The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 9:00 a.m., on Thursday, April 15, 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

Beverly Willis, Committee Secretary

OTHERS PRESENT:

Chairman Townsend opened the meeting by presenting an Amendment No. 427 (Exhibit C) to Senate Bill (S.B.) 440

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Chairman Townsend requested testimony on Exhibit C, specifically at this time, section 3. Dan Reaser, Lobbyist, Nevada Bell, noted he had reviewed Exhibit C and felt there might be work still to be done. Regarding section 3, he declared no material change has been made. This applies to the definition of basic network service as well. Mr. Reaser presented an explanation of several other changes and the reasoning behind these changes. Senator Townsend and Mr. Reaser reviewed various dates when sections of Exhibit C would become effective, with Senator Townsend concurring with clarification given by Mr. Reaser. Mr. Reaser continued his review pertaining to sections of the proposed amendment.

Senator Rhoads inquired what category, of Exhibit C, his rural phone service would fall. Mr. Raser noted this would be an incumbent local exchange carrier, as defined in section 9. Frederick Schmidt, Consumer’s Advocate, Chief Deputy Attorney General, Bureau of Consumer Protection, Office of the Attorney General, joined the conversation, explaining that any carrier under 30,000 participants would remain a regulated monopoly for local service. Mr. Reaser continued his explanation/clarification of Exhibit C.

Chairman Townsend alerted several of those scheduled to testify he would need special clarification concerning section 14 of Exhibit C. Mr. Reaser claimed some changes in numbering might be needed particularly referring to section 17. Senator Townsend sought clarification on exactly which issue this would address and asked if this covered selling services; bundled or unbundled below cost. Mr. Reaser confirmed this was correct. Senator Townsend suggested this particular issue might be covered in other sections of law.

Steve Tackes, Lobbyist, MCI WorldCom, and Nextlink, and Senator Townsend discussed items Mr. Tackes might need to have placed in this legislation. Mr. Reaser and Mr. Tackes conferred on language needed for Amendment No. 427 (Exhibit C). After a lengthy discussion, it was determined that section 17 was fine and did not require any changes. Mr. Reaser continued his review of Exhibit C covering suggested changes through section 22.

Mr. Tackes started his review of Exhibit C with section 23. He noted section 23 tracked identically language contained in S.B. 207 that has been approved. Mr. Tackes continued with his review of Exhibit C offering suggestions and possible changes. Mr. Tackes noted in particular in language pertaining to fines imposed for infractions of the law. Referring to a $500 fine, Mr. Tackes stated, "There is currently a $500 fine on penalties." He continued, "Certainly, within this context we do not want to limit penalties to $500 for violation of interconnections used." Mr. Tackes continued his remarks pertaining to wording relevant to S.B. 440. Mr. Tackes, stated, " . . . the bottom line is, the intention of the legislation is not to cap penalties to $500." Senator Townsend concurred with this statement by Mr. Tackes.

Chairman Townsend requested further clarification on section 14. According to Mr. Tackes, section 14 is basically the section that codifies the situation that companies have right now; claiming, you do not look at their earnings if they are in alternative regulation. He noted the exceptions are if their alternative regulation is terminated, or if they indicate they want to renew their alternative, but want a rate increase at that time. He claimed with either of these situations, the commission would look at earnings, and possibly other related items; i.e., rate base. Mr. Tackes noted concerns pertaining to language in subsection 4. Mr. Reaser referring to subsection 4 stated, "I still read it to be the same. . . . This is an important part of the bill; we do not want to have any mistakes. I still read it to do the same thing we thought it did."

Senator Townsend, referring to Exhibit C, required further clarification with several fine points on section 14, subsection 1 and subsection 4. Mr. Reaser offered his thoughts and explanation; however, Senator Townsend indicated his difference of opinion with the language/implication. As this particular section dealt with service rates, Senator Townsend stated he did not want to put the commission in the position of always having to grant a rate increase. Mr. Schmidt asserted the determination made by Senator Townsend was correct and presented his reasons.

