HOUSE SPECIAL COMMITTEE ON UTILITY RESTRUCTURING March 10, 1999 8:05 a.m. MEMBERS PRESENT Representative Bill Hudson, Chairman Representative John Cowdery, Vice Chairman Representative Pete Kott Representative Norman Rokeberg Representative Brian Porter Representative John Davies Representative Ethan Berkowitz Representative Joe Green (alternate) MEMBERS ABSENT All members present COMMITTEE CALENDAR HOUSE BILL NO. 101 "An Act relating to the reinstatement of corporations that are public utilities; and providing for an effective date." - MOVED HB 101 OUT OF COMMITTEE HOUSE BILL NO. 62 "An Act relating to the Alaska Public Utilities Commission; and providing for an effective date." - HEARD AND HELD PRESENTATIONS: ALASKA TELEPHONE ASSOCIATION AND FOUR DAM POOL - SCHEDULED BUT NOT HEARD (* First public hearing) PREVIOUS ACTION BILL: HB 101 SHORT TITLE: CORPORATE PUBLIC UTILITY REINSTATEMENT SPONSOR(S): REPRESENTATIVES(S) MORGAN Jrn-Date Jrn-Page Action 2/19/99 258 (H) READ THE FIRST TIME - REFERRAL(S) 2/19/99 258 (H) URS, L&C 3/03/99 (H) URS AT 8:00 AM CAPITOL 120 3/03/99 (H) HEARD AND HELD 3/03/99 (H) MINUTE(URS) 3/10/99 (H) URS AT 8:00 AM CAPITOL 120 BILL: HB 62 SHORT TITLE: ALASKA PUBLIC UTILITIES COMMISSION SPONSOR(S): REPRESENTATIVES(S) THERRIAULT Jrn-Date Jrn-Page Action 1/22/99 68 (H) READ THE FIRST TIME - REFERRAL(S) 1/22/99 69 (H) URS, L&C 2/08/99 172 (H) FIN REFERRAL ADDED 2/17/99 (H) URS AT 8:00 AM CAPITOL 120 2/17/99 (H) HEARD AND HELD 2/17/99 (H) MINUTE(URS) 3/10/99 (H) URS AT 8:00 AM CAPITOL 120 WITNESS REGISTER REPRESENTATIVE CARL MORGAN Alaska State Legislature Capitol Building, Room 409 Juneau, Alaska 99801 Telephone: (907) 465-4527 POSITION STATEMENT: Sponsor of HB 101. ASHLEY REED, Lobbyist for Bush-Tell, Incorporated 360 West Benson Blvd., Suite 200 Anchorage, Alaska 99503 Telephone: (907) 562-2560 POSITION STATEMENT: Testified in support of HB 101. DAWN WILLIAMS, Supervisor Corporations Section Division of Banking, Securities and Corporations Department of Commerce and Economic Development P.O. Box 110808 Juneau, Alaska 99811-0808 Telephone: (907) 465-2297 POSITION STATEMENT: Testified in support of HB 101. HEATHER GRAHAME, Attorney Dorsey and Whitney LLP 1031 West Fourth Avenue, Suite 600 Anchorage, Alaska 99501 Telephone: (907) 257-7822 POSITION STATEMENT: Testified in support of HB 101. WILDA RODMAN, Legislative Administrative Assistant to Representative Gene Therriault Alaska State Legislature Capitol Building, Room 511 Juneau, Alaska 99801 Telephone: (907) 465-4797 POSITION STATEMENT: Testified on behalf of sponsor on HB 62. WALT WILCOX, Legislative Assistant to Representative Bill Hudson Alaska State Legislature Capitol Building, Room 108 Juneau, Alaska 99801 Telephone: (907) 465-3744 POSITION STATEMENT: Testified on HB 62. GINNY FAY, Legislative Liaison Office of the Commissioner Department of Commerce and Economic Development P.O. Box 110800 Juneau, Alaska 99811-0800 Telephone: (907) 465-2503 POSITION STATEMENT: Testified on HB 62. BOB LOHR, Executive Director Alaska Public Utilities Commission Department of Commerce and Economic Development 1016 West 6th Avenue Anchorage, Alaska 99501-1963 Telephone: (907) 276-6222 POSITION STATEMENT: Announced that Chairman Cotten is not present. TIM COOK, Commissioner Alaska Public Utilities Commission Department of Commerce and Economic Development 1016 West 6th Avenue Anchorage, Alaska 99501-1963 Telephone: (907) 276-6222 POSITION STATEMENT: Testified on HB 62. DAVID FAUSKE, General Manager Arctic Slope Telephone Cooperative; and President, Alaska Telephone Association 4300 "B" Street, Suite 501 Anchorage, Alaska 99503 Telephone: (907) 563-3989 POSITION STATEMENT: Testified on HB 62. ACTION NARRATIVE TAPE 99-7, SIDE A Number 0001 CHAIRMAN BILL HUDSON called the House Special Committee on Utility Restructuring meeting to order at 8:05 a.m. Members present at the call to order were Representatives Hudson, Cowdery, Kott, Porter, and Davies. Representatives Green (alternate), Rokeberg and Berkowitz arrived at 8:10 a.m., 8:15 a.m., and 8:17 a.m., respectively. CHAIRMAN HUDSON announced there will not be a presentation by Four Dam Pool today because of errors found by staff. HB 101 - CORPORATE PUBLIC UTILITY REINSTATEMENT CHAIRMAN HUDSON announced the first order of business is HB 101, "An Act relating to the reinstatement of corporations that are public utilities; and providing for an effective date." CHAIRMAN HUDSON explained at the last hearing of HB 101 there were questions of the prime sponsor, Representative Carl Morgan, who was not there. He is here today, and called him. Number 0135 REPRESENTATIVE CARL MORGAN, Alaska State Legislature, apologized for not being there at the last meeting. House Bill 101 is a vehicle to allow the Department of Commerce and Economic Development the discretion to reinstate as a corporation a local telecommunication company that services several communities in Western Alaska. After reviewing the facts and circumstances that surround the issue, he hopes that the committee members will agree this measure warrants attention and support. The following are the facts surrounding the involuntary dissolution of Bush-Tell, Incorporated (Bush-Tell): - Bush-Tell is a small, rural, local telephone company located in Aniak, Alaska which provides service to ten small villages in Western Alaska. - Bush-Tell was incorporated on November 10, 1969 and has been providing telecommunication service ever since 1970. - Mr. Harry Colliver, Jr, President and sole shareholder, was recently informed that Bush-Tell is no longer registered as a corporation because the registered agent failed to follow the proper procedures for resigning as a registered agent resulting in the involuntary dissolution of Bush-Tell. - Since the involuntary dissolution, Bush-Tell has observed all the corporate procedures required by its bylaws and state laws, including board of director meetings and paying corporate