HOUSE SPECIAL COMMITTEE ON UTILITY RESTRUCTURING March 31, 1999 8:06 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 APUC PROPOSED LEGISLATION (* First public hearing) PREVIOUS ACTION No previous action to record. WITNESS REGISTER WALTER WILCOX, SR., Legislative Assistant to Representative Bill Hudson Alaska State Legislature Capitol Building, Room 108 Juneau, Alaska 99801 Telephone: (907) 465-3744 POSITION STATEMENT: Presented a sectional analysis of the proposed legislation. PAT HARMAN, Legislative Administrative Assistant to Representative Pete Kott Alaska State Legislature Capitol Building, Room 118 Juneau, Alaska 99801 Telephone: (907) 465-3777 POSITION STATEMENT: Discussed concerns of ex parte. JIM POSEY, 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: Discussed the proposed legislation. SAM COTTEN, Commissioner/Chairman Alaska Public Utilities Commission Department of Commerce and Economic Development 1016 West 6th Avenue Anchorage, Alaska 99501-1963 Telephone: (907) 276-6222 POSITION STATEMENT: Discussed the proposed legislation. 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: Discussed the proposed legislation. JAMES ROWE, Executive Director Alaska Telephone Association 201 East 56th Avenue, Suite 114 Anchorage, Alaska 99518 Telephone: (907) 563-4000 POSITION STATEMENT: Discussed the proposed legislation. ACTION NARRATIVE TAPE 99-11, SIDE A Number 0001 CHAIRMAN BILL HUDSON called the House Special Committee on Utility Restructuring meeting to order at 8:06 a.m. Members present at the call to order were Representatives Hudson, Cowdery, Kott, Porter, Davies, Berkowitz and Green (alternate). Representative Rokeberg arrived at 8:07 a.m. APUC PROPOSED LEGISLATION CHAIRMAN HUDSON announced the only order of business today is discussion on proposed legislation relating to the Alaska Public Utilities Commission (APUC). CHAIRMAN HUDSON indicated the committee will take up work draft, I-LS0764\A, Cramer, 3/26/99. He called on Walter Wilcox, Sr. to explain it. Number 0119 WALTER WILCOX, SR., Legislative Assistant to Representative Bill Hudson, Alaska State Legislature, came before the committee and presented the following sectional analysis: Section 1 changes the term "chairman" to "chair", and makes the chair responsible for the administration of the commission and its employees; Section 2 removes the legislature's approval of the governor's removal of a commissioner; Section 3 changes the background requirements for commissioners; Section 4 adds a section that says no more than two commissioners may be of the same political party; Section 5 gives the chair more power by establishing offices for the commission; Section 6 gives the chair more power by being able to hire temporary legal counsel when the attorney general is representing the public's interest; Section 7 gives the chair the ability to hire certain employees and outside consultants; Section 8 deals with the transition for members regarding Section 3 and 4; and Section 9 deals with the rights of existing members regarding Section 2. MR. WILCOX, SR. indicated that the proposed legislation does not have an effective date. He stated a strong chair should be able to deal with the timeliness concern. He also noted that Pat Harman [Legislative Administrative Assistant to Representative Pete Kott] will discuss the issue of ex parte or dual advocacy of key staff within the commission. Number 0485 REPRESENTATIVE BERKOWITZ said he doesn't like Section 4. He wondered what would happen if a commissioner changed his/her party affiliation in the middle of his/her service. REPRESENTATIVE COWDERY said anybody can change his/her party affiliation at anytime. He doesn't know how that can be addressed. REPRESENTATIVE BERKOWITZ noted that the proposed legislation doesn't say at the time of application. If there was a change, the board could be in violation of this statute. REPRESENTATIVE COWDERY said the positions are highly sought after. REPRESENTATIVE BERKOWITZ said it seems that this section injects a degree of partisanship that is not necessary. The legislature has oversight over the commission and it should be concerned with qualifications, not party affiliation. Number 0641 REPRESENTATIVE PORTER stated that anybody who takes a position where party affiliation is a criteria is expected to maintain his/her affiliation. If for some reason a commissioner changed his/her party affiliation, he thinks it would negate his/her appointment. He cited the Joint Committee on Ethics as an example. Number 0692 REPRESENTATIVE DAVIES said he didn't see this particular issue in any of the reviews of the commission - the NRRI [National Regulatory Research Institute] report or the legislative audit report. It goes against finding the best person for the job. Number 0765 CHAIRMAN HUDSON commented that the proposed legislation is a composite of ideas that have been expressed to him and his staff. Number 0797 REPRESENTATIVE GREEN said he agrees that changing a party affiliation in mid-term is putting a commissioner's appointment in harm's way. It would probably be good, however, for the sake of trying to keep the commission neutral and balanced. Number 0854 REPRESENTATIVE BERKOWITZ noted that the Joint Committee on Ethics is involved in partisan politics while the APUC is not. He further stated that 58 percent of Alaskans are not affiliated with either major political party. The proposed legislation says that no more than three people could be nonpartisan when that would be more representative. Number 0920 CHAIRMAN HUDSON commented that the majority of the people in Alaska are nonpartisan. He is hesitant to inject partisanship as well. Number 0951 REPRESENTATIVE GREEN noted that the nonpartisan group has historically voted about the same for the two major parties; therefore, it is not the case to say that they wouldn't be represented. But it could be perceived as partisan to allow a sitting governor and a majority of a single party ... A sense of balance would bode well for an impartial tribunal trying to make independent decisions. Number 1017 REPRESENTATIVE PORTER said it seems that the unspoken issues are between the Hickel appointments and the Knowles appointments. That's pure party politics. He suggested eliminating the second sentence from Section 4 as a compromise. Number 1114 REPRESENTATIVE ROKEBERG said that the nonpartisan and undeclared affiliations represent the largest pool of appointee; therefore, he doesn't want to see an arbitrary barrier put in their way. CHAIRMAN HUDSON noted, if those affiliations were removed, it would be left wide open. REPRESENTATIVE ROKEBERG said, if that's the intent, he would agree with it. Number 1197 REPRESENTATIVE PORTER recommended language to preclude the appointment of someone who has changed his/her party affiliation in the previous year. REPRESENTATIVE BERKOWITZ suggested deleting Section 4 entirely. Number 1342 PAT HARMAN, Legislative Administrative Assistant to Representative Pete Kott, Alaska State Legislature, noted that the industry is concerned about the dual role of staff as an advocate for particular dockets. Staff is appointed when there is no opposition or adequate opposition in order that the commissioners can hear both sides of an issue. He is not aware of any misuse, but he is aware of fear in both the electric and telephone industries. As a result, it has been suggested to either separate the staff or to use contractors to perform these types of functions. Number 1447 REPRESENTATIVE DAVIES commented he has not heard that concern from the industry. He asked Mr. Harman whether the industry brought that concern to him directly. MR. HARMAN replied at least ten people have brought that concern to him. There is reticence to speak on it because they don't want to offend the commission. CHAIRMAN HUDSON wondered about language requiring an outside advocate, if there was an internal problem with a sitting staff member, for example. Number 1564 REPRESENTATIVE DAVIES said there are several degrees of freedom in choosing independent advocates. For example, there might be concern that staff represents the consumer interests too well. Number 1598 REPRESENTATIVE ROKEBERG said he thinks that the committee should look at hiring independent counsel for the employees of the commission who are not directly connected or beholden to the attorney general. This is an independent commission and it should have its own counsel. In addition, there is merit in discussing the issue of each commissioner having his/her own counsel vis-a-vis the rest of the executive and chairman's staff. It relates to the issue of consumer protection and the need to provide a timely response. Number 1731 JIM POSEY, Commissioner, Alaska Public Utilities Commission, Department of Commerce and Economic Development, testified in Juneau. He noted that the commission plans to add the technology recommendations made by the NRRI by the end of this year in order to help get data in and out of the commission quicker. The commission uses its web page to publish most of its orders. The changes in the proposed legislation may be an overreaction to a number of different comments. He's not sure, however, because he hasn't been privy to all the comments. He noted that Alaska's