HOUSE LABOR AND COMMERCE STANDING COMMITTEE October 15, 1999 10:10 a.m. Anchorage, Alaska MEMBERS PRESENT Representative Norman Rokeberg, Chairman Representative Andrew Halcro, Vice Chairman Representative Tom Brice (via teleconference) Representative Sharon Cissna MEMBERS ABSENT Representative Jerry Sanders Representative Lisa Murkowski Representative John Harris OTHER HOUSE MEMBERS PRESENT Representative John Davies COMMITTEE CALENDAR HOUSE BILL NO. 81 "An Act relating to the provision of electric service in the state; and providing for an effective date." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: HB 81 SHORT TITLE: ELECTRIC CONSUMER'S BILL OF RIGHTS SPONSOR(S): REPRESENTATIVES(S) ROKEBERG, Dyson Jrn-Date Jrn-Page Action 2/05/99 144 (H) READ THE FIRST TIME - REFERRAL(S) 2/05/99 144 (H) URS, L&C 2/16/99 228 (H) COSPONSOR(S): DYSON 4/21/99 (H) URS AT 8:00 AM CAPITOL 120 4/21/99 (H) HEARD AND HELD 4/21/99 (H) MINUTE(URS) 4/23/99 (H) L&C AT 3:15 PM CAPITOL 17 4/23/99 (H) 4/28/99 (H) URS AT 8:00 AM CAPITOL 120 4/28/99 (H) HEARD AND HELD 4/28/99 (H) MINUTE(URS) 4/30/99 (H) L&C AT 3:15 PM CAPITOL 17 4/30/99 (H) 5/05/99 (H) URS AT 8:00 AM CAPITOL 120 5/05/99 (H) MOVED CSHB 81(URS) OUT OF COMMITTEE 5/05/99 (H) MINUTE(URS) 5/06/99 1199 (H) URS RPT CS(URS) NT 3DP 3NR 5/06/99 1199 (H) DP: DAVIES, PORTER, HUDSON; 5/06/99 1199 (H) NR: COWDERY, BERKOWITZ, KOTT 5/06/99 1199 (H) FISCAL NOTE (DCED) 5/06/99 1199 (H) REFERRED TO LABOR & COMMERCE 10/15/99 (H) L&C AT 10:00 AM ANCHORAGE LIO WITNESS REGISTER JANET SEITZ, Legislative Assistant to Representative Norman Rokeberg Alaska State Legislature 716 West Fourth Avenue, Suite 640 Anchorage, Alaska 99501-2133 (Interim address) POSITION STATEMENT: Presented CSHB 81(URS) on behalf of prime sponsor. ERIC YOULD, Executive Director Alaska Rural Electric Cooperative Association, Incorporated 211 Fourth Avenue Juneau, Alaska 99801 POSITION STATEMENT: Testified that although the intent is good and some form of consumer protection should be put in place, CSHB 81(URS) is premature. DONALD EDWARDS, General Counsel Chugach Electric Association P.O. Box 196300 Anchorage, Alaska 99519-9300 POSITION STATEMENT: Testified on CSHB 81(URS). STEPHEN CONN, Executive Director Alaska Public Interest Research Group P.O. Box 101093 Anchorage, Alaska 99510 POSITION STATEMENT: Testified on CSHB 81(URS). MIKE KELLY, President and Chief Executive Officer Golden Valley Electric Association P.O. Box 71249 Fairbanks, Alaska 99707-1249 POSITION STATEMENT: Testified on CSHB 81(URS). Strongly supported the legislature, rather than the RCA, retaining control of the so-called trip wire; generally supported moving the bill forward but expressed concern about the speed and care with which it is done. MEERA KOHLER, General Manager Municipal Light & Power 1200 East First Avenue Anchorage, Alaska POSITION STATEMENT: Supported the legislature, rather than the RCA, retaining control of the so-called trip wire. ACTION NARRATIVE TAPE 99-60, SIDE A [Due to a tape recorder malfunction, the first 15 minutes of the meeting were not recorded but were reconstructed from log notes.] CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee meeting to order at 10:10 a.m. at the Anchorage Legislative Information Office (LIO). Members present at the call to order were Representatives Rokeberg, Halcro, Brice (via teleconference) and Cissna. Chairman Rokeberg called an at-ease almost immediately because of a malfunctioning tape recorder. He called the meeting back to order at 10:13 a.m. HB 81 - ELECTRIC CONSUMER'S BILL OF RIGHTS CHAIRMAN ROKEBERG acknowledged that the tape recorder still was not functioning. He announced that the committee would hear HOUSE BILL NO. 81, "An Act relating to the provision of electric service in the state; and providing for an effective date." Before the committee was version CSHB 81(URS). JANET SEITZ, Legislative Assistant to Representative Norman Rokeberg, Alaska State Legislature, gave a brief overview on behalf of the sponsor. In response to a question from Representative Halcro regarding bill amendments, she indicated there was little change. REPRESENTATIVE HALCRO expressed concerns about the broad title. [The tape recorder was replaced, and recording began at 10:25 a.m.] Number 001 CHAIRMAN ROKEBERG mentioned a contract that the Alaska Public Utilities Commission (APUC) had entered into. He said this bill resulted from testimony in the House Special Committee on Utility Restructuring (URS), as well as from conclusions of the court. CHAIRMAN ROKEBERG next discussed three proposed amendments to be taken up following testimony. First, 1-LS0181\K.1 (K.1) clarifies the name change from the APUC to the Regulatory Commission of Alaska (RCA). Second, l-LS0181\K.2 (K.2) speaks to one of the bill's more controversial sections. Currently, certain public utilities can opt out of economic regulation by the RCA; concern had been heard that this bill would mandate that those utilities be swept back in under the RCA's regulatory umbrella. However, there could be no true regulation of the competitive marketplace without a completely level playing field. As sponsor, Chairman Rokeberg believes all utilities should be regulated similarly in a particular realm if there is a competitive environment created, whether within the entire state, a particular jurisdiction, or a particular kind of program. Changes in proposed amendment K.2 therefore clarify language or intent. CHAIRMAN ROKEBERG told members he expected to hear testimony about this being a de facto deregulation bill. Therefore, amendment 1-LS0181\K.3 (K.3) creates a clearer trip wire, although it may not go to the degree he would like. His intention is that regulations would not have to be in place until there is a grant by the RCA, and/or even action by the legislature, to develop a competitive environment. He pointed out that the fiscal note for the original HB 81 - from the then-APUC, dated April 20, 1999 - indicates this bill will cost $207,000. In his five years in the legislature, he didn't recall having a fiscal note over $10,000 and he is almost shocked by this. He hopes RCA personnel will review this matter, as he doesn't believe the large number of personnel to develop regulations is entirely justified. He suggested the current committee discuss it with the RCA in the coming months, and he hopes to hear from the RCA on a revised fiscal note. Number 034 ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative Association, Incorporated (ARECA), testified via teleconference, specifying that he represents the electric utility industry in Alaska. Although ARECA's membership had supported HB 81 when it was in the House URS committee, they currently believe the bill is premature. That decision follows a number of studies, including the most recent by CH2M Hill, as well as direct meetings with Karl Rabago and others who are giving advice about what is happening with restructuring, primarily in the Lower 48. MR. YOULD pointed out that Alaska's utility industry is connected with neither those in Canada nor the Lower 48. Furthermore, there aren't numerous transmission lines to call upon for either consumer choice or emergency needs. He likened the Railbelt's limited interconnection to an extension cord from Anchorage to Fairbanks, saying beyond that, the main interconnected region is the Anchorage area. In the Railbelt area, the only three providers are Golden Valley Electric, Chugach Electric and Anchorage Municipal Light and Power. Hence, there aren't the myriad selections that consumer choice would require. Mr. Yould recalled previous comments of Karl Rabago of CH2M Hill indicating that in a robust area, at least eight providers would be needed. MR. YOULD characterized Alaska as a "consumer-owned utility state," having either a cooperative utility in the area served or a municipal utility. In fact, 90 percent of the retail electricity is provided by a consumer-owned utility, with 70 percent from cooperatives, 20 percent from municipals, and only 10 percent from investor-owned utilities. This fosters a philosophy of providing electricity as inexpensively as possible and passing savings on to consumers, who own the system. In contrast, an investor-owned utility's overriding objective is to maximize profits for its shareholders, who aren't served by the system itself. It is primarily the push of the investor-owned utilities in the Lower 48 that stimulates the desire and need for consumer choice there, although that is not to say there aren't advantages from consumer choice, Mr. Yould added, because even Alaskans believe there are significant potential advantages. MR. YOULD pointed out that there has been no public outcry for consumer choice or restructuring of the industry. He stated, "We had a number of meetings in Juneau, and the previous summer there were a number of hearings held by a special committee of the legislature. And, quite frankly, it was very difficult to get the person off the street to come in and testify, and, as a matter of fact, I can think of only one or two private individuals that came in and had anything to say, and I'm not sure that their arm wasn't bent up behind their back, either." He noted that a recent study by CH2M Hill basically said restructuring