income taxes. REPRESENTATIVE MORGAN further noted, for the record, he drafted the bill on a narrow bias because, according to his understanding, it is the way the legislature has handled these types of issues in the past. He feels this is the best approach. He urged the committee members to support the bill and move it out of the committee without any amendments. CHAIRMAN HUDSON announced, for the record, the arrival of Representative Green. Number 0408 REPRESENTATIVE COWDERY asked Representative Morgan what has Bush-Tell changed to keep the same thing from happening again. REPRESENTATIVE MORGAN replied Bush-Tell hasn't done anything yet, because it hasn't been reinstated. He is sure, however, that Bush-Tell will not let this happen again. Number 0465 REPRESENTATIVE COWDERY asked Representative Morgan whether Bush-Tell will now be its own registered agent using its own address for receiving notifications. REPRESENTATIVE MORGAN replied yes. Number 0486 REPRESENTATIVE DAVIES asked to review what didn't happen that resulted in the involuntary dissolution. He wasn't at the last meeting. REPRESENTATIVE MORGAN deferred the question to Ashley Reed, Lobbyist for Bush-Tell. Number 0520 ASHLEY REED, Lobbyist for Bush-Tell, Incorporated, explained since 1969 Robert Colliver, Jr. has been the sole shareholder of Bush-Tell, Incorporated. A lawyer in Anchorage acted as the registered agent to handle corporate filings. That lawyer's life became more complicated and somewhere along the line his office closed and he didn't leave a forwarding address, even though it is required by law to notify the Department of Commerce and Economic Development of the resignation of a registered agent. This past year when Mr. Colliver contacted the department to register a new "d.b.a." (doing business as) he was informed of the involuntary dissolution. Apparently, the department sent a certified letter to the registered agent. The letter came back to the department and went into its file. Criticism has been expressed to the department and since then policies have been instituted to prohibit this type of thing from happening again in the future. Apparently, now, when a certified letter is returned, the department will actually track down listed board members. Number 0650 REPRESENTATIVE DAVIES asked Mr. Reed whether there are any corporate taxes or annual reports due that were not filed as the result of this. MR. REED replied Mr. Colliver has conducted his affairs not knowing that he is not a newly registered corporation. He just found out at the end of 1998. He has continued to hold board meetings, and pay federal and state corporate taxes. Number 0698 REPRESENTATIVE DAVIES stated, clearly, this bill verges on special legislation. It is obviously intended for a particular situation. He wondered why the legislature doesn't put a general reinstatement provision in statute to cover these types of circumstances. Number 0744 CHAIRMAN HUDSON stated the prime sponsor has asked that the bill stick to this particular subject. Number 0759 MR. REED stated, according to research, the last two times this has been done it related to village corporations. The department likes the narrow focus because it already is a requirement of law. The department wants corporations to follow the rules and frankly this is an extraordinary step that most corporations don't want to do. The department wants it to be an arduous process to ensure that everybody else follows the rules to the best of their ability. In the case of Bush-Tell, there is a unique set of circumstances because the registered agent left. The outcome would not be the same today because of policy changes within the department. Number 0852 REPRESENTATIVE DAVIES stated he doesn't see an automatic repealer in the bill, and asked whether the language would stay on the books. CHAIRMAN HUDSON replied yes. Number 0881 REPRESENTATIVE DAVIES stated he is troubled by this. He agrees that there ought to be some big hoops to jump through when these types of circumstances arise, but on the other hand, it is too much to put this type of language in statute. Clearly, it is a one shot affair, but he is not sure how it should be handled exactly. Number 0908 CHAIRMAN HUDSON noted at the last hearing there was discussion on expanding the bill to cover corporations in general. Number 0931 REPRESENTATIVE PORTER stated he agrees with Representative Davies. There should be a provision to repeal it out of the statutes, once it has become effective. CHAIRMAN HUDSON announced, for the record, the presence of Representatives Rokeberg and Berkowitz. CHAIRMAN HUDSON called on Dawn Williams from the Department of Commerce and Economic Development. Number 1005 DAWN WILLIAMS, Supervisor, Corporations Section, Division of Banking, Securities and Corporations, Department of Commerce and Economic Development, stated the division supports the bill. The division also supports a repealer in order not to clutter the statutes. The division does not support making a general change to cover all corporations, however. The Act of the division is modeled after the Model Business Corporation Act which allows for involuntary dissolution for the failure to file biennial reports and maintain registered agents. There is a two year period of reinstatement for every corporation and that period should stay. Number 1087 REPRESENTATIVE BERKOWITZ referred to AS 10.06.633(c) and read, "If, following a hearing, the commissioner determines the presence of neglect, omission, delinquency, or noncompliance providing grounds for involuntary dissolution under this section, the corporation may appeal to the superior court...". He asked Ms. Williams whether this avenue was pursued in this case. MS. WILLIAMS replied no. She doesn't have any record of that in Bush-Tell's file. Number 1123 REPRESENTATIVE ROKEBERG noted in this case the two years have elapsed. Number 1148 REPRESENTATIVE PORTER noted the appeal is if a corporation