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Public Utilities and Technology Interim Committee

MINUTES OF THE

    
PUBLIC UTILITIES AND TECHNOLOGY MEMBERS

April 23, 1997 - 9:00 p.m. - Room 223 State Capitol


Members Present:
    Sen. Lorin v. Jones, Co-Chair
    Rep. Beverly Ann Evans, Co-Chair
    Sen. John P. Holmgren
    Sen. Alarik Myrin
    Rep. Jeff Alexander
    Rep. Ralph Becker
    Rep. Orville D. Carnahan
    Rep. Gary F. Cox
    Rep. Brent H. Goodfellow
    Rep. Byron L. Harward
    Rep. Tom Hatch
    Rep. J. Brent Haymond
    Rep. Dennis H. Iverson
    Rep. David M. Jones
    Rep. Jack Seitz
    Rep. Daniel H. Tuttle

Members Absent:
    Sen. Mike Dmitrich
    Sen. Craig A. Peterson
    Rep. Christine R. Fox


Staff Present:
    Mr. Richard North,
     Research Analyst
    Ms. Tani Pack Downing,
     Associate General Counsel
    Ms. Wendy Bangerter,
     Committee Secretary

Note:    A list of others present and a copy of materials distributed in the meeting are on file in the Office of Legislative Research and General Counsel.

1.        Call to Order

    Sen. Lorin Jones called the meeting to order at 9:10 a.m. and welcomed everyone. He asked Rep. Beverly Evans, Co-Chair to introduce the committee members and Mr. Richard North to introduce the staff members. He explained that a standing committee was created by the House of Representatives in the 1997 general session and that both the Senate and the House created a joint committee for this year's interim.

    Rep. Evans introduced visitors from various commissions, consumer groups, and public utility companies. She announced the cost of the mailing list for those interested. She stated committee members would be receiving the agendas for both the Information Technology (IT) Commission and Electrical Deregulation and Customer Choice Task Force (EDT). She expressed concern that free television in rural Utah could be eliminated, and announced that a federal auction of television broadcast channels 60-69 will be held sometime in the near future.



2.         Public Service Commission, Division of Public Utilities, Committee of Consumer Services
    
    Steve Mecham, Chair - Public Service Commission, reviewed the evolution of utility monopoly regulation in the State of Utah. He stated that many years ago, it was decided to allow only one provider for utility service. He also stated that a monopoly occurs naturally in some areas because it is less expensive and more efficient to have one provider. Commissioner Mecham also indicated that in 1917, because of the complexity of rate-setting, the Public Utilities Commission was organized to perform the rate-making function for the Legislature. In 1935, that name was changed to the Public Service Commission(PSC) in an effort to be more reflective of the Legislature's intent to emphasize service to both the utility companies, as well as the public. He stated the commission functioned as part of the Dept. of Business Regulation and in 1969, all of the administrative functions were taken away from the commission. However, it retained the quasi-judicial rule-making authority. He also stated the commission included an investigative staff which, in 1983, was separated from the commission and placed in a division under the Dept. of Commerce. He explained during formal rate proceedings, that the division and the commission are to have no ex-parte communications. He stated that the division appears before the commission in all rate-making and other formal proceedings and represents the public interest, which includes the utilities as well as all classes of customers. He explained the Committee of Consumer Services was created in 1977 to specifically represent the interests of residential, small business, and agricultural customers before the PSC. He summarized the regulatory model today involved in rate-making which includes:

.     The Public Service Commission - a three-member body appointed by the Governor for six- year terms and approved by the Senate;
.     The Division of Public Utilities, which advocates a position before the PSC. It is supposed to be the neutral case, but takes into consideration the interests of the utility and all classes of utility customers;
.     The Committee of Consumer Services, which represents residential, small business, and agricultural interests.

    He explained the PSC conducts court-like proceedings and then makes decisions. He stated they are bound by administrative law to substantiate those decisions or the decisions can be appealed directly to and be overturned by the Supreme Court. He stated telephone regulation has been the most active area. He stated they also make rules informally. He stated that they also gather information from customers and providers. He was joined by Connie White, Division of Public Utilities, and they answered questions from members of the committee. They also explained the working relationship between the Division of Public Utilities and the Public Service Commission.

    Mr. Doug Borba, Executive Director of the Dept of Commerce, distributed a chart showing the organization of the Dept. of Commerce. He stated the structure is unique in that it allows the Governor the opportunity to provide executive guidance regarding public utility matters. He also stated the six-member committee is appointed by the Governor and is independent.

    Mr. Ric Campbell, Director for the Division of Public Utilities (DPU), reviewed his handout, covering the nine functions of the division. He also reviewed the objectives of the DPU. In answer to questions from the committee, he reviewed how they make reports to the Public Service Commission during a formal process. He also answered questions regarding filings stating that they have no filing before them at this time regarding a rate case, but they do have one on the interjurisdictional allocation of costs among states. He stated that, even though the Legislature has frozen the rate case for this year, the division needs to collect information about the rate case a year in advance of the rate case.
    