in Alaska - at least as it is envisioned in the Lower 48 - may be significantly premature. MR. YOULD explained that with all of these things in mind, the utility managers had met that summer, concluding the following about restructuring, if it comes to Alaska. In rural Alaska, it absolutely won't work. In the Railbelt, it is somewhat questionable whether it can work as a free, open, and technologically available system, primarily because of the transmission line up to Fairbanks and a tenuous transmission line down to the Kenai Peninsula. In Anchorage, it might work, but even then, certain things must take place beforehand, not the least of which is settling the issue of market presence, ensuring there is wholesale competition prior to retail competition; presently, at least one utility provides not only its own needs but also the needs of three other utilities that ostensibly would be trying to compete with that very utility. MR. YOULD concluded that for the foregoing reasons, the utility managers had pretty much directed that although there is value in a consumer bill of rights, this bill is premature. In particular, it appears to relegate the responsibility of defining restructuring for the state to the new RCA rather than to the legislature. This especially concerns them given that on May 7 the House Special Committee on Utility Restructuring wrote the then-APUC a letter indicating they didn't want to see the regulatory body take responsibility for electric utility restructuring, which they believe is the legislature's purview and jurisdiction. Likewise, the utilities believe elected policy makers can best determine whether electric utility restructuring should come to Alaska, and in what form. MR. YOULD noted that furthermore, it isn't known what the competitive market will look like in Alaska. If it were decided that only portions of the state should be subject to electric utility restructuring, then the RCA would find itself trying to fit the entire state, when in fact the legislature may well decide that only a portion of the state - the Anchorage area or maybe the Railbelt - should be subject to restructuring. Although the intent is good and some form of consumer protection should be put in place, it should occur only when it is better understood what electric utility restructuring should look like for Alaska. Number 113 CHAIRMAN ROKEBERG commented about a general consensus throughout the industry in Alaska regarding the RCA's authority to undertake and grant a certificate for a utility that wishes to compete head-to-head. He asked whether ARECA agrees now that the commission has the ability to do that without the legislature's approval. MR. YOULD replied that he was stepping out on a limb because he hadn't polled all of the utilities. However, he had seen briefs from their attorneys and discussed the issue with them, and he would say that yes, the public utility commission has a certain amount of authority to bring in some form of utility restructuring in the form of customer choice. "My comment, however, would be that the way that it's levied to them, it's a very cumbersome process, a very awkward process," he added. "And, as a result, perhaps while they have the legal authority, I'm not sure that they would find it feasible to actually try and bring it in without some streamlining of their own statutes by the legislature." Number 141 CHAIRMAN ROKEBERG asked whether ARECA would be more comfortable if the legislature removed that authority from the RCA through statute, in effect giving the legislature the singular, unilateral authority to create restructuring. MR. YOULD answered that he doesn't know that it is a necessary step. Although they would prefer that the policy come from the legislature, ARECA has generally seen a willingness by the commission to not move forward in deference to the legislature itself. If, on the other hand, ARECA saw a general attitude at the RCA that "by God, they were going to do restructuring because it worked, say, in the telecommunications industry," then yes, ARECA would like to see that authority taken away. Mr. Yould added, "But I think we're dealing with responsible people here, and I think that if the legislature came up with a policy that sort of outlined the baffle boards of where restructuring go, I think that they would work within those limits, and I think that we could live with that." Number 159 CHAIRMAN ROKEBERG emphasized that he'd introduced the bill for that very purpose, understanding that the regulatory authority had the ability to grant a certificate to allow and create competition. Without some guidance from the legislature as to what issues and policies should be taken up in the regulatory scheme, he said, the legislature would have no input or would be derelict in its duty to help protect consumers in Alaska. MR. YOULD agreed with the rationale. However, he believes the legislature had let it be known, at least through the letter of May 7, that this is the legislature's jurisdiction, he said. As long as the legislature is moving forward with trying to establish whether or not there should be restructuring in the state, and in what capacity, he believes the RCA will take a back seat but, at the same time, will try to work with the legislature and make sure they have a lot of input. "But I don't think that they're going to go off half-cocked, frankly," he added. Number 180 CHAIRMAN ROKEBERG suggested he wouldn't be unfair by characterizing the attitude of a number of people from rural Alaska, in particular, as fearful of any deregulated, restructured type of environment. He then asked whether there would be a greater level of comfort in ARECA if the legislature prohibited any kind of competitive environment in rural Alaska. MR. YOULD answered that there probably would be, because he believes they will establish and maintain a pretty strong belief that restructuring cannot physically come to rural Alaska, in any form, without harming other consumers. If this bill were to make that clear, he believes rural residents would like that. On the other hand, the elements of the bill that would rain down on rural Alaska would be somewhat obviated, he said, and should be restricted, then, to the Railbelt area. CHAIRMAN ROKEBERG responded that he believes it is restricted, at stage one, to the transmission intertie system in the Railbelt area. He then asked whether it is fair to characterize ARECA's change of opinion as a delaying tactic. MR. YOULD replied no. If anything, the educational process has allowed ARECA to conclude this won't work in rural Alaska. Furthermore, the utilities are not as adamantly opposed to deregulation as they were two years ago. Especially in Fairbanks, however, they want time to fully position themselves to compete. He also believes all utilities want to ensure a truly level playing field for consumers and utilities, when and if restructuring comes along. Whereas a vote two years ago probably would have been 24-1 against restructuring, today it would probably be 20 against it, with 3 or 4 "maybes" or abstaining votes, and one adamantly in favor of it. MR. YOULD continued, pointing out that larger utilities in the Railbelt itself are the ones looking at the benefits of restructuring and truly trying to decide whether benefits could come to the consumers. He believes they are making a legitimate, good-faith effort to decide whether restructuring should come to Alaska. It has been frustrating for him, he added. It would be so much easier if he could maintain a 24-1 vote and tell the legislature the utilities don't want restructuring. CHAIRMAN ROKEBERG asked whether Mr. Yould believes the legislature should put this bill, and this issue, aside and take up the "telecom wars" next session. MR. YOULD replied, "We'd love to see that." [There was laughter.] CHAIRMAN ROKEBERG mentioned talk that perhaps ARECA members believe HB 81 is a backdoor way to establish restructuring in Alaska without sending a signal to the RCA. He asked if that is a concern. MR. YOULD affirmed that, explaining their fear that if this bill passes, it will almost become a fait accompli. It is a de facto policy direction that perhaps the RCA would view as where the legislature wants to go. He pointed out that page 1 of the bill, beginning at line 6, says that as part of any general proceeding to investigate electric industry restructuring, the commission shall establish by regulation the following things, many of which are at the heart of restructuring itself. Mr. Yould expressed concern that this bill brings them into restructuring without a full debate, in the legislature, on the merits of restructuring; he alluded to its being a wolf in sheep's clothing. In contrast, HB 248, filed the last day of the session by Representative Kott, he would call an up-front restructuring bill. Number 262 CHAIRMAN ROKEBERG indicated one of his proposed amendments resulted from previous discussions with Mr. Yould. He asked whether ARECA members would be more comfortable if the bill were modified to clarify the trip wire or trigger, and if regulations wouldn't be taken up until the RCA granted a certificate of authority to compete. MR. YOULD replied no, they would rather see a trip wire that regulations