had felt something had been done improperly in relation to the requirements in statute. Obviously, that is not the case here. Number 1165 REPRESENTATIVE BERKOWITZ stated he reads the appeal to the superior court as a safety valve. REPRESENTATIVE PORTER noted that the legislature is the only branch of government that can make an exception to the law, not the courts. Number 1190 REPRESENTATIVE ROKEBERG noted that the Model Business Corporation Act refers to the secretary of state. He asked Ms. Williams whether a corporation has the right to appeal to the department rather than going to court. MS. WILLIAMS replied yes. A corporation has 60 days to request a hearing from the commissioner. REPRESENTATIVE ROKEBERG stated a request for reinstatement would be to the department and not to the court. MS. WILLIAMS said correct. REPRESENTATIVE ROKEBERG asked Ms. Williams whether that is in statute. MS. WILLIAMS replied, according to statute, if a corporation files a biennial report, pays taxes and/or penalties within 60 days, it can avoid dissolution. REPRESENTATIVE ROKEBERG stated his question related to the two-year provision, not the 60 days. MS. WILLIAMS stated a corporation can reinstate within two years after dissolution by following a biennial report, paying taxes and/or fees. There is a two-year period without going or going to court. Number 1288 REPRESENTATIVE ROKEBERG stated a compromise could be to extend the period of appeal to court. He would like to hear why Bush-Tell didn't go to court. CHAIRMAN HUDSON called on Heather Grahame, Attorney for Bush-Tell. Number 1335 HEATHER GRAHAME, Attorney, Dorsey and Whitney LLP, testified via teleconference from Anchorage. She noted that neither of the remedies are available for Bush-Tell because a request for a hearing has to be made within a 60-day period. In this case, Bush-Tell was involuntary dissolved in 1993, but didn't learn of it until 1998. In addition, there is no way for Bush-Tell to go to court because it is outside the two-year time period. The only remedy now is a legislative Act extending the reinstatement period to the end of this year. Under AS 10.06.965, there is a provision that gives the legislature the right to alter, amend or extend any part of Title 10 with respect to any company doing business within the state. This is the way the legislature has dealt with these types of issues in the past. Bush-Tell would rather have the issue resolved legislatively than go to court. She said, "If you can imagine, this is a public utility and it needs to get its corporate affairs in order as quickly as possible." Number 1444 REPRESENTATIVE DAVIES asked Ms. Grahame whether there is a prohibition against reestablishing a new corporation. MS. GRAHAME replied that was looked at, but it doesn't take care of the time period from 1993 to 1999, and Mr. Colliver would be exposed to all sorts of Internal Revenue Service (IRS) liabilities during that period of time. Even under the Model Business Corporation Act, the only remedy is a legislative one similar to HB 101 relating back to the point in time of dissolution. Number 1516 REPRESENTATIVE KOTT referred to AS 10.06.633(c) and noted that a copy of the dissolution "shall" be mailed to the registered agent. He asked Ms. Williams whether the change made by the division is internal policy or set in regulation. MS. WILLIAMS replied it is internal policy. It is not for notifying a corporation of its dissolution, however. In the past, biennial reports were sent to the registered agent, but the division found that many registered agents lost them. Therefore, the division started updating its files using the principal office address. If a report is returned now, one is then sent to the registered agent. Number 1634 CHAIRMAN HUDSON stated, in reading the bill, it is not necessary to broaden the bill's application. He asked that the chairman of the House Labor and Commerce Standing Committee consider the issue in his committee. He announced that the committee at this point has exhausted hearing the bill and called for a motion to move it out of committee. Number 1653 REPRESENTATIVE PORTER made a motion to move HB 101 out of committee with individual recommendations and the attached zero fiscal note with a caveat that the next committee of referral look at a sunset provision. There being no objection, HB 101 was so moved from the House Special Committee on Utility Restructuring. HB 62 - ALASKA PUBLIC UTILITIES COMMISSION CHAIRMAN HUDSON announced the next order of business is HB 62, "An Act relating to the Alaska Public Utilities Commission; and providing for an effective date." CHAIRMAN HUDSON announced there are two amendments to be considered (1-LS0327\A.2 and 1-LS0327\A.3). Number 1761 CHAIRMAN HUDSON called for a brief at-ease at 8:35 a.m. and called the meeting back to order at 8:38 a.m. CHAIRMAN HUDSON called on Wilda Rodman, staff to Representative Gene Therriault, sponsor of the bill. Number 1774 WILDA RODMAN, Legislative Administrative Assistant to Representative Gene Therriault, Alaska State Legislature, stated in reference to Amendment A.2, Representative Therriault would prefer to amend HB 62 instead of separating it into two different bills. CHAIRMAN HUDSON asked Ms. Rodman for clarification whether Representative Therriault would like to see the amendment incorporated into HB 62. MS. RODMAN said correct. CHAIRMAN HUDSON asked Ms. Rodman to speak to Amendment A.2 (1-LS0327\A.2, Cramer, 2/26/99). It reads as follows: Page 1, following line 3: Insert new bill sections to read: "* Section 1. AS 42.05.020(b) is amended to read: (b) The governor shall designate one member of the commission as chair [CHAIRMAN] of the commission. This member shall serve as chair [CHAIRMAN] for a term of four years, but may be appointed for successive terms. The chair is responsible for the administration of the commission and commission employees. * Sec. 2. AS 42.05.101(a) is amended to