HOUSE FINANCE COMMITTEE APRIL 6, 1993 1:30 P.M. TAPE HFC 93 - 95, Side 1, #000 - end. TAPE HFC 93 - 95, Side 2, #000 - end. TAPE HFC 93 - 96, Side 1, #000 - end. TAPE HFC 93 - 96, Side 2, #000 - #386. CALL TO ORDER Co-Chair Ron Larson called the meeting of the House Finance Committee to order at 1:30 P.M. PRESENT Co-Chair Larson Representative Brown Vice-Chair Hanley Representative Foster Representative Therriault Representative Grussendorf Representative Hoffman Representative Martin Representative Navarre Representative Parnell Representative MacLean was not present for the meeting. ALSO PRESENT Brent Petrie, Alaska Energy Authority, Anchorage, Alaska; Bob Martin, Jr., General Manager, Tlingit-Haida Electric Authority, Auke Bay, Alaska; Judy Mathias, Aid to Representative Ron Larson; Dave Hutchens, Executive Director, Alaska Rural Electric Coop Association (ARECA), Anchorage, Alaska; Juanita Hensley, Director, Division of Motor Vehicles, Department of Public Safety. SUMMARY INFORMATION HB 216 An Act relating to power cost equalization; and providing for an effective date. HB 216 was held in Committee for further discussion. HB 179 An Act relating to motor vehicles and mobile homes; and providing for an effective date. HB 179 was held in Committee for further discussion. HOUSE BILL 216 "An Act relating to power cost equalization; and 1 providing for an effective date." Co-Chair Larson explained the changes made in preparing the work draft #8-LS0010\J, Cramer, dated 4/06/93 to HB 216. BRENT PETRIE, ALASKA ENERGY AUTHORITY, ANCHORAGE, ALASKA, (testified via teleconference) noted that 9.82 cents per kilowatt-hour cost is based on the 1991 calendar year residential sales for utilities in Anchorage, Fairbanks and Juneau. This is the weighted average retail cost for the first 500 kilowatt-hours per month which rate payers paid for utilities. Representative Brown questioned the information source used to determine those figures. Mr. Petrie advised the information was provided from the Alaska Energy Authority electric power statistic report directly originating from the utilities. Representative Brown said the figures had not been reviewed by the Alaska Public Utilities Commission (APUC). Mr. Petrie commented that the cost includes monthly cost and charges that a customer needs to have service. Representative Hoffman asked how much additional money would be needed to fully fund the program. Mr. Petrie noted that $403 thousand additional dollars would be needed to fund both the state offices and facilities. To include schools, costs would increase by an additional $566 thousand dollars. Representative Brown asked how the average cost per kilowatt hour differed from the retail residential rate. Mr. Petrie replied that the consumers cost has no change, whereas, the cost to the utility allows for fund reserves. He suggested using the rate would be a more precise figure for calculation determination. ROBERT MARTIN, JR., GENERAL MANAGER, TLINGIT-HAIDA RETAIL ELECTRIC AUTHORITY (THREA), JUNEAU, ALASKA, noted that he represented seven rural communities in South East Alaska. He pointed out that his company has been participating in the Power Cost Equalization Program since it originated noted that he did not support reducing the kilowatt hour to "650" per month. He pointed out that the average consumption for his company is less than 500 kilowatt hours per month, year round and those averages do not reflect the differences between the winter and summer month's consumption. The proposed change will affect the consumers ability to pay their electric bills. Mr. Martin urged raising the floor in order to create a more balanced system. Representative Brown thought the impact of raising the floor would penalize the more efficient utilities. She suggested the most equitable system would be 2 to lower the ceiling. Mr. Martin argued the most fair change would be to lower the floor. Co-Chair Larson asked if the utility has the authority to average the usage cost during the course of the year. Mr. Martin stated that they could offer that service. He recommended that the floor be set at 9.5 cents per kilowatt hour. He felt this would provide savings. The average consumption is going down as people are becoming more conservation minded. Representative Hoffman reminded the Committee that in the colder sections of the state utility rates are much higher. He provided the Committee with handouts. [Attachment #1]. Representative Hoffman encouraged using the "700" kilowatt hours per month cost sold. Mr. Petrie commented that Attachment #1 did not include the community facilities. The chart indicates only residential and commercial spaces and excludes the state and federal facilities. Representative Grussendorf MOVED to adopt work draft #8- LS0010\J as the version before the Committee. There being NO OBJECTIONS, it was so ordered. Representative Hoffman asked the cost savings in refunding the program. Mr. Petrie replied it would cost $1.1 million dollars. Representative