The Senate Committee on Finance was called to order by Chairman William J. Raggio, at 8:00 a.m., on Monday, March 1, 1999, in Room 2134 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 William J. Raggio, Chairman

Senator Raymond D. Rawson, Vice Chairman

Senator Lawrence E. Jacobsen

Senator William R. O’Donnell

Senator Joseph M. Neal, Jr.

Senator Bob Coffin

Senator Bernice Mathews

STAFF MEMBERS PRESENT:

Judy Jacobs, Committee Secretary

OTHERS PRESENT:

Ken West, Chief Deputy Controller, Office of the State Controller

Judy M. Sheldrew, Chairman, Public Utilities Commission of Nevada

Michael A. Pitlock, Commissioner, Public Utilities Commission of Nevada

Senator Raggio addressed several bill draft requests (BDRs) for committee consideration. The first was requested by the Department of Administration.

Senator Raggio noted the BDR will appropriate $8.6 million from the Highway Fund to the Department of Motor Vehicles and Public Safety (DMV&PS).

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Senator Raggio noted the next BDR will appropriate $1.2 million from the Highway Fund.

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Senator Raggio pointed out BDR S-1441 will appropriate $35,000 from the General Fund.

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Senator Raggio explained the bill reallocates $57,850 for payment of compensation, per diem, and travel.

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Senator Raggio noted the next BDR was requested by the Budget Division.

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The next bill draft also was requested by the Budget Division. Senator Raggio indicated it will restore $4.5 million to the General Fund.

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Senator Raggio said BDR S-1443 will provide a supplemental appropriation of $15.4 million for class-size reduction.

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There being no further bill draft requests, Senator Raggio turned to Senate Bill (S.B.) 158 which he indicated came about as a result of the incident involving boxer Mike Tyson.

Senator Raggio recollected the bill had been heard on February 22 and an amendment had been discussed. He said the Legal Division of the Legislative Counsel Bureau concurred that an amendment would be appropriate and prepared Amendment No. 63 for S.B. 158. He explained the bill and amendment will provide that, upon receipt of an application and payment of a penalty not to exceed $250,000, the commission may reinstate a revoked license. The amended measure also provides that the commission may require that a sum of money be deposited as deemed necessary to pay for costs. The commission may require that the applicant pay the costs of the proceedings associated with the reinstatement of the license, including investigative costs and attorneys’ fees. Senator Raggio cited other provisions of the bill and the proposed amendment.

Dan Miles, Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, explained the amendment will allow the Nevada Athletic Commission to assess fees and the cost of services under three circumstances. He said one circumstance is the initial investigation for the applicant’s license, another is any investigation for a disciplinary action, and the third is any hearing related to an investigation regarding a reinstatement. He opined those terms allow the commission to charge the applicant for costs of such hearings.

Senator Neal announced he would abstain from the vote during the hearing although there is a possibility he will vote when the bill reaches the floor. He explained he had a matter to check with the Legal Division prior to participating in a vote.

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Senator Raggio asked the committee to consider Senate Bill (S.B.) 190.

Maynard K. Yasmer, Administrator, Rehabilitation Division, Department of Employment, Training and Rehabilitation, distributed copies of a request to amend the bill in two places (Exhibit C). He explained the purpose of the bill is to combine two existing revolving accounts, one of which is for the Bureau of Services to the Blind and Visually Impaired in chapter 426 of the Nevada Revised Statutes (NRS), and one of which is presently in the Bureau of Vocational Rehabilitation statute of NRS Chapter 615. He asserted combining the two funds will provide better use of the fund flow which is currently limited to $25,000 for the former and $35,000 for the latter. He said the volume of client needs has grown considerably since the funds were last considered during the 1980s.

Instead of requesting that the fund be increased by $30,000 as set forth in section 2, Mr. Yasmer requested replacing it with another amendment to provide that the total not exceed $90,000, which he opined will address the shortfall in state funds. He admitted the deletion of an additional $30,000 is being proposed reluctantly, but he felt its inclusion might jeopardize the bill considering the situation with state funds at this time. He explained the amendment will allow the fund to be increased should other nonstate or nonfederal funds be found that can be included.