read: (a) The chair of the commission shall establish for the commission a principal office and branch offices necessary to discharge its business efficiently. For the convenience of the public or of parties to a proceeding, the commission may hold meeting, hearings, or other proceedings at other locations. * Sec. 3. AS 42.05.111(b) is amended to read: (b) The chair of the commission may employ temporary legal counsel for the commission from time to time in proceedings before the commission in which the attorney general is representing the public interest or a party before the commission. * Sec. 4. AS 42.05.121 is amended to read: Sec. 42.05.121. Employment of commission personnel. (a) The chair of the commission may employ an executive director of the commission. The executive director [WHO] shall have had at least five years of experience in public utility management or regulation, law, accounting, engineering, or an allied field. The executive director is responsible for directing the administrative functions of the commission and carrying out the policies as set by the commission. The chair of the commission may employ engineers, hearing officers, administrative judges to the extent provided in AS 42.06.140(b), experts, clerks, accountant, and other agents and assistants considered [IT CONSIDERS] necessary. Employees and agents of the commission who are not partially exempt under AS 39.25.120, other than legal counsel, are in the classified service under AS 39.25.100. (b) In addition to the [ITS] staff of regular employees, the chair of the commission may contract for and engage the services of consultants and experts the chair [COMMISSION] considers necessary." Page 1, line 4: Delete "Section 1" Insert "Sec. 5" Renumber the following bill section accordingly. MS. RODMAN explained Amendment A.2, in response to testimony at the last hearing, delineates the power and authority of the chair of the commission. The chair doesn't have the authority to hold someone accountable. CHAIRMAN HUDSON stated there are constitutional problems with Amendment A.2. Number 1856 REPRESENTATIVE PORTER stated, in the general consideration that the committee has had and the exposure that most of the members have had over the last couple of years, this type of shoring up is necessary. The greatest concern expressed about the commission is delay and consequently he feels compelled not to be subject to the same criticism. He said, "If--if it is that making the individual chair responsible for hiring is improper, then let's just not do it. But, if there is an alternative that is acceptable, let's consider it. If not then, my feeling would be, let's get this thing moving." Number 1906 REPRESENTATIVE COWDERY stated he thought the intent of the bill is a sunset date. It has a wide title, and that is a problem too. He would like to see the committee address the sunset date and address the other things in another piece of legislation. The wide title calls for mischief. He would like to tighten the title to pertain to the sunset date only. Number 1950 REPRESENTATIVE DAVIES agreed with tightening the title to reflect the sunset and the intent of the amendments. If it looks like it will be dragged on longer beyond these two amendments, then he agrees the bill should be separated in order to get one going. He supports Amendment A.2. It is consistent with the material provided by the independent internal review. It is essentially one of the recommendations. Number 1983 CHAIRMAN HUDSON stated he would like to see Amendment A.2 be incorporated into the bill. In reference to the concern of the open ended title, he read the following suggestion by Representative Therriault: "An Act relating to the extension of the termination date and the organization structure of the APUC [Alaska Public Utilities Commission]." CHAIRMAN HUDSON indicated it would need to be in writing before taking it up. Number 2029 REPRESENTATIVE ROKEBERG suggested taking up the amendments pertaining to the body of the bill then work on a title. CHAIRMAN HUDSON asked for someone to address the constitutional problem in Amendment A.1. MS. RODMAN replied the problem is with the language starting on line 18, "(a) The chair of the commission may employ an executive director of the commission...". It is unconstitutional because the commission needs to vote on an executive director. It can be fixed by deleting that language so that it reads, "The commission may employ an executive director...". CHAIRMAN HUDSON called for a motion to amend Amendment A.2. Number 2075 REPRESENTATIVE PORTER made a motion to adopt Amendment A.2 deleting the language as indicated on lines 18-20 that would result in leaving the current statutory language. REPRESENTATIVE ROKEBERG objected. He announced he has another amendment to Amendment A.2 and asked that the motion be restated to incorporate his amendment. CHAIRMAN HUDSON stated he assumed that the motion was an amendment to Amendment A.2. REPRESENTATIVE PORTER removed his motion. REPRESENTATIVE PORTER made a motion to delete lines 18-20 of Amendment A.2 that would result in leaving the current statutory language. REPRESENTATIVE DAVIES called for a point of order. Amendment A.2 is not before the committee. CHAIRMAN HUDSON called for a motion to officially adopt Amendment A.2. Number 2126 REPRESENTATIVE PORTER made a motion to adopt Amendment A.2. CHAIRMAN HUDSON designated the amendment as Amendment 1, and asked whether there is any objection. There being no objection, it was so adopted. CHAIRMAN HUDSON asked whether there is any objection to amending Amendment 1 as already discussed. Number 2162 REPRESENTATIVE COWDERY objected. He asked Ms. Rodman how amending Amendment 1 meets the constitutional standard. MS. RODMAN replied she can't answer that. She only knows how to fix it. She deferred the question to Walt Wilcox, staff to Representative Bill Hudson. Number 2191 WALT WILCOX, Legislative Assistant to