shall not be adopted until such time as the legislature establishes that they want restructuring, either in part or in total, throughout Alaska. CHAIRMAN ROKEBERG asked whether ARECA would get behind this bill again if those two corrections were made: first, clarifying that the legislature had to make a positive step and, second, limiting it to the so-called grid. MR. YOULD said he doesn't believe it would, because Railbelt members are the most concerned about the bill. Certainly, he believes they would like it if the legislature came up with a clear policy that there would be restructuring, and if this bill, as part of that more comprehensive bill, tried to establish ground rules. However, ARECA is nervous about a bill going forward that tries to establish ground rules when, in fact, it isn't even known what this competitive market will look like in the future. CHAIRMAN ROKEBERG asked whether ARECA could support this bill if it were amended or attached to another bill that created a pilot program in the Anchorage area, for example. MR. YOULD answered, "We're adamantly against pilot programs." CHAIRMAN ROKEBERG asked what would make ARECA happy. MR. YOULD suggested the whole issue of restructuring will be at the forefront during this legislative session, and there will be public debate at that time. The ARECA members are saying they think this bill is too early. CHAIRMAN ROKEBERG replied that based on the position of ARECA, he isn't sure he agrees with the statement that this will be in the forefront of discussions at the next session. Number 308 REPRESENTATIVE HALCRO indicated the dialogue with Mr. Yould had reinforced his own concerns about the broadness of the title. The bill's intent, as repeated by the sponsor, is to protect consumers, but they are discussing deregulation. He noted that they are requiring the RCA to adopt regulations to provide standards of operation and consumer protection. Next referring to page 4, he said subsection (g) had jumped out at him; it read, "The commission shall, by regulation, require reports from electric service providers who are participating in a competitive electric service market and establish the contents of the reports." He asked whether there had been talk within ARECA about specifying the contents of those reports. For example, are they going to get into back-office, proprietary information? MR. YOULD answered that there has been no discussion. One ARECA member, Matanuska Electric Association, has brought up that specific paragraph, expressing concern about what would be in those reports. Mr. Yould pointed out that in the electric industry, a portion - the transmission lines and service territories - would probably remain regulated, whereas the generation side would be unregulated. In the telecommunications industry, there was a requirement that a "Chinese wall" be built between the regulated and unregulated parts, meaning separate staff for each portion. Although not too bad for a larger utility such as Golden Valley or Chugach Electric Association, that gets very expensive in rural Alaska, where there is minimal staff to start with. Mr. Yould concluded that although they don't know what reports will be required, the reporting requirements will be greater, and costs to small rural utilities will be much more difficult for them to shoulder. CHAIRMAN ROKEBERG thanked Mr. Yould, then called upon Don Edwards. Number 364 DONALD EDWARDS, General Counsel, Chugach Electric Association ("Chugach"), informed members that generally Chugach supports this legislation. They support the idea of consumer protection and feel the bill gives appropriate legislative policy guidance to the regulators. However, he perhaps would suggest some minor changes later, and he would talk about perceived significant problems. He noted that previous testimony that year by Gene Bjornstad, General Manager of Chugach, made it clear they regard consumer protection as a key element of restructuring. Therefore, they are pleased to see progress on what they view as an important part of the package of developing restructuring. Their concern, however, is with the Railbelt. They have opinions but not a great deal of expertise on how things should happen in the Bush, Mr. Edwards noted, nor do they feel it is their place to speak about that. MR. EDWARDS said Chugach believes there is a need to start somewhere, which is why they are supportive of this. However, this bill is "the sound of one hand clapping," introduced to protect consumers in a customer-choice environment, when, in fact, they don't have a choice now. This is called a "consumer bill of rights," but in their view there is no more fundamental right than the right to choose from whom to buy services. Chugach's primary point is to remind everyone that still to come is the main event: some action, by some entity with authority - the legislature or possibly even the courts - to allow customers to exercise their fundamental right. However, they are happy to see these puzzle pieces begin to fall into place. Number 440 MR. EDWARDS turned to specific concerns. First, subsection (c) requires a needs-based rule allowing additional time for payments. They operate now under a tariff, approved by the commission, that has what they believe are fair rules; problems don't arise out of those tariffs in Chugach's situation, nor does he believe many other utilities have problems. It is legitimate for any consumer protection bill to be concerned about a level playing field among all service providers. In addition, there may be some need for uniform payment and service termination provisions for all customers in a competitive environment. However, he said, there is every reason to believe the commission is capable of doing this kind of rule making, after hearings and due deliberation; in contrast, it is not the kind of detailed rule making for which the legislature is well suited. In summary, Chugach would accept a fair set of rules, which they believe they operate under now. But they think it would be a mistake to "hard wire" into a statute a needs-based determination requiring the utility to decide who deserves a special break and who does not. They believe that is neither efficient nor required by fairness. They would rather that it be left to the commission, or that it be adjusted somehow, so it is not a needs-based determination made by the utility. CHAIRMAN ROKEBERG asked whether the term "economic hardship" was what Mr. Edwards was calling "needs-based," even though it might be a temporary circumstance. MR. EDWARDS affirmed that. CHAIRMAN ROKEBERG noted that it would be defined by the rule-making authority of the commission, not the legislature. He said that is the whole idea, to make it broad enough and to give them direction. MR. EDWARDS clarified that the only problem Chugach has with it is this: Even if developed by the commission under the policy guidance set out in this draft, the determination would have to be needs-based. If the legislature simply sent the commission off to develop fair rules for termination that are uniform for all service providers, Chugach would have no problem. However, having to determine whether people meet income guidelines or qualify for "hardship" status would take a lot of time and effort. Chugach believes the tariffs contain good and fair provisions for termination and bill payment. They also believe the commission can come up with fair standards without the legislature requiring a needs-based determination. Number 509 REPRESENTATIVE HALCRO requested confirmation that current guidelines include provisions for handicapped or elderly customers. MR. EDWARDS replied: We have very few special provisions. We do have ... some special notification of outage provisions, but I'm not sure that they're actually in our tariffs. I'd have to go back and research exactly what kinds of special provisions we have ... that are in the tariffs, that do pertain to hardship. But we have very few there. But, like I say, we don't seem to have many problems arising ... from it. We have very few complaints ... on those grounds. REPRESENTATIVE HALCRO suggested the concern with economic hardship could be for only one month, for example. Perhaps a person might not want to find the money to pay the electric bill. To him, that represents an economic hardship, whereas to Mr. Edwards that represents somebody who just doesn't want to pay the electric bill. MR. EDWARDS affirmed that, then emphasized the more important point: The utility would rather not have to make that choice and have to examine a customer regarding the needs-based guideline set by the commission, which he believes, as this bill is written, the commission would be compelled to establish. Now, in contrast, if a customer doesn't pay, the utility must give the customer notice in specified ways, providing so many days to cure the problem; if unable to work out terms, the utility then is authorized, after specified types of notice, to cut off the service. The utility doesn't have to determine whether a customer meets needs-based hardship standards. However, Mr. Edwards pointed out, he doesn't know of a utility that doesn't already work with customers to avoid cutting off service, which would be hooked up again