Mr. Yasmer noted the bill contains a reference to the Office of the State Controller which he suggested be deleted and the word "chief" be inserted. He explained the controller does not work with outside bank accounts, thus making the word "chief" more appropriate.

Senator Raggio asked how the situation will be improved by the proposed changes. Marty Ramirez, Deputy Chief Financial Officer, Financial Management Section, Department of Employment, Training and Rehabilitation, reported that during the current fiscal year the department has experienced cash-flow problems in both revolving accounts due to activity that has gone beyond the department’s capacity. He said the primary users of the vocational rehabilitation revolving fund are the vocational assessment centers, which process client payrolls for 80 to 120 clients on a weekly basis. He stated there has at times been less than $2,000 in the account, leaving it impossible to process the payroll on a timely basis. He indicated the department attempts to process payroll for the clients each week, and the weekly payroll may run from a low of $8,000 to over $15,000.

According to Mr. Ramirez, in the "blind" account there have been a couple of times when the department needed to set up for a new vendor, and the funds were so limited it took an excessive amount of time to do so. He opined it will work better to combine the accounts, which he insisted will not impair either program. Senator Raggio noted the problem regarding the extra $30,000 might be addressed through a letter of intent.

Mr. Yasmer clarified the references to payroll do not connote an employer-employee relationship; rather, they are client stipends given while they are being evaluated while in training.

Ken West, Chief Deputy Controller, Office of the State Controller, acknowledged one of the amendments addresses a concern he had with S.B. 190. He voiced approval of combining the outside bank accounts because it will mean one less account that will have to be reconciled. He reported his office recently sent out a letter requesting that state agencies provide the office with copies of reconciliations of outside bank accounts as of December 31, 1998. He noted both the accounts under consideration were reconciled as of that date.

Mr. West said his office generally has a problem with outside bank accounts because of federal requirements regarding the reporting of income. He explained the controller’s office sometimes underreports income when more than one agency pays a vendor, even though the amount is less than $600 from any one agency due to the difficulty of picking up information on the outside bank accounts. He reiterated there is no opposition from his office to combining the two accounts.

Senator Raggio asked whether assurance can be given that the controller will be given proper notice. Mr. West replied notice will be given to the Office of the State Controller.

Mr. West pointed out the assets are not under control of the treasurer or the controller, and he anticipates no problems so long as the wording is changed to delete reference to the controller.

Mr. West asserted there is inappopriate language on the second page of the bill in section 1, subsection 3. He suggested it include language reading, "Payments made from the revolving account must be promptly reimbursed from appropriations of the division on claims as other claims against the state are paid." He proposed deleting most of the language referring to the State Board of Examiners, the treasurer and the controller.

In response to Senator Raggio’s query regarding the change, Mr. Yasmer said he would have no problem with the proposal "so long as the word ‘appropriations’ means what it usually means." He clarified, "’Appropriations’ generally means state funds." Mr. West disagreed, saying an appropriation is an authorization by the Legislature. Mr. Yasmer stated he would have no problem with the change.

There being no further testimony on the matter, Senator Raggio closed the hearing on S.B. 190 and opened the hearing on budgets.

Public Utilities Commission of Nevada – Budget Page P.U.C.-1 (Volume 2)

Budget Account 224-3920

Judy M. Sheldrew, Chairman, Public Utilities Commission of Nevada, testified the budget contains few changes. She described the changing role of the Public Utilities Commission of Nevada (PUC) since the passage of legislation in 1997. Assembly Bill 366 of the Sixty-ninth Session directed the PUC to change its focus from one of regulating monopolies that provided utility services to one of taking a more aggressive role to encourage and enhance the development of a competitive market for the provision of utility services.