Representative Bill Hudson, Alaska State Legislature, stated last evening it was brought to his attention that Section 42.05.121 in the amendment is unconstitutional under the "Boards and Commissions" section of the state constitution. That section says the entire commission has to hire an executive director, not one commissioner. Number 2217 REPRESENTATIVE COWDERY asked Mr. Wilcox whether the amendment to Amendment 1 makes it constitutional. MR. WILCOX replied if that portion is taken out of the amendment it goes back to the original language. According to his understanding, the original language is constitutional. Number 2227 REPRESENTATIVE COWDERY removed his objection. CHAIRMAN HUDSON asked whether there is any further objection. There being none, it was so adopted. Number 2256 REPRESENTATIVE ROKEBERG asked Mr. Wilcox whether the language starting on line 23 of Amendment 1, as amended, giving the chair not the executive director the authority to employ remains constitutional. MR. WILCOX replied the area just discussed was the only portion that Legislative Legal Counsel pointed out as being unconstitutional. CHAIRMAN HUDSON noted that the new section would read, "The commission may employ an executive director." REPRESENTATIVE ROKEBERG stated the language starting on line 23 reads, "The chair of the commission may employ engineers..." MR. WILCOX explained that has nothing to do with the executive director or managerial slot for the whole organization. It has to do with the other employees. Number 2280 REPRESENTATIVE ROKEBERG made a conceptual motion to delete the word "governor" and to add the word "commission" to page 1, line 4 of Amendment 1, as amended. REPRESENTATIVE ROKEBERG stated the idea of the conceptual amendment is to allow the members of the commission to appoint the chair rather than the governor. He has discussed this issue with a number of people involved and he thinks it might help with the general morale, efficiency and operation of the agency according to the study and other reorganization methods. It may be controversial, but it deserves an airing. CHAIRMAN HUDSON called on Ginny Fay from the Department of Commerce and Economic Development to discuss the conceptual motion. Number 2339 GINNY FAY, Legislative Liaison, Office of the Commissioner, Department of Commerce and Economic Development, stated the Administration strongly opposes the conceptual amendment. The Governor would like to continue to appoint the chair and under the current circumstances the situation would be worse if the commissioners appointed the chair. Number 2363 REPRESENTATIVE DAVIES stated he is against the conceptual amendment. The structure now achieves a certain balance. The issue of whether a governor can replace all of the members of the commission in order to be more responsive to the current Administration has been struck down in court. He supports a staggered set of appointments so that the commission, hopefully, is more depoliticized and that there is representation from a broad set of views. However, a commission like this needs to be a little bit more responsive and having the governor appoint the chair is a compromise between those two circumstances. Number 2406 REPRESENTATIVE PORTER stated he understands the idea of the conceptual amendment and he could argue for it, but at the same time he recognizes that there is a situation that needs to be worked through with this individual commission. He said, "Until we get through this, it seems to me making this amendment exasperates that situation. It would also put a difficult spin on a situation where there would be one person missing, that having been the chair for some reason. And, then the four members are required, with an inability to strike a majority, to appoint a chairman and the stalemate could go on forever. I think that considering all of that, it's a close call, but I would speak against the amendment." Number 2451 REPRESENTATIVE COWDERY stated it is important to remember that the legislature has its voice in confirming the members. He stated he is against the conceptual amendment. Number 2470 CHAIRMAN HUDSON asked Representative Rokeberg whether he still wants to offer the conceptual amendment after hearing the testimony. Number 2477 REPRESENTATIVE ROKEBERG stated it appears that there might be a constitutional prohibition to... TAPE 99-7, SIDE B Number 0001 REPRESENTATIVE ROKEBERG continued. The conceptual amendment is to help overcome some of the internal problems of the commission by having a more collegial type of selection of the chair. Number 0012 REPRESENTATIVE ROKEBERG withdrew his motion based on constitutional grounds. CHAIRMAN HUDSON called for a motion to adopt Amendment 1, as amended. Number 0021 REPRESENTATIVE DAVIES made a motion to adopt Amendment 1, as amended. There being no objection, it was so adopted. CHAIRMAN HUDSON called for a motion to adopt Amendment 2 (1-LS00327\A.3, Cramer, 3/9/99). It reads as follows: Page 1, following line 3: Insert a new bill section to read * Section 1. AS 42.05.035 is amended to read: Sec. 42.05.035. Removal of commissioners. The governor may remove a commissioner from office for cause [BY AND WITH THE CONSENT OF A MAJORITY OF THE LEGISLATURE]." Page 1, line 4: Delete "Section 1" Insert "Sec. 2" Renumber the following bill section accordingly. CHAIRMAN HUDSON stated Amendment 2 means the governor can remove a commissioner from office for cause and eliminates the requirement of going back to the legislature for consent. Number 0063 REPRESENTATIVE COWDERY asked whether Amendment 2 would be in the statutes forever. CHAIRMAN HUDSON replied it would be in the statutes until it is properly removed by some further action of the legislature. It is not a time-sequenced amendment. Number 0085 REPRESENTATIVE COWDERY stated there were lawsuits that cost a lot of money and misery when there were efforts to do something similar to this in the past. He can see the