eventually. Utilities want to figure out payment plans so customers can make payments, get caught up, and remain on service. Number 559 CHAIRMAN ROKEBERG asked whether that is a customary practice or exists in the tariffs, to not cut off people's power in the wintertime. MR. EDWARDS said that is by custom. There was a proceeding in front of the previous commission to look into it, but that commission decided it wasn't a problem that needed to be fixed. Its survey of utility practices found although it isn't something utilities prefer to publish, as a practical matter no utility should cut people off when it is extremely cold. REPRESENTATIVE HALCRO asked whether they couldn't also interpret hardship as being seasonal or temperature-related, for example, as opposed to being needs-based. MR. EDWARDS replied that he'd rather not have to be at the commission saying the legislature didn't really mean money but meant temperature. CHAIRMAN ROKEBERG asked whether Alaska is the only state without some type of needs-based criteria and help. MR. EDWARDS said he hadn't researched that. CHAIRMAN ROKEBERG suggested there is no help for low-income people, which most states have in the form of a universal service charge. He said he wasn't advocating that, but it is a bit ironic. He then asked if Mr. Edwards thinks it is irresponsible of the legislature to ask that the RCA set standards for hardship, which now are based only on customary practice. MR. EDWARDS responded that he wouldn't say it is irresponsible, but the question is a matter of public policy: What is the best way to take care of people with a hardship? To him, that is not necessarily best addressed by the utility commission in a utility tariff. Ultimately, he believes it comes down to this question: How should they fund customers who are more expensive to serve? One way is to put provisions into statute or tariffs that have the practical effect of saying that customers who pay on time should pay for the cost of customers who don't. Mr. Edwards suggested that kind of analysis is needed when wanting to set up a system like this. They need to figure out who should pay for these things, and what public policy sends the right signals to customers to help everyone behave in a way that is fair to all. CHAIRMAN ROKEBERG acknowledged there could be a heavy debate over that, but suggested moving on. Number 636 MR. EDWARDS turned attention to subsection (e), which read: "The commission shall, by regulation, provide that an electric service consumer in a competitive electric service market may receive only one periodic billing for the provision of electric service to a location." [Beginning comments cut off by tape change.] TAPE 99-60, SIDE B Number 001 MR. EDWARDS continued with subsection (e), saying it is an area where many competitors could, and presumably would, be available to participate. There is no reason why utility billing services have to be bundled together with monopoly services. Many local and "outside" firms can provide the former; in fact, he indicated, some of Chugach's utility billing services now are contracted out. They believe customers should be allowed to buy services in the way they feel is most convenient. He suggested it might be particularly problematic for regulators to manage and police the mixing of various competitors' contributions to the utility bill. MR. EDWARDS pointed out that the legislation now is fairly wide-open, saying one utility must include a competitor's information in the bill. He cautioned that it could be even to the point of advertising. Once it is clear that competition is allowed in unbundled services - which formerly were bundled as generic utility service - it even could become illegal under antitrust law to tie billing services to service in which, as a provider, a utility might have too much market power. It is a problem area that deserves a closer look, Mr. Edwards said. These aren't huge problems, but Chugach isn't comfortable with setting in statute exactly how the billings are done. CHAIRMAN ROKEBERG asked whether that isn't the one area where fraud and other problems come into play, as shown particularly in telecommunications. He suggested there is great potential for abuse to consumers if the billing system isn't regulated some way. MR. EDWARDS specified that he doesn't have a problem with regulations aimed at consumer protection, including prevention of fraud, and Chugach is generally supportive of that. As written, however, this particular provision seems to allow and require that competitors let anyone else place virtually anything into the billing packet. It also seems to require that the customer can only get the bill one way: all together on one bill. However, some customers may choose to buy from different sources and not particularly care whether there is more than one bill. It is simply a matter of principle, Mr. Edwards concluded, indicating Chugach believes customers should have the choice to buy from whomever they want, regardless of whether the bill is bundled. It is not a huge issue, but rather is Chugach's viewpoint. CHAIRMAN ROKEBERG asked whether there couldn't be a situation, though, where a customer would have to buy from multiple suppliers. MR. EDWARDS said he thinks it is conceivable. But if enough customers want to buy services and see all their utilities bundled on one bill, Chugach will try to sell that to them. The capability also exists of bundling together all the utility bills; huge billing companies in the Lower 48, as well as plenty of companies in Alaska, have all kinds of billing capabilities. Chugach believes customers ought to be allowed to choose from whom and how they get their bills, letting the market take care of it. CHAIRMAN ROKEBERG agreed, indicating part of the intention was to allow outsourcing of the billing, which this legislation doesn't prohibit. MR. EDWARDS responded that it says the entire electric bill has to be a single bill. CHAIRMAN ROKEBERG noted that it says one periodic billing. He posed a scenario where a "reseller" isn't able to provide power, then expressed his understanding that a consumer could be charged for multiple utilities. MR. EDWARDS suggested that isn't a billing problem, however, but a consumer protection problem about regulating various service providers, to prevent fraud and to ensure that customers can determine whether a bill is the entire bill, for example. He restated that Chugach agrees with those kinds of consumer protections and information disclosure provisions. They would be harmed if fly-by-night operators come in and don't properly disclose information. They simply are concerned about a hard-wired requirement that everything must be bundled into one bill and that says a customer can only get a bill in one way. Number 063 REPRESENTATIVE CISSNA asked what Mr. Edwards would eliminate, then, in subsection (e). MR. EDWARDS said he would want to change it so that it didn't say the electric service can only be reflected on one periodic bill. REPRESENTATIVE CISSNA indicated her understanding that the one periodic bill is the problem. CHAIRMAN ROKEBERG countered that nobody wants to get more than one periodic bill. He said he doesn't understand. MR. EDWARDS responded that he suspects people will want fewer, rather than more, bills. However, they ought to be allowed to buy from whomever they want, even if it requires an additional bill. It is a philosophical issue. Chugach believes establishing a one-bill rule limits options in ways that might ultimately hurt the customers. Number 091 MR. EDWARDS addressed subsection (g), which read: "The commission shall, by regulation, require reports from electric service providers who are participating in a competitive electric service market and establish the contents of the reports." Noting Mr. Yould's mentioned of this, Mr. Edwards indicated Chugach feels the language is a little too broad. In principle, the commission already has tremendous authority to require that information. Mr. Edwards recommended addressing three questions: What exactly does the legislature want the commission to be tracking? What authority does the commission have now? And is there any additional authority that the commission still needs to accomplish these purposes? MR. EDWARDS turned attention to the proposed amendments. Referring to 1-LS0181\K.1, Cramer, 10/4/99 (K.1), he said it was fine. It read: Page 1, line 1: Delete "Alaska Public Utilities Commission" Insert "Regulatory Commission of Alaska" MR. EDWARDS addressed the second proposed amendment, 1-LS0181\K.2, Cramer, 10/4/99 (K.2), by saying Chugach generally agrees with the idea of a level playing field. That amendment read: Page 4, lines 10 - 12: Delete "This section may not be applied to result in a utility that is not otherwise subject to economic regulation by the commission becoming subject to economic regulation by the commission." Insert "This section applies to a utility operating in a competitive electric service market. If a utility is exempt from the provisions of this chapter other than AS 42.05.221-42.05.281, the commission may not apply this section to make the utility subject to other provisions of this chapter." Number 098 MR. EDWARDS pointed out that the third proposed amendment, 