    Rep. Haymond expressed concern that the intent of the Legislature to be the body to review all the issues regarding electrical deregulation during the nine-month freeze period was being ignored. He stated the work being done by the DPU might be counterproductive to the determinations made by the Electrical Deregulation and Customer Choice Task Force during that time.
    
    Mr. Campbell explained that the conclusions of the Pacificorp Interjursisdictional Task force (PITA) will be useful by providing information when the Legislature addresses "stranded costs."
    
    Mr. Sandy Mooy, legal counsel for the PSC, but past secretary for Consumer Services, stated that PITA has representatives of every state who meet and try to allocate the company's plan of costs before the legislative session. He stated the Utah representatives in 1996 noted that Utah was subsidizing Oregon and Washington, and it was determined a change needed to be made. This indicates that this issue had been addressed and was being discussed long before H.B. 313, "Electrical Deregulation and Customer Choice Task Force," instituted a freeze on the rate case for 1997-98. He also stated the issue was never filed on before now because the commission had never determined what method to use, but had used the allocations determined at the PITA meetings each year.

    Mr. Scott Dansie, Deputy Director of the Department of Commerce and interim Secretary to the Committee of Consumer Services, introduced Beverly White, a member of the Committee of Consumer Services. He stated the committee was appointed to represent three constituents; residential, agricultural and small business because the Legislature felt those groups did not have adequate representation. He explained the Governor appoints the six members of the committee and there are eight staff members in his office that assist the committee in making policy. He reviewed the duties and responsibilities of the committee. He stated the committee can convene a

rate case or can file in court if they feel it would be advantageous. He also stated that the Governor appoints the committee secretary with the concurrence of the committee and the Attorney General's office provides an attorney to represent the committee before the PSC.

    Beverly White stated the committee was set up to act as a "watchdog" of the utilities for the ratepayers. She stated that the committee has saved the ratepayer thousands of dollars over the years, and emphasized that they believe in fairness and are not out to negatively impact the utility companies. She stated that one of the reasons the economy in Utah is so good is because the committee has helped to maintain low utility rates for the consumers. She explained the committee is supported by a small fee collected from the ratepayers. She distributed a copy of a Deseret News editorial and encouraged the Legislature to consider a member of their committee to serve on the newly formed Electrical Deregulation and Customer Choice Task Force.

3-4.    U.S. West

    Mr. Ted Smith, Vice-President, Utah-U. S. West Communications, distributed a handout summarizing the rate case process. Mr. Smith used an overhead projector to explain how the rate case process works and what questions it answers. He explained that a rate case is initiated by a pleading or petition accompanied by pre-filed testimony and exhibits. He also explained how the company tests whether overall revenues should be increased or decreased and the formula that is used for their revenue requirements. He answered questions regarding the non-mandated paying of dividends to shareholders, reinvestment, and expenses. He reviewed some pros and cons of deregulation and how competition would impact U.S. West.

5.        Utah Power & Light

    Mr. Doug Larsen, Director of Regulatory Policy for Pacificorp, introduced Edward Hunter, legal counsel for Pacificorp. Mr. Larsen stated that in the 1996 Auditor General's report, the issue of competition entering into the electrical industry was addressed, which necessitates a change in regulation. He reviewed the status of the current case filed with the PSC. He stated that as part of H.B. 313, Utah Power and Light agreed to implement a $12.4 million price reduction on an interim basis, and that the reduction was filed with the PSC on April 15, 1997. He also stated the DPU has filed an allocation case and the commission has agreed to hear the case. He stated the Committee of Consumer Services has filed a petition with the commission to establish hearings to determine the "test year" and continue discovery, and the commission will hear the arguments of that case on May 6, 1997. He reported that the first quarter earnings of Pacificorp have been announced and are 10% below the level of the first quarter of last year, and that the company is in the process of looking at some ways to cut costs and still earn a reasonable return.

6.         Roles of the Public Utilities and Technology Interim Committee (PUT), the Information Technology Commission (IT), and the Electric Utility Deregulation Task Force (EDT)    

    Representative Evans explained there will be a lot of questions on a number of interconnected issues, and that both the PUT and IT committees would want to consider those issues. She stated the IT commission would focus more on implementation. She also stated the master study items for the PUT would be the telecommunications deregulation and the utility deregulation, and that they would be working closely with the task force. The chairs of both committees would be meeting at 7:30 a.m., prior to their interim meeting, to brief each other and coordinate study items. She encouraged the committee members to voice their concerns regarding these restructuring processes to the Chairs or staff so they can be addressed. She indicated the notices and agendas for the IT and EDT meetings would also be available to the committee members. She noted they are listed on the Legislature's internet home page (www.le.state.ut.us), but are also available through a hard-copy mailing.

    Chair Jones stated UDOT implemented a policy last year to charge utilities $1 a foot in urban areas and 10 cents a foot in rural areas for the use of right-of-ways on the public road systems. He stated the policy was rescinded, and that UDOT would be studying the issue and has agreed to seek legislative and public input before reaching future conclusions.

7.    Sen. Jones adjourned the meeting at 11:15 a.m.
    




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