reason for it, but on the same token he doesn't want to have one Administration appoint a commission for a given length of time and a new Administration wipe everybody out. Number 0110 REPRESENTATIVE GREEN stated in most legislation "cause" is pretty well defined. But, because of the contentious nature of this particular commission, he is concerned that cause could be stretched to say that disruption amongst the troops is a reason for dismissal. He wondered whether Pandora's box is being opened without a definition of the term "cause". CHAIRMAN HUDSON deferred the question to Ms. Fay from the Department of Commerce and Economic Development. Number 0144 MS. FAY replied the department is concerned about the limitation of the amendment to address those concerns, especially extensive legal battles. She wondered whether or not changing the statute at this time would be applicable to the current situation. She announced she has an amendment from the Department of Law. It has not been drafted by Legislative Legal Counsel. It attempts to address the issue of clarifying cause. This type of amendment has been before the committee in the past dealing with the Department of Fish and Game and the Board of Game. The proposed amendment reads as follows: * Sec. AS 42.05.035 is repealed and reenacted to read: Sec. 42.05.035. Removal of commissioners. The governor may only remove a commissioner from office for inefficiency, neglect of duty, or misconduct in office, or because the member while serving on the commission is convicted of a misdemeanor for violating a statute or regulation related to public utilities or of a felony. A copy of the charges shall be delivered to the commissioner in writing. The commissioner shall have an opportunity to be heard in person or through counsel at a public hearing before the governor or a designee upon at least 10 days notice by registered mail. The commissioner may confront and cross-examine adverse witnesses. Upon removal, the governor or a designee shall file in the proper state office the finds and a complete statement of all charges made against the commissioner. * Sec. In accordance with AS 01.10.100(a), the repeal and re-enactment of AS 42.05.035 enacted in sec. of this Act applies to a commissioner of the Alaska Public Utilities Commission appointed before the effective date of this Act and is intended to extinguish any existing right of a sitting commissioner to the removal procedure specified informer AS 42.05.035. Number 0197 CHAIRMAN HUDSON asked Ms. Fay whether the recommended language bears the scrutiny of the Department of Law. MS. FAY replied it was prepared by the Department of Law. CHAIRMAN HUDSON asked Ms. Fay whether she is saying that this is common in other applications. MS. FAY replied she thinks the legislature recently enacted something similar with relationship to the Board of Fisheries or Board of Game. She doesn't recall which one. Number 0217 REPRESENTATIVE COWDERY referred to the language, "...while serving on the commission is convicted of a misdemeanor for violating a statute or regulation related to public utilities or of a felony. A copy of the charges shall be...". He noted that in this society the key word is "conviction" and asked Ms. Fay to explain the language. Number 0243 REPRESENTATIVE GREEN stated the language reads "or". He thinks it refers to a sequence rather than having to be convicted of all of them. Number 0259 REPRESENTATIVE DAVIES noted the charges refer to the grounds for removal, not the grounds for conviction. CHAIRMAN HUDSON stated that is his reading too. MS. FAY stated she thinks that is correct. CHAIRMAN HUDSON stated it is up to the committee members to determine which action to take on either amendments - Amendment 2 or the proposed amendment from the Department of Law. REPRESENTATIVE DAVIES asked Chairman Hudson whether he intends to hold the bill over for one more meeting. CHAIRMAN HUDSON replied, if the bill can get cleaned up and the committee members feel generally comfortable with it, he would like to move it out. REPRESENTATIVE DAVIES asked Chairman Hudson where the bill goes next. CHAIRMAN HUDSON replied it goes next to the House Labor and Commerce Committee. CHAIRMAN HUDSON labeled the proposed amendment as new Amendment 2 and called for a motion to adopt it. Number 0334 REPRESENTATIVE DAVIES made a motion to adopt the new Amendment 2. REPRESENTATIVE ROKEBERG objected. He is not sure where it is coming from. He is reluctant to see the power of the legislature when it comes to these constitutionally protected, quasi-judicial agencies go to the governor. It seems the amendment is skewed towards an instant fact pattern and not for the benefit of the state in the long run. Number 0396 MS. FAY stated, according to her understanding, the APUC statute is the only place that the legislature votes to concur with the removal of a member and its constitutionality is questionable. The new Amendment 2 would make the APUC removal clause constitutional and more consistent with other removals for boards and commissions. Number 0420 REPRESENTATIVE ROKEBERG stated he has not had a chance to look over the new Amendment 2 and its ramifications. It is an interesting point, but without seeing a legal opinion relating to its constitutionality and given the importance of this matter, he will maintain his objection. Number 0448 REPRESENTATIVE BERKOWITZ stated it seems, when the legislature takes on the position of a judicial function, it would create some kind of problem. That would probably be the constitutional concern with the statute as it is currently configured. Number 0483 REPRESENTATIVE PORTER stated, in recognizing that an individual situation has been brought to the legislature's attention, he agrees with Representative Rokeberg. It should be looked at in the context of whether or not it is good public policy. It is also his understanding that this particular statute is the only one that