senators in Washington D.C. call on their commissioners for a report on their caseload and complaints and how they are handling them. He suggested looking at something like that rather than trying to make substantive changes to the commission. He further noted that it is very unpredictable to determine how a commissioner will vote based on his/her party affiliation. A decision is really based on a commissioner's knowledge. Politics may play a part of interpersonal relations, but that will always be a problem. He further noted that, if the legislature decides to go in the direction of a strong chair, it might as well be a commission of one commissioner because one commissioner will be making all the decisions whoever the commissioner is. There have been some complaints, but in general the overall working of the commission is not impaired, especially when looking at its statistical record. He cited there were 33 percent more orders issued last year than in 1997 mostly due to telecommunication restructuring. That is a significant number. He commented that he has been working on securing two hearing officers to help matters. In fact, most of the things that the commission needs to do can be done internally without any legislative changes. Number 2036 REPRESENTATIVE GREEN noted that the chair of the commission has indicated to the committee that personalities are a portion of why there is delay in making decisions. He asked Mr. Posey whether there is anything that can be done that would help to relieve the real or perceived personality problems. MR. POSEY replied he doesn't think that personality problems have impeded the rate of getting decisions out. It may affect interpersonal relations at times, but once at the table often times the two people who disagree vote on the same side of the issue. He further stated that the commission has hit snags before, but not to the degree that it deserves substantive changes. If the commission is going to be restructured, he suggested having NRRI take another look at it in that context for recommendations. It is by far the most qualified group. Number 2233 REPRESENTATIVE GREEN asked Mr. Posey whether he feels that the concept of a stronger chair to expedite things is not worth the effort. MR. POSEY replied the administrative workings of the commission are done by the chair via a directive in the form of a letter from the Governor. It works fairly well, and with two commissioners rotating off this year things will go back to working seamlessly. Number 2289 REPRESENTATIVE COWDERY asked Mr. Posey whether he said that the present operations are efficient. MR. POSEY replied, given the dynamics of a five-member commission, it is as efficient as possible while remaining independent enough to render good decisions. Number 2306 REPRESENTATIVE COWDERY noted that the governor is strong in this state and that a strong chair is not necessarily bad. MR. POSEY said he doesn't necessarily agree. The chair is appointed by the governor and already has a sufficient number of things to do, especially for a quasi-judicial body. Number 2362 REPRESENTATIVE COWDERY stated it seems that there is a lot of conflict amongst the commissioners and chair. The proof is in the letters that have been written and sent out. Number 2379 REPRESENTATIVE DAVIES noted that one of the recommendations by the NRRI was a strong chair. The proposed legislation calls for a strong chair in the sense of administration, but not any stronger in the sense of making substantive decisions. He asked Mr. Posey whether strengthening the administrative functions of the chair would overlap into regulatory decisions. MR. POSEY replied giving additional powers to the chair to select and make decisions that are intrinsic to the operation of the commission without the other people having a say divides the group even more over a period of time, especially given the fact that the commission is a quasi-judicial body. Number 2461 REPRESENTATIVE ROKEBERG asked Mr. Posey to comment on the conversation that he had with him regarding legal counsel. TAPE 99-11, SIDE B Number 0001 MR. POSEY said, on certain issues, he has thought that there should have been outside or independent legal counsel, otherwise the attorney general is on two or three different sides of one issue. He cited the state of Nevada uses full-time legal counsel who answers only to their commission. Alaska has a strong administration, governor and attorney general, which makes it more difficult but not impossible. He has advocated hiring and using outside counsel. Number 0048 REPRESENTATIVE ROKEBERG asked Mr. Posey's opinion on the