1-LS0181\K.3, Cramer, 10/4/99 (K.3), is a serious problem because it is a big step backwards. It read: Page 1, line 6 - 8: Delete "As part of any general proceeding to investigate electric industry restructuring, the commission shall establish by regulation" Insert "After the commission has determined that a competitive electric service market should be established by law in the state, the commission shall adopt regulations for electric consumer protection standards. The competitive electric service market may not be implemented until after the regulations take effect. The regulations must establish" Mr. Edwards explained that under Chugach's view of the law now, the legislature never has prohibited competition. From his understanding, this provision would be interpreted as the following statement from the legislature: "Well, we may never have said it before, but starting now we are prohibiting competition." Chugach urges the legislature not to include any amendment that would say competition is not allowed. Mr. Edwards suggested consumer protection is a good (indisc.), but that now they need the whole opera. They need to allow customers to actually choose, and to figure out exactly how that will happen. He would just hate to see amendment K.3, a step backwards, he concluded. Number 117 REPRESENTATIVE DAVIES asked Mr. Edwards to amplify about how proposed amendment K.3 would be read to prohibit competition. MR. EDWARDS noted that there would be an oral argument about it in front of the judge that very afternoon. He indicated AS 42.05.221 is the only current statute containing a reference to competition, then explained: It says that you can prevent competition once it's started, and once the commission has determined that there's a problem with it; and at that point, then, the commission can remedy that problem. Nowhere in the statutes does it say competition is not allowed. If you put in a provision such as this, it says, "After the commission's determined that ... a market should be established, the commission shall establish protection measures." That presumes that competition can't occur until after the commission says it can. And we don't agree with that. And that's why ... it's in the courts now. The commission does agree with that. ... They think it's implied that no competition ... can occur until they say that it can, and we simply disagree with that, on the basis, as I said, that the only explicit reference is the reverse of that: that it can happen until you stop it. It's not that the commission has no authority. It's just that the commission's authority is an after-the-fact, rather than a prior restraint. And that's what the debate this afternoon will be about, and that's why I don't want to see anything which supports the idea, in the statute, that there is a prior restraint, because ... there's no explicit prior restraint in the statutes now. I don't want to see anything that lends supports to the idea that there's a prior restraint. Number 140 CHAIRMAN ROKEBERG inquired whether that is a docket before the RCA or is in the courts. MR. EDWARDS clarified that it is on appeal to the superior court, to be argued that very afternoon. It had been a docket before the commission asking them to establish access charges over the Municipal Light and Power (ML&P) system. The theory and argument were what he had just laid out. However, the commission had denied that, believing the commission has an implied authority to prevent competition unless and until a utility comes before them asking for an expansion to the certificate of the service territory. CHAIRMAN ROKEBERG suggested it is a theory of prior restraint, in a nutshell, because the statutes are silent. MR. EDWARDS affirmed that. He referred to an antitrust law interconnection that he'd apparently discussed at length before but wouldn't address that day. In response to Chairman Rokeberg's mention of the "Portland Steel case," he noted that it is the "Columbia Steel case." Number 155 REPRESENTATIVE HALCRO referred to the language in K.3 that says, "After the commission has determined that a competitive electric service market should be established by law ...." He then referred to the May 7 letter from the URS committee that basically tells the then-APUC it should remain the domain of the legislature to set policy with respect to opening up markets. He requested clarification. CHAIRMAN ROKEBERG referred to an opinion from the attorney general, then expressed his understanding that the general legal opinion indicates the RCA would have the right, as Mr. Edwards had just said, to grant a competitive service situation. The letter from the URS committee was a signal to the RCA: "Please don't do that until we act on it as a matter of public policy." He asked Representative Davies whether that is a fair characterization. Number 171 REPRESENTATIVE DAVIES affirmed that, adding that it has no force of law. It is just a letter, and a political message. MR. EDWARDS, in response to a comment of Chairman Rokeberg, clarified: We're on the side of explicit interpretation of the plain words of the statute. It's the commission and our opponents who are saying, "Well, no, no, no. You can't read just the explicit statement. You have to ... see that there's some implied authority here, even though the only reference to competition says that you can't stop it unless it's started and there's a problem with it." That's what the words say. The commission's view is, "Well, but there must be an implied power for us to prevent it in the first place." And that's what the argument is about. CHAIRMAN ROKEBERG suggested that is based upon their certification process. MR. EDWARDS affirmed that, adding that it is based upon their authority to determine "whether you're fit, willing and able to serve." REPRESENTATIVE DAVIES commented that there are other explicit words in the statutes regarding territories, et cetera. Those need to be read in (indisc.) value, as well. MR. EDWARDS disagreed, stating that the explicit words regarding "service area" are in the provision that says it can be limited if it is occurring and has been determined to be a problem. He explained: That's where it says that you can impose service territory restrictions, and that has, in fact, happened in Anchorage many years ago. There are service territories that are established ..., in our view, to prevent duplication of ... plant. And that's what's changed, and that's why this has come up. It is now technologically feasible and practical for people ... to compete just for the sale of the commodity. It used to be that ... the sale of the commodity and the service over the lines [were] so bound together that, ... practically speaking, you couldn't sell them separately. So, it didn't come up as an issue. Once the service territory or distribution plant issue was decided, it naturally followed that, well, people weren't going to be competing. Well, that's not true anymore. ... There are a number of areas, as I said, ... in which you could possibly compete. And so that's why we're where we are. MR. EDWARDS restated that Chugach is glad to see this bill brought forward, and glad to see something get done on an important piece of the package. If this passes, they can mark this off the list of reasons why customers aren't allowed to choose, and they are looking forward to that. Number 220 CHAIRMAN ROKEBERG expressed his understanding that if K.3 were redrafted to specify the legislature's authority, Mr. Edwards would still find it objectionable because it would be even stronger. MR. EDWARDS affirmed that they would if it applied to the Railbelt. They have always taken the position that they are happy with a compromise which deals only with Anchorage, but the Railbelt would be fine. However, for the reasons he'd stated, he would hate to see any bolstering of the argument that competition is prevented in the Railbelt area. Mr. Edwards suggested an acceptable compromise would be to have the "non-interconnected areas," except the Railbelt, subject to this kind of provision. After Chairman Rokeberg questioned the use of the term "non-interconnected area," Mr. Edwards indicated he would try to come up with a better phrase but for now that is the best he can do. He explained, "You have the Railbelt, and then you have a couple of other areas of the state that are interconnected by transmission lines. So, you'd have to be careful to make sure you caught the right fish in your net." CHAIRMAN ROKEBERG mentioned Southeast Alaska, then referred to his earlier discussion with Mr. Yould about applying some first-aid to this bill to generate support. He noted that Mr. Edwards objected to the legislature's taking back authority, to limiting it to the Railbelt, and to creating a pilot program. He asked, "If you took all those things together, would it be more acceptable to you, then, as a compromise-type of a situation?" MR. EDWARDS answered yes, restating Chugach's ongoing willingness to compromise to the point of just letting them begin in Anchorage. What they propose is simple and not that difficult. It is retail competition; they haven't proposed to do anything at all about the competition that may exist at the wholesale or bulk power level. Retail competition means that