ground. CO-CHAIR ROKEBERG: Would be helpful if we could do that. REPRESENTATIVE DYSON: Would like committee to recommend that the Legislature consider universal service. This would be a precursor to any reevaluation that we do with power cost equalization. Is providing affordable electric power to communities is a public policy issue? CO-CHAIR ROKEBERG: Shares Representative Dyson's concern about the importance of universal service, doesn't believe a linkage between the power cost equalization issue and the issue before this committee is appropriate. Counsels very strongly against it. Once we do that we are not going to be able to make any political progress whatsoever, and I would not like to see that. Appreciates your point. REPRESENTATIVE DYSON: (indisc.) logical, but probably politically inadvisable. JOINT COMMITTEE ON ELECTRIC UTILITY RESTRUCTURING NOVEMBER 18, 1998 CO-CHAIR ROKEBERG: Brings up cherry picking, states if we approach a pilot program, that we recommend it be a percentage of a market area, but not what percentage it should be. Has to be a large enough area to generate "good" information and data. Equalize commercial and residential service to avoid cherry picking. REPRESENTATIVE DYSON: States this gets back to universal service question, one solution to cherry picking is we say as an entry into this market, if you want to go after customers you have agree to take any of them. CO-CHAIR ROKEBERG: Mandate it. REPRESENTATIVE DYSON: Right. CO-CHAIR SHARP: There is a diverse opinion between the four members of the committee who are here. I will work with my co- chair to state what I feel needs to be included in the draft before the January meeting and that we all work together to do the same. Pilot program does have merits, as long as we don't hog-tie the commission into an impossible situation legally. I have nothing else to add. CO-CHAIR ROKEBERG: Mr. Chairman, why don't we request that all committee members and we will send out a memo to make a recommendation in writing to my office, right Janet? Subjects, issues or so forth they would like to see in the committee's recommendation. CO-CHAIR SHARP: Would you please see that all members get that invitation to participate, early in the first couple of weeks in December. CO-CHAIR ROKEBERG: Need to get a target date. How about December 7th. CO-CHAIR SHARP: As there is no objection so ordered. Okay you will be sending out correspondence to all committee members. Anything else Mr. Co-Chairman. CO-CHAIR ROKEBERG: Thank you and a happy holiday season to everybody. Look forward to meeting with everyone after the first of the year. CO-CHAIR SHARP: (Indisc.) I will be on teleconference. Thank you. JOINT COMMITTEE ON ELECTRIC UTILITY RESTRUCTURING NOVEMBER 18, 1998 CO-CHAIRMAN SHARP adjourned the committee meeting at 2:58 pm. Adjournment NOTE The meeting was recorded and handwritten log notes were taken. A copy of the tapes and log notes may be obtained by contacting the House Records Office at 130 Seward Street, Suite 211, Juneau, Alaska 99801-1182, and after adjournment of the second session of the Twentieth Alaska State Legislature in the Legislative Reference Library.