Ms. Sheldrew reminded committee members the PUC was also directed to ensure reliability and safety in the provision of utility services. The legislation also directed the commission to reorganize and present the reorganization plan to the Governor, the Budget Division, and the Legislature by January 1, 1999.

Ms. Sheldrew stated the reorganization plan was transmitted as directed in a letter dated December 31, 1998. She said the reorganization of the PUC will "flatten" the hierarchical reporting structure and will bring the commission, the Regulatory Operations staff, and the Consumer Complaint Resolution Division closer together. She reported the PUC has been operating under the reorganized structure for approximately a year to determine whether it is functional for the commission as well as for the Legislature. She asserted it has provided an excellent transitional plan for the move from regulation of monopoly services and basing decisions on rate-of-return regulation to one of development of a competitive marketplace.

Ms. Sheldrew explained the staff reorganized itself into five divisions. The Safety Division has responsibility for pipeline and railroad safety and other entities that are unlikely to be changed from the move to competitive providers. She added the Small Utilities Analysis and Compliance Division is unlikely to be affected by the move to competition. She explained that division oversees and assists many small water companies throughout the state which are subject to jurisdiction of the PUC. It also oversees small telephone companies, most of which are not in a position to transfer to an alternative form of regulation as prescribed by the statutes. She maintained large telephone companies are given the opportunity to participate in the competitive marketplace with more flexibility.

According to Ms. Sheldrew, the three remaining divisions have emerging roles as the commission works toward developing a more competitive marketplace. Those are the Resource Analysis and Quality Assurance Division, the Regulatory Policy and Market Analysis Division, and the Financial Analysis Division. She said the Financial Analysis Division continues to conduct audits in rate cases. It will experience a shift in responsibility to ensure that a company which has some of its services regulated and some of its services transitioning into the competitive marketplace will keep separate and distinct records. She explained this will be necessary to avoid the potential for subsidization of competitive efforts by regulated ratepayers.

Because under A.B. 366 of the Sixty-ninth Session existing utilities will no longer be required to provide integrated resource planning, Ms. Sheldrew said, the Resource Analysis and Quality Assurance Division has been given the responsibility of ensuring that sufficient electric capacity will be available throughout the state. She expressed hope the marketplace will provide all necessary resources. She noted the division also will have responsibility for monitoring performance standards as they relate to the competitive marketplace, not only for providing services directly to consumers, but also as to how a regulated entity provides network services to many competitors without creating roadblocks to development of competition.

Ms. Sheldrew said the Regulatory Policy and Market Analysis Division houses economists who are charged with development of a competitive marketplace for electric services, telecommunications, and, to a lesser extent, natural gas.

Ms. Sheldrew noted another significant change made as a result of the reorganization was the increased awareness of the Consumer Complaint Resolution Division. She explained small consumers may call the division regarding billing, lack of service, "slamming," "cramming," and similar complaints, and the division will attempt to resolve those complaints quickly. She pointed out there was a significant increase in the number of complaints received by the division during the past year.

Ms. Sheldrew reported the reorganization was reviewed by a consultant who made recommendations, including delineating the duties and responsibilities of the various divisions, and the commission included the strategic plan.

Ms. Sheldrew pointed out the PUC has two major divisions, the Policy Division and the Regulatory Operations staff. She said the Policy Division includes the commission and directs staff, has responsibility for policy direction and acts in a quasi-judicial role to review contested matters. The commission has responsibility for rulemaking and investigation, as indicated in the performance indicators.

Senator Raggio asked whether there is concern the competitive market will limit areas such as research into renewable energy sources and preclude projects that otherwise might have been undertaken by utilities. Ms. Sheldrew responded those concerns have been mentioned, although there was not a great deal of discussion about them during the last legislative session. She stated that currently research and development is funded by the utilities or by organizations funded by utilities. She reported contributions to some of those entities are somewhat lower. On the other hand, she said, the emerging marketplace has fostered development of innovations, such as small microturbines that can be placed in a neighborhood. She stated those microturbines have been found to be very efficient.