customers in one part of town can buy from a supplier in another part of town. It is neither complicated nor radical. They don't have to create an independent system operator, nor any kind of a generation pool or transmission pools. They just let a customer in Muldoon buy from ML&P or vice versa. Mr. Edwards suggested potential compromise would allow competition and customer choice to begin in Anchorage. Again mentioning the concept of one hand clapping, he emphasized that missing from this consumer rights bill is the most important right of all: the right of consumers to choose. CHAIRMAN ROKEBERG suggested this legislation likely would die without some compromises. MR. EDWARDS reaffirmed Chugach's openness to compromises, specifying that their bottom line is simply that it needs to allow competition to begin in Anchorage. Number 269 REPRESENTATIVE HALCRO referred to the analogy of one hand clapping, then mentioned comments in this committee and the URS committee that the bill is premature because they are developing guidelines in spite of not knowing what restructuring will look like. As an example, he directed attention to page 3, lines 12 through 15, which read: "(7) refrain from imposing unreasonable terms and conditions, including service connect or disconnect fees, as a precondition to providing service that meets generally accepted industry standards to a consumer in a competitive electric service market." Representative Halcro pointed out that when the day comes for restructuring, there must be certain items addressed, including transition costs. California has transition costs, for instance. Someone who has gone through a regulated market with one provider, but decides a second provider offers a lower cost per kilowatt hour, owes the previous provider a certain amount for transition costs. Although in certain states that have undergone this restructuring there are associated costs, Alaskan legislators don't know if those will come into play. With this legislation they are already saying, "We're going to exclude certain things," when they don't know what the whole picture looks like. That is part of his own concern, he added. Number 293 MR. EDWARDS noted that there are probably three or four important basic components to restructuring, including consumer protection and the stranded investment provision just mentioned. Chugach has always supported the idea that legislation is a fine way to deal with stranded investments, at least in providing policy guidance to allow the commission to exercise judgment about who will be allowed stranded investment recovery. Although Chugach may have some stranded investments, they have protected themselves by contracts with their large wholesale customers, Matanuska Electric Association, Inc. (MEA) and Homer; the contracts require that those large customers buy their power from Chugach. MR. EDWARDS noted that he hadn't planned to comment on this specific provision today, and indicated he might provide written comments. He stated that although he believes it could use a bit of tightening, he doesn't think it really deals with the stranded investment issue. Rather, it deals simply with creating a level playing field, ensuring that customers are protected from harm by "sharp business practices" in the termination process. Noting the importance of electric service, and that sometimes extraordinary consumer protections must be provided for such service, he concluded, "I think this simply says you can't abuse the customer in the connecting and disconnecting process, and I think that's where we're trying to go with that, and so we would be supportive of that idea." CHAIRMAN ROKEBERG indicated termination fees are a key element that may have negative impacts. This wasn't intended to pick up the entire area of stranded costs, he said. He looks at this bill as an incremental part of the whole puzzle, not the whole thing. He asked if there were further questions, then thanked Mr. Edwards. Number 339 STEPHEN CONN, Executive Director, Alaska Public Interest Research Group (AKPIRG), came forward on behalf of AKPIRG, Alaska's largest consumer group, with 3,000 members statewide. He praised Chairman Rokeberg for spotting this early-on as a critical component of the coming wave of electric deregulation, then educating himself and the public on the issue. The emerging bill comes from a detailed consideration of this subject, Mr. Conn pointed out, and is entirely appropriate as a building block in the process of electric deregulation. He indicated he has had an ongoing opportunity to speak with people experiencing electric deregulation in the Lower 48, including California, New York and Pennsylvania. Furthermore, a great deal has been learned from telephone deregulation, both for long-distance and local service. MR. CONN referred to Mr. Edwards' comments, noting that consumer advocates in this country don't actually believe it is the retail consumer who is pushing for electric deregulation; that hasn't been demonstrated in statistics for California and other places. He indicated AKPIRG's mode tends to be more defensive than offensive, essentially trying to hang on to what existed under regulation and, in some cases, building on those. He expressed optimism in that regard. MR. CONN expressed concern about so-called cherry picking, however, to the degree that it will shift costs to the residential rate payer; he suggested that in some ways reflects the rural utilities. That competition will not be serious, full-fledged competition, residence by residence, business by business, he said, but rather will be partial competition. He indicated he has spoken about that with various committee chairmen and is still concerned about it. This falls under the question of what kind of guarantee will be provided to the consumer in the area. Number 402 MR. CONN remarked that the language still seems a little "squishy," then drew attention to page 2, (b)(2) and (b)(3). He paraphrased from (b)(2), commenting that it makes sense for the provider. Paragraph (b)(2) read: (2) offer electric service to any consumer in the area served by the electric service provider so long as providing the service is technically feasible at a reasonable cost to the provider; He then read from paragraph (b)(3), which stated: (3) provide the same electric service choices and pricing options to all consumers; He suggested that is still a little off the mark, because he is thinking they would offer him, in his house, the same rate as they would offer a large grocery store up the street. His concern is that rates offered in a competitive marketplace be for everyone in that marketplace, not just for a favored few; he asked the committee to look at that. Referring to the phrase "pricing options" and the word "option," he said maybe the word he is looking for here is "price." He said he also thinks - although he doesn't believe the rural electric utilities necessarily agree with him - that that would be "sort of a poison pill to cherry picking." MR. CONN also expressed concern on behalf of consumers about the "ultimate price issue." He reminded members that if all utilities were known and trusted - as are Chugach or ML&P - maybe the consumer situation wouldn't be so disconcerting. However, people are likely to move in who are essentially aggregators, buying up service and reselling it. A lot of the need for a bill that looks out for consumers is because of not only existing players but also new, unknown players; that area of major concern created unanticipated problems in California, he noted. MR. CONN turned to the issue of need. He suggested perhaps Mr. Edwards was correct about isolating the word "economic" exclusively. Mr. Conn said he would offer, at the end of his testimony, a copy of New York's Home Energy Fair Practices Act (on the Internet at www.dps.state.ny.us/p11res.html), which passed some time ago as a utility consumers' bill of rights. In New York, he noted, they are trying to hold the line on maintaining that statute in a competitive marketplace. In examining need, as determined in New York's legislation, Mr. Conn pointed out that the focus is on other areas, including elderly and disabled people, as well as people on life-support systems. There may be a panoply of needs that aren't exclusively economic but that should be examined. MR. CONN next addressed billing, especially bundling. This legislation discusses in some detail the prototype contents of any utility bill, he noted. In the world, down the road, electric utilities will sell telephone service or cable service, for example. As consumer advocates, AKPIRG is concerned that choice be maintained without consumers being forced to buy bundled services, of any sort, in order to get the best choice in any discrete area. An affirmative right of a consumer, in a consumer-choice-driven market, is the ability to buy unbundled services without one being conditioned upon the purchase of another; furthermore, consumers should not have to buy, unwittingly, a bundled service for which multiple bills are issued. MR. CONN referred to pages 21 and 22 of New York's Home Energy Fair Practices Act. He told the committee a possibility, not reflected in the current legislation, is an annual notification to