provides this type of mechanism for the removal of a commissioner. It is the only one whereby the legislature is required to confirm a dismissal. Again, looking at the general problems described for this particular commission, a special session would be needed to avoid an eight-month delay for the removal of a commissioner which doesn't seem reasonable. He is more comfortable with language addressing cause. Well, here is the cause and its a high duty of cause, and one that he is comfortable with. CHAIRMAN HUDSON asked Representative Porter whether he is speaking in favor of the new Amendment 2. REPRESENTATIVE PORTER replied yes. Number 0555 REPRESENTATIVE COWDERY stated he would like to speak against the new Amendment 2. It was just handed to the committee members. He would like to have some time to review it and explore it with Legislative Legal Counsel. He might not object to it later, but he still wants to hold it over. Number 0579 REPRESENTATIVE DAVIES stated it seems reasonable to address those concerns in the next committee of referral, especially since Representative Rokeberg who objected to it is the chairman of the next committee. He suggested adopting the new Amendment 2. Number 0599 CHAIRMAN HUDSON stated, on the other hand, if it is taken care of here, it is only a one week delay. If it is sent to the next committee of referral... Number 0613 REPRESENTATIVE ROKEBERG stated it would be valuable to get a legal opinion on it. He would be appropriate, given the makeup of this committee versus the makeup of the next committee of referral, making the decision in this committee. He asked that the bill be held over one more week to look at the legal aspects and other avenues of ameliorating the problems. It is appropriate to hold it over given the fact that the Administration brought it at the last minute. CHAIRMAN HUDSON stated those are the right reasons to hold the bill and new Amendment 2. He will ask for a legal opinion from Legislative Legal Counsel which will be presented at the next committee meeting. He also asked the committee members to contemplate the title. He will send a copy of Representative Therriault's suggestion to each of the committee members. Number 0720 MS. FAY stated the Administration supports Representative Therriault's wish to include these changes into a sunset bill, as opposed to separate legislation. If the title is changed to the suggested one, it won't capture the essence of the two amendments. In addition, the language "organization and structure" in a title opens it up to other potential changes. She suggested the following language: "...the extension of the APUC, the power of the chair, and the removal of commissioners..." Number 0785 REPRESENTATIVE DAVIES suggested asking Legislative Legal Counsel to narrow the title in relation to the concerns. Number 0795 REPRESENTATIVE COWDERY suggested appointing a subcommittee. CHAIRMAN HUDSON said he has confidence that it can be done in a short order, especially with the help of Legislative Legal Counsel and the committee members. Number 0825 REPRESENTATIVE KOTT stated a title change will depend on what happens with Amendment 2 or new Amendment 2. He is not comfortable with this amendment process. He was looking forward to a clean bill that would expedite itself through the system, rather than offering the opportunity for every committee that reviews it to make administrative changes. While the Administration might support the inclusion of the administrative remedies in Amendment 1, as it moves through the process some of these things might become objectionable to the Governor and the tendency to support it might change. Number 0881 CHAIRMAN HUDSON opened the meeting up to public testimony. BOB LOHR, Executive Director, Alaska Public Utilities Commission, Department of Commerce and Economic Development, testified via teleconference from Anchorage. He announced that Chairman Cotten had to return to the APUC for a public meeting. He was here for most of the discussion, but he was not here for the discussion on the new Amendment 2. CHAIRMAN HUDSON asked Mr. Lohr to pass on to Chairman Cotten the flavor of the comments of the committee members. The committee may want him to comment next week. Number 0935 TIM COOK, Commissioner, Alaska Public Utilities Commission, Department of Commerce and Economic Development, testified via teleconference from Wasilla. He said: "Yes, sir this is Tim Cook in Wasilla. And, I'm sorry that I'm missing a public meeting of the utilities commission, but after listening this morning, I thought, it was imperative that I stay and give you some of my thoughts on...I hope that I'm not too long winded in this, but sometimes I get paid by the nickel as well and I have to talk a long time to make any nickels. Mr. Chairman, I came this morning prepared to say one thing. After listening to the proposed amendments, I guess it really furthers my resolve. I came to advocate that the legislature either make fundamental structural changes at the APUC or let the APUC sunset out of existence. The commission has formally adopted recommendations that we go from five commissioners to three and that we have an internally elected chair rather then a chair appointed by the Governor. The reasons that I take this course--make these recommendations is--is at this juncture the public utilities commission has become a springboard for political aspirations by both the Governor and Chairman. And, after listening to the proposed amendments this morning, I believe that--that the PUC would become an--an absolute puppet of the Governor. Mr. Chairman and members of the committee, many of you know me and supported me in my fight to keep the APUC an independent agency when the Governor tried to remove me from the commission. That fight was expensive to me personally. It took a year of my life and about $65,000 in attorney fees. And we won that battle, but I believe we're losing the war. Particularly with the amendments that are talked about this morning, there is no doubt that the Governor would attack me again as well as other members of the commission. And it puts the commission member in a very difficult situation which is now you're fighting the entire resources of the attorney general's office, the governor's office and (indisc.