Ms. Sheldrew called the work being done in advance metering "quite phenomenal." She said time-of-use meters exist for small customers which will allow them to be charged for the energy used at the time it is used, thus encouraging energy usage during off-peak hours. She explained time-of-use meters do not have to be physically read because they are read by satellites. She asserted there will be a proliferation of technological advances in the power industry similar to what has taken place in the telephone industry, thus contravening concerns regarding restrictions on technology as a result of the legislation.

Michael A. Pitlock, Commissioner, Public Utilities Commission of Nevada, interjected the competitors will have an interest in giving the public what it wants. Over the years, he said, there has been a growing awareness among energy users regarding the environmental ramifications of the source of energy being used, and providers take that concern into consideration.

Regarding the first performance indicator, Ms. Sheldrew reported 86 percent of dockets were resolved within 6 months for Fiscal Year (FY) 1998. She compared that to the 80 percent projected. The performance indicator regarding the percent of rulemaking proceedings completed within 12 months of opening was 40 percent, she said, because they require extended periods of time for noticing and to take public comment. She indicated 100 percent of investigations were completed within 24 months, although investigative dockets take a long time. Senator Raggio commented, "That’s pretty impressive."

Ms. Sheldrew said a survey taken during October and November 1998 indicated 53 percent of all consumers are generally aware of changes in utility restructuring, as addressed under the performance indicators. She acknowledged no figure is available for the percentage of customers statewide directly aware of changes in the electric industry and how they will be affected. She indicated the commission will seek input as to whether a follow-up survey should be taken.

Ms. Sheldrew said 54 percent of formal complaints were determined within 45 days of receipt. She said during the last calendar year there were 4,408 formal complaints. She noted that translated into a 32 percent increase over the previous calendar year. She explained those were all individual customer complaints, such as billing disputes, "slamming," service problems, and "cramming." She described "cramming" as services that appear on a bill that were not ordered by the customer.

Senator Raggio inquired whether it has been possible to track the complaints by their nature and by the action that occurs as a result, and whether any individual companies have an unusual number of complaints in any particular area. Ms. Sheldrew said the Consumer Complaint Resolution Division has a system that allows the division to track complaints by the types, the rapidity of resolution, and which companies generate complaints the most often. She noted most companies cooperate with the consumer division and attempt to resolve problems as quickly as possible. She acknowledged the ability to achieve the same cooperation must be encouraged as the competitive marketplace moves forward, especially since many providers may not be rate-regulated by the commission. She explained that if the Consumer Complaint Resolution Division cannot resolve a complaint to the satisfaction of the complainant, the complaint can be brought to the commission. She acknowledged there are a number of complaints heard by the commission.

Ms. Sheldrew said 17 percent of all gas pipeline systems inspected involved small operators in 1998, as noted in performance indicator No. 7, while 64 percent of inspections were for large operators. She stated 100 percent of total track units were inspected in FY 1998, but she acknowledged that was due to additional funding obtained when a nuclear waste shipment passed through the state.

Senator Neal wanted more information on the nuclear shipment. Ms. Sheldrew told him it was part of federal defense waste shipped from California. She explained a coordinated effort was made by all the states through which it passed to ensure there was as little risk as possible. She pointed out it took a great deal of effort on behalf of railroad inspectors and it cost the state a significant amount.

Ms. Sheldrew clarified performance indicator No. 6. She stated nearly 80 percent of formal complaints were determined in writing within 45 days of receipt. She said an attempt is being made to respond to complaints within 30 days. The achievement of this goal at present stands at 54 percent. Ms. Sheldrew said there is no figure for 1998 regarding the percentage of hazardous material units inspected. She said those inspections reached 53 percent through December.

According to Ms. Sheldrew, there has been a 3 percent increase in the line-locate requests received, which she explained falls under the law that requires contractors to call prior to digging around utility lines. She said the commission has become more aggressive in oversight during the past biennium after three contractors had multiple incidents and were fined. She said the PUC has signed a contract with a national call center to educate contractors about the requirements. Drawing attention to the last performance indicator, she noted there were four "excavator awareness" functions participated in or sponsored in 1998.