consumers of their rights, which would include the following: a description of complaint-handling procedures at the utility and the commission; the rights and obligations of residential customers regarding payment of bills, termination of service and reconnection of service; a description of special protections afforded people who are elderly, blind, disabled or experiencing medical emergencies, or those receiving public assistance, Supplemental Security Income (SSI) benefits, or additional state payments (also, perhaps persons in two-family dwellings, which Mr. Conn said he wouldn't address that day); a request that residential customers who qualify for some of those considerations inform the utility; notification of a person's right to designate a third party to receive copies of notices related to termination; and a few others, including billing information in a language other than English where it applies. Mr. Conn said it is not a bad idea to keep complexity to a minimum. MR. CONN indicated he would share a book on how to compare prices and shop for electric suppliers, produced by the Pennsylvania Office of Consumer Affairs; he suggested either the RCA or some division of the Department of Law might think about doing that. He noted that the current bill's provisions addressing clarity and billing are aimed at what he believes the utilities would like to see too, which is an ability of the consumer and rate payer to do head-to-head comparisons. This would conceivably take a certain financial burden off of the private utilities. If information were sent to the RCA, and if the RCA were given appropriations to generate a book of this sort for availability to the public, there would be one-stop shopping that Mr. Conn believes would enhance competition. Number 566 REPRESENTATIVE HALCRO agreed such a book might help a few, but expressed doubts that anybody would actually call to request one, then read it before making a decision to switch. He recalled that during the so-called telecom wars, a person could almost count on the telephone ringing nightly, with a salesperson trying to pitch a deal. He referred to page 4 of the bill, subsection (f), which read: The commission shall, by regulation, require that, in a competitive electric service market, a customer's electric service provider may only be changed with the written authorization of the customer. REPRESENTATIVE HALCRO said he supports that, because a person might receive a telephone call that sounds too good to be true, for example, and then sign up, only to discover the bill doesn't seem to add up correctly because of what it includes. His thought is not only for the utility to have to send the customer a form or card to sign and submit. The utility would also have to show the comparison between what the consumer currently gets and what the utility offers. Whether the next day or week after the initial sales call, the potential customer could then compare utilities to see what the savings, as represented by the utility, would be. He asked whether Mr. Conn believes that would be helpful. [MR. CONN appeared to answer in the affirmative, but his answer was cut off by the tape change.] TAPE 99-61, SIDE A Number 007 [Unusually long blank tape at beginning] MR. CONN continued, mentioning extremely deceptive advertisements regarding telephone service. Possible ideas include the book mentioned earlier or a site on the World Wide Web. He said he is scouting for "wheels that have already been invented," rather than trying to come up with something new. It would be an improvement - over what is being seen in New York and elsewhere - to have utilities conform to a standardized approach, comparing incumbent service with proposed service, for example, which would be worked out through regulatory hearings with the RCA. "This is good thinking on your part, sir," Mr. Conn concluded. CHAIRMAN ROKEBERG asked if there were further questions, noting that his own could be discussed later. He thanked Mr. Conn, then called upon Mr. Kelly in Fairbanks. Number 068 MIKE KELLY, President and Chief Executive Officer, Golden Valley Electric Association (GVEA), spoke via teleconference from Fairbanks. He referred to comments before the URS committee, indicating that committee had set no clear course. He voiced strong support for the legislature rather than the RCA having control of the so-called trip wire. Because of "the ex parte problem and their vary quasi-judicial constitution," he said it is difficult to have the kind of dialogue with the RCA that is possible with legislators. Furthermore, GVEA wouldn't consider it bad news if the legislature determined a two-year moratorium should occur. On the other hand, he hopes legislators still have copies - which GVEA can furnish - of the "competitive 'we believes'" that state GVEA's board's position on that. MR. KELLY suggested the committee might spend time in the future determining exactly what they want to do. He believes creating opportunities for new players shouldn't get much attention because there are probably no more than ten new players out there. Instead, the focus should be on the consumer. He noted that Mr. Edwards had seen one real consumer at a hearing, whereas he himself hadn't seen any. "We've not had a clamor for this," he added. MR. KELLY mentioned other approaches. If the legislature wants to create more consumer protection, he said, he submits that it is already well in place with the commission, and he agrees with Mr. Edwards that the RCA's system works; he suggested letting the RCA handle that if the legislation moves forward. Mr. Kelly continued: If you want to let the big guys feed, that will probably work pretty well too. Turn them loose in Anchorage if you want. You could say that you turned them loose in Fairbanks. There used to be two of them; now there's one. Do we have more competition or less? That's a good question for you to ponder sometime when you wake up early in the morning. If you really want savings for the consumer as your overall bottom line, then why don't you ... consider to take Seward, Homer, Matanuska, Chugach and ML&P, and eliminate all the separateness of them, and create one utility? I can guarantee a savings that would dwarf most other considerations. However, I've never heard that that's what the people want. And every time somebody tries to pick off the other guy down there, the consumers seem to rise up. ... If you're trying to save money, it might lead you in a different direction. The thought about having the members choose: Since, for example, everybody north of the range up here belongs to a cooperative, and they elect the directors, maybe a thought is that they ought to choose whether they want to open their territory up or not. That might lead to some interesting discussion. The question about whether the elements of competition are ... present: Eric [Yould] mentioned that the CH2M Hill report talked about eight providers being the basic minimum. One wouldn't argue that it takes at least two. We think that the basic elements of competition in Alaska are something that has to be carefully considered. So, we want you to hold on to the reins on this thing, and if this old horse goes slowly, we smile. Number 069 CHAIRMAN ROKEBERG asked if Mr. Kelly believes the legislature's time would be better spent investigating such concepts as "economic dispatch and power pooling." MR. KELLY answered no, that CH2M Hill and Black and Veatch had shown "there's a scrawny little one-and-a-half percent in there." He added, "We're doing it pretty well and improving it all the time, without a lot of help from anybody. So, no, I think that isn't where I would put much of your time." CHAIRMAN ROKEBERG asked about some type of distribution authority in the state to ensure that the intertie lines are properly managed and operated. MR. KELLY responded that it isn't broken, and no help is needed there either. In response to a question by Representative Halcro, he said slowing this down is certainly among the options that make sense. Roughly half of the states have had real opportunities to look at this, and Pennsylvania is doing some interesting things; however, Alaska is unique. Mr. Kelly expressed appreciation for Chairman Rokeberg's and the committee's sensitivity that acting too hastily could be a real problem in the state. He concluded by stating general support for moving the legislation forward. However, he voiced concern that the legislature hold on to the reins and take it carefully. He also expressed hope that his other comments were helpful and not taken as critical. Number 100 MEERA KOHLER, General Manager, Anchorage Municipal Light & Power in Anchorage, noted support for the concept of consumer protection. She indicated the importance of consumer protection with any utility restructuring that occurs, in that no consumer should be harmed. She believed that the bill sets out to do just that. She also believed that the proposed amendments are good, which we [Municipal Light & Power] support generally. Ms. Kohler concurred with regard to the prior comments that the trip wire should be retained by the legislature rather than the utility commission. She said that it is in the realm of the legislature to determine if, when, and