commissioners having separate counsel. MR. POSEY replied that is the way to go in the long-term. He noted he was lucky to get a paralegal who has been very helpful to him. Number 0073 REPRESENTATIVE GREEN asked Mr. Posey whether using subcommittees would expedite the commission's workload. MR. POSEY replied that's how the busiest of commissions do their business. For example, a law judge renders an opinion which goes to the full commission that either accepts or rejects it. He reiterated that he has suggested two hearing officers so that there would be at least two things going on at the same time. Right now, four commissioners sit with one hearing officer and everything is funneled through that person. Number 0124 REPRESENTATIVE PORTER asked Mr. Posey how much the commission has on its RSA [Reimbursable Services Agreement] with the Department of Law. MR. POSEY replied, he thinks, that the commission has two RSAs - one legal assistant and two attorneys. The commission pays approximately $250,000 to $290,000 for legal counsel. Number 0168 CHAIRMAN HUDSON commented it was the personality issue that got the legislature to the point of taking action. But, in the process, the industry has expressed that one of the weaknesses of the system is because nobody is in charge. He asked Mr. Posey whether the commission has any interaction with the Department of Commerce and Economic Development. MR. POSEY replied no. The commission was set up under the department so that there is a centerpiece for budgeting, traveling and purchasing. There are no day-to-day workings with the department. Number 0329 CHAIRMAN HUDSON asked Mr. Posey whether he feels at the present time that the legislature doesn't provide oversight. MR. POSEY replied the legislature provides budgetary oversight, and the commission provides an annual report every year to the legislature, but that's not the same as answering questions in person. [THE RECORD REFLECTED THAT THE GAVEL WAS HANDED OVER TO VICE-CHAIR COWDERY] Number 0378 REPRESENTATIVE BERKOWITZ asked Mr. Posey whether there is any blurring between policy makers and utility commissions. It seems easy for the legislature to impose its views without completely understanding an issue the way a commission might. MR. POSEY replied there is always a concern of blurring, but if it's properly structured ... It's no more than getting a call from a legislator regarding his/her community and wanting the commission to move quicker. [There was laughter] Number 0465 REPRESENTATIVE BERKOWITZ asked Mr. Posey whether he sees reporting back to the legislature as more of an operational oversight. MR. POSEY replied yes. Number 0474 REPRESENTATIVE DAVIES asked Mr. Posey how the legislature should view the 33-percent increase in orders versus the number of dockets. They seem to contradict each other. MR. POSEY replied it seems contradictory, but numbers don't lie. The commission has an overwhelming number of dockets. The commission generally gets what it has to out in a timely manner. There are some things that take a long analysis which requires staff. The commission has been held up because of the hiring freeze. That's not to say that it's all staff related, however. "I will represent the numbers are there, but are we doing something to help relieve that number? Yes. Do we have a plan? Yes." number 0586 REPRESENTATIVE DAVIES asked Mr. Posey whether he is comfortable now with the additional employees approved and the different ways of looking at the structure of the work flow, such as the new management information system. He wondered whether the trend would be reversed in relation to the number of dockets opened and closed. MR. POSEY replied he would like to make that promise, but it depends on what the courts, the legislature, and the federal government sends the commission's way. Number 0664 REPRESENTATIVE GREEN asked Mr. Posey how long it takes a commissioner to come up to speed. MR. POSEY replied a citizen commission relies on experts and practitioners. He takes home binders by the bag full to read. If a commissioner reads and listens to presentations, a decision can be made. When he was new, he was making decisions within the first 20 to 30 days. VICE-CHAIR COWDERY asked Sam Cotten [Commissioner/Chairman of the APUC] to comment on the discussion so far and the proposed legislation. Number 0774 SAM COTTEN, Commissioner/Chairman, Alaska Public Utilities Commission, Department of Commerce and Economic Development, testified via teleconference from Anchorage. He noted that there has been activity on the part of the commissioners that is traditionally left to an executive