Scott M. Craigie, Lobbyist, Sprint, maintained he wanted to be sure everyone had a complete understanding of this legislation. Mr. Craigie stated:

He claimed there were serious problems for Sprint. Mr. Craigie continued, "The electing carriers, as they are defined, are carriers that opt into the plan created by this bill [S.B. 440]." He referred to page 4 and page 5 of Exhibit C, indicating the elected carrier shall not increase any rate and areas defining only the time when rates may be increased. Mr. Craigie claimed in order for Sprint to take advantage of any positive parts of this legislation, their rates would have to be frozen at a "subsidized" level. He asserted if this were to happen, some services would have to be over-priced. Due to confidentiality issues, Mr. Craigie declined to answer a question from Senator O’Connell, pertaining to a rate hearing for his company. Mr. Craigie reiterated his assertion that there were sections of Exhibit C that would allow his organization flexibility. He continued a review of Exhibit C pointing out areas of benefit for his company. Mr. Craigie claimed he would agree with penalties noted; however, his organization would be subject to the penalty side without the opportunity to participate in the benefits.

Michael A. Pitlock, Commissioner, Public Utilities Commission of Nevada (PUCN) and Senator Townsend perused topics associated pertaining to rate earnings and increases. Mr. Pitlock noted rates would need to be adjusted in both directions, not just one direction.

Mr. Schmidt expressed doubts about some previous testimony, stating:

Mr. Schmidt agreed with Mr. Pitlock, ". . . that you should never write into the law, a one direction [rate] only." Mr. Schmidt presented his reasoning for this being part of this legislation. He claimed as a general policy matter, ". . . you should adopt laws that are not geared toward one company’s individual situation in a particular circumstance. It should be geared toward broad-based policy that works either way." Mr. Schmidt noted he was not comfortable with language in section 14 of Exhibit C, as it is presently written.

Senator Townsend stated he did not feel the committee should get involved in the determination of rate issues, at the legislative level. Senator Townsend, Mr. Reaser, Mr. Craigie and Mr. Schmidt continued their review of Exhibit C and reached a level of agreement pertaining to previously discussed issues.

Mr. Craigie asserted he had not gone to members of the committee, or anyone else to change the date of the October 1 effective date. Mr. Craigie stated, "We have never tried to angle this package that opens the door to us." He continued, ". . . I am not going into the issues on the rate case." Mr. Craigie indicated his appreciation of the excellence of this legislation; however, stating, ". . . but because of our economic circumstances, it really closes us out. . . . We like this bill because it is good policy." He declared it would be hard for his organization to watch this bill come to fruition, as they would be, ". . . the caged competitor."

Senator Townsend and Mr. Schmidt discussed circumstances under which a company might be able to go to the PUCN to request a rate adjustment. Mr. Schmidt stated:

Mr. Schmidt and Mr. Craigie continued reviewing whether or not this legislation would make it possible for other companies to have their rates altered.

Senator Townsend and Mr. Reaser conferred on changes Mr. Schmidt had determined should be made. Mr. Reaser asserted in the final analysis, the PUCN would make the final decision. Mr. Schmidt presented reasoning for his point of view. Once again, Mr. Craigie offered comments differing with others that had testified.

Senator Townsend in summary, stated:

Senator Townsend asked those involved, to meet to come to a conclusion to which the committee could agree. He indicated if there was no resolution, the committee would make a determination. Senator Townsend stated he did not want the committee to be put in the position of deciding on rate design. He asked for notification of any decision made.

The hearing was closed on S.B. 440. As there was no further business, the meeting was adjourned at 10:25 a.m.

RESPECTFULLY SUBMITTED:

Beverly Willis,

Committee Secretary

APPROVED BY:

Senator Randolph J. Townsend, Chairman

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