how any restructuring should occur. Therefore, that should be the trip wire to stimulate some form of consumer protection. She also believed that the ARECA utilities would generally support the concept of carving out the noninterconnected utilities early on. Ms. Kohler stated that the committee may want to consider proposing this consumer protection bill as a general utility consumer protection bill. The electric utility industry is not the only industry nor the only utility in this state that is an essential service. She provided examples of other essential services such as water, sewer, basic telephone service, et cetera. Ms. Kohler believed that a consumer's bill of rights would potentially receive broad acceptance if such contained underlying elements that should be included in any consumer protection process. In conclusion, Ms. Kohler said that we [Municipal Light & Power] continue to support [the legislature's] efforts to promote consumer protection laws. CHAIRMAN ROKEBERG expressed concern with the fiscal note that would result from applying this legislation to all utilities, although it did sound intriguing. He informed the committee that although there would be a fiscal note, the general fund would not be assessed as it comes from the regulatory cost charge (RCC). The consumer actually pays for the RCC. REPRESENTATIVE HALCRO inquired as to the percentage of energy dollars spent on electricity. He clarified that he was interested in a household's expenditure on energy. MS. KOHLER pointed out that, obviously, it would depend upon one's location in the state. She informed the committee that a homeowner in the Railbelt spends, on average, about $200 per month on energy. Of course, that expenditure would probably be significantly higher in Fairbanks. Therefore, Ms. Kohler estimated that one spends about 5 percent of his/her household expenditures on energy per month. MR. CONN informed the committee that the Governor's Commission on Power Cost Equalization did a report, and therefore would know how much people are spending in rural and urban Alaska. The commission also included average household incomes in the report. He directed the committee to the Department of Commerce. MS. KOHLER commented that, in her experience in Naknek, those in Bush Alaska spend 15-20 percent of the household's monthly disposable income on energy. Therefore, the Railbelt spends a much smaller component. CHAIRMAN ROKEBERG turned to the hardship issue. He asked if each utility's tariff reflects how that utility handles the hardship or is that a uniform rule. MS. KOHLER replied that there is no uniform rule. She explained that some utility tariffs address specific scenarios under which hardship is triggered. Typically, each utility is left to construe the internal regulations in order to deal with the issue of hardships. She pointed out that the hardship issue consumes an inordinate percentage of time. She noted that the utilities are very responsive and only with the greatest reluctance will a utility disconnect a consumer for nonpayment. Ms. Kohler interpreted the intent of the bill to ensure that a hardship customer will always be provided a basic human service, which is electricity. When there are utilities that are no longer the sole-serving utility, there could be very little incentive to serve those customers. As noted earlier, the commission did perform a comprehensive survey of all the utilities in the state in order to determine whether the commission should institute regulations in statute which would require certain hardship non-disconnects. Ms. Kohler felt such would be remiss. She posed an example in which the commission dictated that if the ambient temperature is below 32 degrees or 20 degrees Fahrenheit, the utility shall not disconnect consumers. One size does not fit all. There are many consumers that would take advantage of such a dictate and cause hardship to the utility. Therefore, [the cost of those taking advantage of the system] would be spread throughout those who do not take advantage of the system. CHAIRMAN ROKEBERG surmised then that the problem is the lack of a uniform rule. However, if a criteria is established then there is more of an opportunity to take advantage of the system. MS. KOHLER indicated agreement. CHAIRMAN ROKEBERG commented that having the legislature dictate this seems to be a common sense approach. However, the legislature runs the risk of having people use the dictate as a loophole to escape their responsibility. MS. KOHLER suggested that the legislature could essentially dictate that each utility must develop internal rules to address those issues without specifying the parameters. CHAIRMAN ROKEBERG noted that some states have a differential tariff for disabled elderly people or lower income people. Chairman Rokeberg asked Ms. Kohler if she was aware of the legislation introduced by Senator Murkowski [U.S. Senator Frank Murkowski]. MS. KOHLER informed the chair that Senator Murkowski had not yet introduced the legislation, which is currently in draft. She noted that the draft legislation is on the Senate Energy & Resources Committee website. Compared with Representative Joe Barton's [U.S. Representative Joe Barton] legislation which was introduced a couple of weeks ago, Senator Murkowski's legislation is more streamlined. Senator Murkowski's legislation supports state's rights with regard to restructuring and proposes to repeal the Public Utilities Holding Companies Act (PUHCA) and the Public Utility Regulatory Policies Act of 1978 (PURPA). CHAIRMAN ROKEBERG pointed out that Senator Murkowski's bill would delete the requirement under PURPA to take any power generated. MS. KOHLER explained that PUHCA would basically allow companies to merge. With regard to PURPA contracts, some utilities are paying providers of co-generated power or power generated by alternative means two to three times what it would cost the utility to purchase or generate that utility elsewhere. Therefore, Senator Murkowski's legislation would lighten that requirement. CHAIRMAN ROKEBERG asked if, under PURPA, utilities have to take the power at the cost at which it was generated. MS. KOHLER interjected, "The utilities avoided cost. In some cases that would include avoided new generation capacity that would have to develop at some stage down the road." CHAIRMAN ROKEBERG surmised then that it would have a higher rate potential. MS. KOHLER replied, "Yes or the most expensive alternative form of generation, for example." She explained that one would take the most expensive generation plant and project that... CHAIRMAN ROKEBERG understood then, "So even if they had a surplus of power, they would even have to shut in their own generation (indisc.)" MS. KOHLER interjected, "They would have to buy the co-generated power first." CHAIRMAN ROKEBERG commented that the co-generated power would have to be purchased first even if it is at a higher tariff. Chairman Rokeberg mentioned that is overcome for some folks with the separate green power tariff. In other words, those that want green power pay a higher rate. MS. KOHLER noted that the alternative power is offered as an option by specific utilities, especially in the deregulated states. Under President Clinton's proposed bill, it was proposed that about five percent of generation, nationally, would be through renewable resources such as wind. One issue with that proposed bill was that hydropower was excluded from being considered green power. Ms. Kohler felt that ridiculous because hydropower is the most viable green power that Alaska has. MS. KOHLER informed the committee that Senator Murkowski's draft bill also specifically excludes Alaska from having to be covered by the Federal Energy Regulatory Commission (FERC) jurisdiction with regard to reliability standards. She said that Alaska was concerned because the "one size fits all" reliability standards that apply to the large interconnected systems in the Lower 48 could simply not apply in Alaska. MS. KOHLER said, "There is no question that there is not going to be a federal restructuring bill this year." In response to Chairman Rokeberg, Ms. Kohler reiterated that both Senator Murkowski and Representative Barton have introduced legislation. Representative Barton's legislation is HR 2944. Number 301 CHAIRMAN ROKEBERG asked if there were any questions. There being none, he thanked Ms. Kohler and commented that he was intrigued by her suggestion of a uniform bill. He announced that this would conclude this portion of public testimony and HB 81 would be held over. Chairman Rokeberg was concerned about the third amendment, and therefore was uncertain with regard to taking action to create a committee substitute. After determining that Representative Brice was no longer present, he announced that there was not a quorum and the amendment would not be taken up. CHAIRMAN ROKEBERG announced that the committee would be taking up HB 207 on October 21, 1999, at 10:00 a.m. and at 1:30 p.m. on the same day the committee will hear HB 190. The committee will also meet on October 22, 1999, at 10:00 a.m. in order to take up HB 211. ADJOURNMENT There being no further business before the committee, the House Labor & Commerce Committee meeting was adjourned at 12:15 p.m.