The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 7:00 a.m., on Wednesday, April 7, 1999, in Room 2135 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Randolph J. Townsend, Chairman

Senator Ann O’Connell, Vice Chairman

Senator Mark Amodei

Senator Dean A. Rhoads

Senator Raymond C. Shaffer

Senator Michael A. (Mike) Schneider

Senator Maggie Carlton

STAFF MEMBERS PRESENT:

Scott Young, Committee Policy Analyst

Ardyss Johns, Committee Secretary

OTHERS PRESENT:

Chairman Townsend opened the meeting asking for a motion to request a waiver for S.B.37 in order to extend the right of the committee to have jurisdiction until April 23. In addition, he explained, it would extend the jurisdiction of the Senate Floor until April 30, extend the Assembly committee’s time frame until April 17, and it would extend jurisdiction of the Assembly Floor until April 24.

Chairman Townsend opened the work session on S.B. 207 and S.B. 440.

Brian Herr, Lobbyist, Executive Director, External Affairs, Nevada Bell, told the committee that all of the parties involved in S.B. 207 and S.B. 440 had begun negotiations at 7:00 a.m. the previous morning and concluded at approximately 9:00 p.m. that night with agreement on all of the issues. He said as the parties attempted to blend the various different drafts of the bills, they found some difficulty in making sure the language said what everyone wanted it to say. He stated they continued until 1:00 a.m. this morning to produce a single draft, after which the parties met again this morning at 6:30 a.m. to go over the details. He begged the indulgence of the committee and asked for an hour to make sure all parties were in agreement before bringing forward consensus language in both S.B. 207 and S.B. 440.

Robert A. Ostrovsky, Lobbyist, Cox Communications, and Nextlink, asked on behalf of the competitive local exchange companies for an hour delay. He claimed he would bring the committee what he thought would be a historic opportunity. He said it was something that had not been done anywhere in the country relative to some of the issues that were addressed, and stated the committee would need to make some policy decisions on both bills.

At 7:25 a.m., Chairman Townsend recessed the meeting until 8:30 a.m.

The meeting reconvened at 8:50 a.m. with Chairman Townsend referring the committee to proposed amendments to S.B. 207 (Exhibit C), and S.B. 440 (Exhibit D).

Steve Tackes, Lobbyist, MCI Worldcom, and Nextlink, said S.B. 207 had been slimmed down and amended as a whole and told the committee they had before them, in Exhibit C, the resulting language. He stated section 2, paragraph (a) of the bill says the Public Utilities Commission of Nevada (PUCN) shall, by regulation, establish the performance and reporting standards relating to local telecommunication services. He claimed paragraph (b) was the provision that allowed the PUCN to establish penalties for failure to meet those performance standards. He declared all parties had agreed that there needed to be some recourse for someone who did not meet those performance standards. Section 3 of the bill, he continued, provided for a mechanism for an expedited procedure for complaints filed by one carrier against another carrier. He pointed out it specifically limited what kind of interim relief could be imposed by a single commissioner, and it excluded the monetary penalties from that interim relief.

Mr. Tackes noted section 4 merely ensured that all decisions are still subject to the judicial review provisions that apply to all PUCN decisions. He said the language in section 5 was agreed upon by the consumer advocate’s office, and claimed that section 6 was merely a cleanup to make sure to craft a mechanism for penalties.

Senator O’Connell asked if there was a reason the proposed amendment did not show passage on approval. Mr. Tackes replied it was desirous to have passage on approval.

Dan Reaser, Lobbyist, Nevada Bell, stated that after working with all the parties in negotiating S.B. 207, he had become comfortable with the bill and had no objection to its passage on approval.

Mr. Herr said he wanted to thank the committee for the time they had given the various parties to debate and negotiate the issues contained in S.B. 440. He asked that Mr. Reaser walk the committee through the bill.

Mr. Reaser stated because S.B. 440 was very lengthy, he would try to summarize each of the provisions to let the committee know what those provisions essentially meant and what the objectives were. He requested the bill be amended as a whole, commencing with section 1 and running through section 23. He said he would touch briefly on the definitions shown in section 2 through 11 because they would be of importance as he went through the bill. An "affected person," he claimed, simply defined persons who would have certain rights to receive information and participate in certain proceedings if they so desired, based on a decision by an electing carrier to get involved in this form of alternative regulation. He said it is essentially a public utility customer whose rates are affected, a competitor, or the Bureau of Consumer Protection in the attorney general’s office.