director. For example, there was a motion passed to take away the ability to hire people from the executive director and placed that ability with the division heads. There was also a motion passed that said every promotion, lateral transfer, or new hire has to be approved by the commissioners. That means the executive director can't make simple decisions without the consent of the commissioners. In his opinion, that ought to be left to the executive director. It's not a major problem, but it ends up occupying the time of the commissioners when there are only so many hours in a day. He agrees with Commissioner Posey in regards to the issue of internal conflicts. They don't really filter down to the decisions made on dockets. His point earlier was that long meetings on personality conflicts take away from time and have the potential to detract from the commissioners' abilities to focus on the important issues in front of them. Number 0941 REPRESENTATIVE BERKOWITZ asked Mr. Cotten whether partisanship drives decisions. MR. COTTEN replied it shows up in some areas, but he doesn't see a partisan breakdown on decisions in areas like electric competition, for example. Number 0982 VICE-CHAIR COWDERY asked Mr. Cotten when his term is up. MR. COTTEN replied his term expires in March of 1999 - now. [There was laughter] Number 0998 VICE-CHAIR COWDERY asked Mr. Cotten to comment on the issue of a strong chair. It seems that a strong chair is appropriate. MR. COTTEN replied he's not sure that the best thing is to give the chair any more power. He's not sure that more administrative authority would translate into leverage on decisions. At times, this commission has occupied itself with minor details on administrative matters when there is only so much time in a day. Number 1079 REPRESENTATIVE PORTER asked Mr. Cotten whether the administrative activities could be fixed statutorily. MR. COTTEN replied he hopes a statutory fix wouldn't be necessary. It's a policy call that the legislature needs to make, however. Number 1136 GINNY FAY, Legislative Liaison, Office of the Commissioner, Department of Commerce and Economic Development, testified in Juneau in support of a stronger chair. It's not much different than a chief justice she said. It helps to keep things flowing. The department wants to hear that everything is going well with its independent agencies. The department only really gets involved when something is going wrong. The department supports the section on the removal of commissioners. She is not prepared to comment on Sections 3 and 4, but questions whether Section 4 is legal in terms of freedom of affiliation. REPRESENTATIVE ROKEBERG asked Mr. Rowe [of the Alaska Telephone Association] whether he has had a chance to join forces with the electric industry in presenting recommendations to the legislature on this issue. MR. ROWE, Executive Director, Alaska Telephone Association, testified in Juneau. He replied he has not been able to meet with Eric Yould on that matter. MR. ROWE further stated he is concerned about Sections 3 and 4 of the proposed legislation because the industry would like to see the best candidates sitting on the commission. With the executive branch nominating a commissioner, and the legislature approving that nominee, he thinks, the industry has to have faith in the system. He would hate to limit the best person because he/she doesn't have some sort of artificial qualification. In relation to the issue of ex parte, the Alaska Telephone Association has discussed it with staff and committee members. The association is concerned because staff of the commission can also be counsel to the commissioners. It is difficult to separate items that can or can't be talked about. He has not heard of any pressures from the executive director or commissioners to do something a certain way; he is concerned about human interaction and the opportunity for that to happen. The association would like to see professional counsel designated to the commissioners for a real clear separation. The association would also like to see equally capable people advocating the staff's position. Number 1490 REPRESENTATIVE ROKEBERG said Mr. Rowe wisely didn't use the term "independent counsel." MR. ROWE explained he is talking about professional staff who can review and gather information so that the commissioners don't have to do it themselves. Number 1524 VICE-CHAIR COWDERY indicated that the committee will work on the proposed legislation again at the next meeting. ADJOURNMENT Number 1564 VICE-CHAIR COWDERY adjourned the House Special Committee on Utility Restructuring meeting at 9:26 a.m.