Hoffman recommended including "state" facilities to Page 1, Lines 10 & 11. Representative Brown asked the amount saved if the consumption limit was dropped to 650 kilowatt hours per month. Mr. Petrie replied the saving would be $260 thousand dollars if the cap was dropped. Representative Hoffman MOVED adding "700" as the cap on Page 1, Line 9. Representative Brown questioned the impact of the change. (Tape Change, HFC 93-95, Side 2). Mr. Petrie explained the proposed change would create an estimated savings of $260 thousand dollars. A further reduction could affect more residential customers. Representative Brown asked if the shortfall experienced by the utility would be passed on to all incremental users. DAVE HUTCHENS, EXECUTIVE DIRECTOR, ALASKA RURAL ELECTRIC COOP ASSOCIATION (ARECA), ANCHORAGE, ALASKA, stated that the legislation is not a subsidy to the utility and it is passed through to the consumer on a dollar to dollar basis. When consumption goes above a level being assisted, the consumer will pay the price. 3 Representative Parnell asked ARECA's position on the change proposed by Representative Hoffman. Mr. Hutchens stated that the Association would not be handicapped by the "650" figure. The primary effect of the change would be to consumers in the regional trade centers where consumption is higher. He recommended using "700" kilowatt hour level which will not reduce the cost, although will cap the program to prohibit future growth. He added, ARECA would recommend that "state facilities" be included in the legislation. Representative Martin OBJECTED to the motion of changing the cap figure. A roll call was taken on the MOTION. IN FAVOR: Hoffman, Navarre, Brown, Foster, Grussendorf. OPPOSED: Martin, Parnell, Therriault, Larson. Representatives Hanley and MacLean were not present for the vote. The MOTION PASSED, (5-4). Representative Hoffman MOVED a change on Page 1, Lines 10 & 11, and to Page 2, Lines 21 & 22, to add "state or". Representative Hoffman explained the effect of the change. Co-Chair Larson felt that removing the word "state" would shift a reduction to the PCE program; if "state" is left in the legislation, there would be an additional $600 thousand dollars in the PCE program which would not have to be prorated. Representative Hoffman advised that if "state facilities" are removed then "federal facilities" should also be excluded. Representative Martin OBJECTED. A roll call was taken on the MOTION. IN FAVOR: Navarre, Parnell, Brown, Foster, Grussendorf, Hoffman. OPPOSED: Martin, Therriault, Larson. Representatives Hanley and MacLean were not present for the vote. The MOTION PASSED, (6-3). Representative Brown MOVED changing Page 2, Line 9, to read "based on the weighted average cost per kilowatt hour for residential consumers in Anchorage". Mr. Hutchens suggested 4 that the amendment would be contrary to Representative Brown's intent. The "cost" refers to the cost to the utility, not the cost to the consumer. "Rate" determines what the consumer pays. Mr. Petrie explained the "rate" versus the "cost". He offered alternative language to Page 2, Line 7, suggesting to insert the words "rate above" after the word "power" and delete the language "costs for". Representative Brown referenced a letter from the Alaska Energy Authority dated 3/31/93. [Attachment #2]. Mr. Hutchens advised that the language being deleted is the language that APUC identified as "nonsensible". Representative Larson OBJECTED. A roll call was taken on the MOTION. IN FAVOR: Brown. OPPOSED: Navarre, Parnell, Therriault, Foster, Grussendorf, Hoffman, Martin, Larson. Representative Hanley and Representative MacLean were not present for the vote. The MOTION FAILED, (1-8). Representative Parnell asked what "retail residential" meant. Mr. Petrie said it was a customer class which utilities use to determine rates. Co-Chair Larson HELD the bill in Committee for further discussion. HOUSE BILL 179 "An Act relating to motor vehicles and mobile homes; and providing for an effective date." JUANITA HENSLEY, DIRECTOR, DIVISION OF MOTOR VEHICLES, DEPARTMENT OF PUBLIC SAFETY, provided the Committee with a sectional analysis of work draft #8-LS0679\K dated 3/30/93. Ms. Hensley asked the Committee to make a change to Page 1, Line 13, deleting the language "but only". Section 1 will provide $100 thousand dollars revenue for the State which the Division of Motor Vehicles is currently collecting. There was no objection to the suggested changes. (Tape Change, HFC 93-96, Side 1). Ms. Hensley continued, Section 2 would create ten thousand 5 plates at $6 dollars each, costing the State $60 thousand dollars. There will be $300 thousand dollars revenue generated. The State will develop a plate which protects Alaska flora and fauna. Section 3 generates $300 thousand dollars revenue. Section 4 will bring Alaska into compliance with the uniform federal regulation guidelines for the issuance of handicap plates. The standards limit the plates and parking places to persons with