Ms. Sheldrew said the base budget continues funding for the 88 full-time equivalent (FTE) classified and unclassified positions. She clarified the PUC has mostly unclassified positions.

Senator Raggio asked about the status of the merger between Sierra Pacific Power Company and Nevada Power Company. Ms. Sheldrew responded a conditional order approving the merger was issued in late December. She said the utilities asked for minor clarification on a couple of points, and those were issued in January. Next the merger must be approved by the Federal Energy Regulatory Commission (FERC) as well as by the Securities and Exchange Commission (SEC). She was unsure whether those have been scheduled or whether the merger will go forward without hearings. She noted the PUC put several compliance requirements on the conditional approval, and the commission is awaiting reports on those.

Senator Raggio disclosed that members of his law firm represented one of the companies involved in the merger.

Ms. Sheldrew stated the regulatory assessment in the current year is at 3.25 mills, down from 3.5 mills in 1997. She explained the commission increased the mill assessment in order to be prepared to pay for any unanticipated expenditures as a result of the reorganization. She said a significant reserve balance accumulated by the end of FY 1998, so the commission felt comfortable in reducing the assessment to 3.25 mills. She noted the commission’s budget for the upcoming biennium dropped the assessment to 2.94 mills, but the Budget Division increased the assessment to 3.04 mills in order to fund ongoing costs associated with relocating the Las Vegas office. The statutory maximum is 3.5 mills for the PUC, she said.

Ms. Sheldrew reported letters regarding the mill assessment are sent out to regulated utilities in May after the intrastate revenues are recorded for prior calendar years. She acknowledged the commission does not have the actual 1998 revenue figures yet, so the commission took the precaution of assuming there will be no increase to revenues. She pointed out the mill assessment applies only to public utilities, and as some competitive providers enter the marketplace the commission must ensure they can be assessed a similar amount. She said the commission is in the process of formulating regulations to establish a licensing fee for competitive providers that do not quite meet the definition of public utilities.

Ms. Sheldrew stated the maintenance decision unit M-100 simply includes inflationary adjustments determined by the budget office for printing, insurance, and postage. She noted the most significant changes occur in decision unit M-200, Demographics/Caseload Changes, with a request to allow use of additional funds to continue the consumer outreach program. She recalled the 1997 Legislature gave the PUC the authority to spend $500,000 for the consumer education program, and another $170,000 over the biennium is being requested. She reported two contractors were hired, one to handle creative information through brochures and television advertising, and one to conduct focus groups on the best way to manage the consumer education campaign.

Ms. Sheldrew provided a summary of the results, Consumer Attitudes About Changes Facing the Electric Power Industry (Exhibit D), and noted the participants in the focus groups had no knowledge of companies providing energy services in other states, only of their own companies. She said there was name recognition of Sierra Pacific Power Company and Nevada Power Company in both service areas covered by those entities. She indicated the only other company identified by members of the focus groups was Pacific Gas and Electric (PG&E) Company, and that company had a negative impression on them. In general, she said, participants were positive regarding the role of the PUC and regarding the opportunity to select a power provider, but they wanted more information. The results of the focus groups are being used by the commission to clarify the message to be used in advertising, she said. Ms. Sheldrew reported residential focus groups were utilized in Elko and Las Vegas, and another targeted business customers in Reno.

Senator Raggio reviewed the summary of consumer attitudes (Exhibit D) and expressed amazement that in September nobody was aware of the bill requiring deregulation. Ms. Sheldrew remarked many were aware of the merger but not aware of deregulation.

Senator Coffin wondered how the commission will make people more aware. Ms. Sheldrew responded the commission has been working to inform consumers and, even though people were not aware in September 1998 that the Legislature had acted, as the time nears the public will be subjected to advertisements from various competitive providers and become aware of deregulation. She reiterated the PUC will be available to provide information to assist consumers to allow them to make a choice.