Mr. Reaser pointed out that section 4 defines "basic network service" and listed 13 different items, which comprise the central basic network services available to Nevadans. "Electing carrier," defined in section 5, he explained, is a local exchange carrier that has elected to be regulated pursuant to alternative regulation. He stated the plan of alternative regulation (PAR) was provided by the commission’s existing law. He testified section 6 defined "competitive service" as one that is competitive and nonregulated today, under the existing PAR regulations. Additionally, he noted, "competitive service" could be a basic network service that is reclassified under section 14 of the act and also declares that intraLATA toll services of electing carrier will be a competitive service.

Mr. Reaser said a "competitive supplier" defined in section 7 is essentially a competitive company that provides or wants to provide local telephone services. He stated section 8 in defining "discretionary service," adopted the regulation definition of a discretionary service under the existing PAR regulations as they exist today. Section 9, he explained, defined "incumbent local exchange carrier" as it was done under the Telecommunications Act of 1996. He asserted section 10 provided a definition of "other essential service" which adopted the regulation definition that was given currently by the PUCN. He pointed out that section 11 defined "price floor" to mean the minimum price that would be determined by the commission through regulation. He noted section 12 gives to an electing carrier what is termed as rate-of-return protection. In other words, he explained, a par-regulated company, after electing into this statute, will not be subject to any review of its income or its earnings in any form. However, he continued, if that company terminates its participation in PAR, or decides it wants to raise its basic network service rates, it will then become subject to rate-of-return review by the commission. He said subsections 2 and 3 of section 12 gives the electing carrier additional protections, one being that the commission cannot consider rate of return or other earnings in connection with any rate change allowed under this act. The commission also cannot decrease the rates of an electing carrier without the carrier’s concurrence. Subsection 4, he added, prevents an electing carrier from increasing its rates unless the commission agrees to a reclassification of the electing carrier’s basic network service.

Senator Rhoads wanted to know if the rural companies had been represented during the debates that had taken place in the last several weeks. Mr. Herr said the executive director of the Nevada Telecommunications Association had tracked and been aware of the discussion on S.B. 440. He added he was not sure if they had a copy of the exhibits given to the committee today but said he knew they had seen versions presented in the last few days. Mr. Herr noted that Nevada Telecommunications Association represented not only Nevada Bell and Sprint, but all of the telephone companies in the state, and had specific focus and emphasis on the rural areas.

Mr. Reaser, continued to walk the committee through the bill by pointing out subsection 5 of section 12, which prohibits an electing carrier from receiving funds from the Nevada Universal Service Funds except for Lifeline or Link-up. Section 13, he said, makes clear that nothing in this act will allow an electing carrier to avoid its provider-of-last-resort obligations for basic residential services. He mentioned section 14 empowers the commission at any time, on its own motion or that of any other person, to reclassify a basic network service, except access to emergency 911 service. He claimed local law enforcement agencies would not see any kind of a rate increase because of the enactment of this statute. He asserted there was no intent through this act to somehow change how 911, as a basic network service, was treated currently. Section 14, subsection 2, he stated, empowers the commission to adopt regulations setting criteria as to how services will be reclassified. He said in section 15, an electing carrier is granted flexibility in the pricing of competitive services, discretionary services and in-service packages. He instructed the committee to insert in section 15, paragraph (b), after ‘Service packages subject to the provisions of subsection 3’, before the period, ‘,which may include basic network service, competitive service, discretionary service, and other essential service.’

Mr. Reaser pointed out that subsection 2 of section 15 sets up a reporting procedure when an electing carrier desires to exercise the flexibility of either competitive services, discretionary services or the service packages. Subsection 4, he stated, provides that the commission will not specify a maximum rate for a service package, while subsection 5 requires that anything offered in a package must also be available individually. He said section 16 empowers an electing carrier to do promotional price reductions but also requires those reductions to be available in all of that carrier’s geographical areas. Section 17, he testified, required the electing carrier to set the price of any competitive or discretionary service at a level above the price floor of the service. He noted section 18 allows electing carriers to introduce new services after a 30-day notice to the commission. He pointed out that subsection 3 of section 18 defines a new service as one providing a materially different function, feature or capability from an existing service previously offered, or combines any previously existing new services.