mobility handicaps. This section will generate a revenue of $16.8 thousand dollars. Representative Brown asked if Section 3 was a new category. Co-Chair Larson explained this section defines who is eligible to park in handicap parking places. Representative Brown recommended amending Page 2, Line 28 by deleting "or" and adding "and" after "United States". Ms. Hensley noted that existing law has the original language, although she felt the deletion of "or" would be compatible. Section 5 ends a loophole in current law which allows motor vehicle dealers to display one license plate on a car. With the proposed change, a dealer would be required to place two plates on each car. Section 6 removes the authority to issue vehicle titles to mobile homes. The Division wants mobile homes to be treated as real estate property instead of vehicles. This section does not cover recreational travel trailers. The proposed change will decrease revenue by $15 hundred dollars per year to the Department of Public Safety. Ms. Hensley continued, Section 7 will remove the ambiguity addressing senior citizens exemptions and associated problems. The amendment will allow senior citizens only one vehicle exemption per year. Section 8 adds a $10 dollar fee for those individuals who do not renew their registration by mail. This section will provide $2 million dollars additional revenue to the State. Section 9 requires a business to register their vehicle as a commercial vehicle. The section will generate $400 thousand dollars additional revenue. Representative Therriault questioned what criteria will be used to determine whether a vehicle is a business or personal vehicle. Ms. Hensley noted it would be necessary for the party to declare if the vehicle would be used for commercial purposes. Representative Brown questioned the effect of the amendment. She asked the amount that a commercially used vehicles would be charged. Ms. Hensley replied a car is currently charged $35 dollars registration fee; with the new legislation the charge will be $51 dollars. 6 Representative Brown pointed out the loop hole used on Page 4, Line 13, in the usage of the word "or". She advised that many employees, as a part of their job are required to use their personal vehicle for commercially related purposes. Ms. Hensley said that the language proposed is not new to the legislation and currently is in statute. A personal car would not be required to be registered. Representative Brown MOVED to delete "or" and insert "and" after the word "business". Committee discussion followed regarding the recommendation. Representative Hanley OBJECTED. A roll call was taken on the MOTION. IN FAVOR: Brown, Hoffman. OPPOSED: Parnell, Therriault, Hanley, Martin, Larson. Representatives Foster, Hanley, Navarre and MacLean were not present for the vote. The MOTION FAILED, (2-5). Ms. Hensley stated that Sections 10 - 13 would address motor vehicle municipality registration tax which the Division of Motor Vehicles currently collects for the municipalities. These sections were not in the original bill and they were amended in the Labor and Commerce Committee to increase the motor vehicle registration tax. (Tape Change, HFC 93-96, Side 2). Ms. Hensley indicated that the proposed legislation would increase the motor vehicle tax seventy percent in the next two years. Section 10 increases the tax thirty-five percent the first year. Section 11 is an additional increase of thirty-five percent the following year. Section 12 increases the administrative fees which the Division of Motor Vehicles would pay, from five to eight percent. Section 13 will establish the motor vehicle registration tax which the Division collects from the municipalities based on computations from the Department of Labor which will be finalized in 1998. Section 14 is a cross reference to the section dealing with handicap plates. Section 15 defines "vehicle". Section 16 is the repealer of mobile home areas indicated in statute. Section 17 -20 clarifies the effective dates the previous sections. 7 Ms. Hensley summarized the additional revenues which would be generated from the proposed version. Representative Martin thought the State was taking funds from the municipalities. Ms. Hensley pointed out this would increase what the State remits back to the municipalities. The Committee discussed the impact on local government and to individuals. Representative Hanley MOVED to delete Section 13 and Section 20. These two sections address the automatic COLA which is in statute. It allows departments to increase fees without coming back to the Legislature. Ms. Hensley replied that the Department would support the amendment. There being NO OBJECTION, it was adopted. Discussion followed regarding the changes proposed in the legislation. Co-Chair Larson noted his concern with raising the motor vehicle registration fees seventy percent in the next two years. HB 179 was HELD in Committee for further discussion. ADJOURNMENT The meeting adjourned at 4:00 P.M. 8