--coughing) own nickel. The legislature supported me. Let me rephrase it, they didn't support me, they supported their position. I had to hire an independent counsel to represent my interests and that cost me $65,000 approximately out of my pocket. By going to a cause-basis that becomes a very nebulous concept that has no basis. This I don't think is simply my opinion in terms of where we need to go. I've said that the Governor has a strangle hold on this commission previously. I'd like to read to you a letter that the Governor sent to the commission with regard to personnel." CHAIRMAN HUDSON asked Mr. Cook whether the letter is long. MR. COOK said: "No sir, I'm only going to read one sentence--two sentences. It says, 'Therefore, I am appointing Commissioner Clark as commissions hearing officer--that's the Governor speaking--and I do not recognize the validity of the discharge of Robert Lohr. Further, any other appointments or removals from exempt or partially exempt provisions--positions at the commission will be subject to approval by me or my chief of staff.' In essence, the Governor owns the executive director's office." MR. COOK further said: "As far as the chairmanship of the commission, I'd just like to read a very short quote from Commissioner Hanley at our last public meeting. She said that, 'I think we have a situation right now where decisions are made by the chairman and the executive director and board commissioners know nothing about them.' That's the position that Commissioner Hanley has. As far as the--the ability to remove commissioners, the entire trust of giving that to--a requirement has to (indisc.--door closing and coughing) the legislature to remove the ability of the Governor to manipulate politically the decisions of the commission. At this point, we're in a situation where the Governor has completely eviscerated that provision as well. The chairman of the organization's term expired March the first. He serves under provision of 42.05.030 that states, 'the commissioners term expiration of the term shall continue to hold office until a successor is appointed'. In effect what's happened is Sam Cotten is serving at the pleasure of the Governor. And, I believe that Commissioner Cotten will continue to serve in this state of suspended animation as long as he pleases the Governor. And, at the point that he displeases the Governor, the Governor will name a successor and Sam Cotten will be removed immediately from the commission. Mr. Chairman and members of the commission, make no mistake, this Governor and this Chairman have high political aspirations and they also have the keen ability for retaliation. This is not simply within the commission, but there is a fear, I believe, of the utilities throughout the state to say anything critical of the public utilities commission for fear of retaliation. In fact, we've already had a situation occur that put a very chilling effect on communications from the public utilities to the legislative auditor..." CHAIRMAN HUDSON asked Mr. Cook to conclude his comments and to fax any letters or anything else that he would like the committee to consider. MR. COOK said: "Yes, sir I was trying to wind up right there. I guess, the bottom line of my position is, at this point, I believe the public utilities commission needs to either have fundamental structural change or we need to sunset it and start over again." Number 1338 REPRESENTATIVE ROKEBERG asked Mr. Cook to provide the committee members with a list of recommendations on what needs to be done to restructure the APUC and to refer to the National Regulatory Research Institute's (NRRI) report, if it is part of the recommendations. Number 1383 DAVID FAUSKE, General Manager, Arctic Slope Telephone Cooperative; President, Alaska Telephone Association (ATA), testified in Juneau. The committee members have two letters from the ATA in their packets. The ATA certainly advocates the reinstatement of the APUC, and is very concerned with a wind down, lame duck or holding situation. The last time that happened, the consumer, the industry and the general public interest suffered. At that time, there were numerous issues and dockets before the commission. At this point, there has been a five-fold increase in the issues heard and considered before the APUC. The types and kinds of issues have broadened due to the fallout of the Federal Communications Act of 1996. Therefore, a wind down situation would be even more exacerbated by the public and very costly. Those costs eventually wind up hitting the pocketbooks of the consumers in one way or another. The ATA urges the reinstatement of the APUC under the sunset provisions as a specific Act, and the restructuring or redefining of the APUC as another piece of legislation. CHAIRMAN HUDSON called on Ms. Rodman to address any of the concerns heard today. MS. RODMAN asked Chairman Hudson for a brief at-ease. Number 1648 CHAIRMAN HUDSON called for an at-ease at 9:30 a.m. and called the meeting back to order at 9:32 a.m. CHAIRMAN HUDSON asked staff of the prime sponsor to prepare final comments for the committee to consider next week. He doesn't want the bill to become a Christmas tree and he doesn't want it to dally around too much longer. He knows how much it takes to get a bill through both bodies. It is important not to let it sunset because there isn't anything to substitute its place. CHAIRMAN HUDSON indicated that the bill will be held over for further consideration. ADJOURNMENT Number 1738 CHAIRMAN HUDSON adjourned the House Special Committee on Utility Restructuring meeting at 9:34 a.m.