Mr. Reaser stated section 19 allows pricing flexibility to the electing carrier in its discretionary services subject to the provisions in section 17, which sets the upper and lower limits and section 20, which relates to geographical averaging. He pointed out that section 20 provides that with the exception of competitive services, rates charged by the electing carrier must be geographically averaged throughout its service territory. Section 21, he continued, states that electing carriers intrastate-access prices will not be in excess of the interstate-access prices charged by that electing carrier as authorized by the Federal Communications Commission (FCC). He mentioned section 22, wherein it provides that nothing in this act intended to impair the commission’s authority under the Telecommunications Act of 1996. Further, he said, it does not limit or modify any of an electing carrier’s obligations as a local telephone company to a customer or a competitive supplier. Section 23, he concluded, makes the bill effective on October 1, 1999.

Gardner F. Gillespie, Lobbyist, Cox Communications, and Nextlink, speaking on behalf of competitive telecommunications carriers, stated after long and difficult negotiations on S.B. 440, a point had been reached where everyone was comfortable with the outcome.

Mr. Ostrovsky stated he had no objection to S.B. 440.

Mr. Herr stated for the record:

Chairman Townsend asked to hear from both the PUCN and the office of the consumer advocate (OCA).

Frederick Schmidt, Consumer’s Advocate, Chief Deputy Attorney General, Bureau of Consumer Protection, Office of the Attorney General, commended the parties for working diligently to resolve most of the differences between them as businesses. He said there were still two areas in the bill on which he had questions. He stated with or without those two areas, or with modifications to them, this was still a substantial deregulation bill. Probably in the forefront of the country, he added, in terms of the amount of deregulation allowed. He claimed he was not opposed to that; but noted, he wanted to address one interpretation and put his interpretation on the record because he had not gotten a consistent or clear answer from the parties involved as to intent. Mr. Schmidt stated:

Chairman Townsend asked Mr. Pitlock if he cared to comment before Mr. Schmidt moved on to his interpretation of the other issues. Mr. Pitlock said he agreed with everything Mr. Schmidt had said, so far.

Chairman Townsend noted it was important for that to go on the record so subsection 1, paragraph (b) would not supercede any regulation currently in place.

Mr. Schmidt continued:

Chairman Townsend asked Mr. Pitlock if he agreed with Mr. Schmidt. Mr. Pitlock said while he shared Mr. Schmidt’s concern regarding section 21, he thought he had a better and simpler way of dealing with the problem. He suggested making it a requirement for the commission to approve any change to essential service pricing. To simply say that in order to have the revenue-neutral change, you must first have the commission’s approval, he said, would give a forum for Mr. Schmidt to voice any concerns he has with a particular essential service is being affected.

Mr. Schmidt stated he did not have any problem with that approach which, he acknowledged, was actually broader.

Mr. Reaser stated he must respectfully disagree with Mr. Schmidt’s interpretation with regard to section 12, subsection 3. He said his own interpretation was that it only applied if the electing carrier has not made the application allowed in subsection 1, paragraphs (a) or (b), which was to either terminate PAR, or continue its participation in PAR but subject to an upward adjustment of its rates. Mr. Reaser explained:

Mr. Schmidt replied:

Mr. Pitlock said:

Mr. Gillespie said he concurred with Mr. Reaser’s interpretation of what was intended in section 12, subsection 3.

Mr. Reaser stated he had no objection to mutually acceptable language if Mr. Schmidt and the commission would rather have clarifying language to say exactly what the intent was.

Mr. Reaser, referring to section 21 stated:

Chairman Townsend asked for an example of a service that was not used enough to generate much revenue. Mr. Reaser said foreign exchange would be one example.

Mr. Gillespie said he was not sure that he interpreted section 21 exactly the way Mr. Schmidt did. He stated:

Mr. Reaser said he had just a slightly different view and explained:

Mr. Schmidt stated that a phrase added to the end of section 21 saying ‘if it is beyond the flexibility provided in current regulations,’ would be adequate. Mr. Reaser said he would not oppose adding language to make clear what was intended.

Chairman Townsend suggested that since both S.B. 207 and S.B. 440 had to be amended as a whole, they be combined into S.B. 440, and sent out as one bill.

Chairman Townsend opened the work session on S.B. 356.

Chairman Townsend presented to the committee an actuarial analysis of the bill done by PricewaterhouseCoopers (PwC) (Exhibit E. Original is on file in the Research Library.). He said the bill, as drafted, did not include substance abuse, which was currently in the law. He stated the expected net employer contributions for health costs under this bill, which are mental health services comprehensive, would rise $1.00 per person per month, which, he added, is a 0.7 percent increase.

There being no further business, the meeting was adjourned at 10:40 a.m.

RESPECTFULLY SUBMITTED:

Ardyss Johns,

Committee Secretary

APPROVED BY:

Senator Randolph J. Townsend, Chairman

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