Saying the Division of Insurance advises consumers, Senator Coffin wanted to know why the PUC does not plan to help consumers decide which provider to use. Ms. Sheldrew responded the PUC will make comparisons, but will leave the decision as to which provider to select up to the consumer. She said the regulation adopted by the PUC requires that providers furnish comparative information.

Ms. Sheldrew drew attention to the next summary in Exhibit D which reflects a telephone follow-up survey of those who participated in the focus groups. The survey was made one month after the focus group met to ascertain how the level of awareness of competition had changed. Approximately 53 percent of the focus group participants indicated they were aware that a change is in the offing, providing a baseline number from which to start the public education campaign. Ms. Sheldrew explained participants in the focus groups, although aware of the proposed change, were uncertain of the source of the change. She asserted the survey confirms that people are aware of a coming change, but they do not know the details and they need more information.

Ms. Sheldrew reported that during the time the focus group surveys were taking place, advertisements were being run to encourage people to call the PUC. She noted ads were run during the Super Bowl. She discussed a proposal to send a direct mailing to ratepayers, which has been delayed pending advice from members of the Legislature. She explained the brochure will inform customers and will demonstrate the effectiveness of the outreach effort being made by the PUC. She asserted it will be difficult to demonstrate results without the mailing, although, she admitted, direct mail is extremely expensive. She estimated it will cost approximately $195,000 to mail information to every ratepayer.

Kathy Kollar, Consumer Outreach/Public Information Officer, Public Utilities Commission of Nevada, testified it will be difficult to estimate exactly how much the direct mail will cost. She reported on February 12 lists of ratepayers were requested from the incumbent utilities in order to determine just how many users there are. She said no response from either utility has been received yet, although she has been informed the utilities are preparing responses. She estimates there are 1,050,000 ratepayers in the state.

Ms. Kollar said the PUC also has an application with the U.S. Post Office to receive a nonprofit status or government rate to avoid sending mail to "Postal Route Customer" or "Ratepayer," which she assumed would be discarded unread. She calculated the postage at $85,000 based upon standard weight for 1,050,000 pieces of first class mail that would be reduced to $45,000 to $50,000 if the nonprofit or government rate can be secured. She pointed out there must be added funding to cover the costs of envelopes, the development and printing of the brochure and the identification of those pieces returned.

Senator Coffin declared advertising companies say a message needs to be repeated more than once, even to the most intelligent person. He wondered whether, with the cooperation of the incumbent providers, there was any reason the commission could not help subsidize the required mailings to customers by inserting a notice from the PUC, and still not put the providers at a disadvantage. He asserted that mailings should be included in the utility bills four, five, or six times.

Ms. Kollar responded the commission has considered using a combination of approaches. She drew attention to a timeline chart on the back of Exhibit D which shows the planning for consumer efforts. She noted the PUC has planned all along to utilize "bill-stuffers" in cooperation with the utilities. She said professional marketers have indicated a direct mail piece will be reviewed more closely by consumers than will a bill-stuffer. She related the utilities have indicated only 4 to 5 percent of the populace reads bill-stuffers, although occasionally as many as 11 percent of their subscribers peruse them. She explained that in order to meet the requirement laid down by the Legislature to ensure that 50 percent of the ratepayers will know how they will be affected by the changes, the commission feels bill-stuffers may not be the best way to inform users. She said newspaper, radio and television advertising will also be used for follow-up along with the bill-stuffer. She stated the PUC is prepared to pay for any bill-stuffers and any increased postage incurred.

Senator Raggio asked what component of the budget reflects payment to the expert consultant. Ms. Sheldrew responded the budget decision unit M-200 includes a request to continue work being provided by two firms, Kruse and Parker and Strategic Alliances.

Ms. Sheldrew said decision unit M-201, Demographics Caseload Changes, includes a request to delete one financial analyst position which has been vacant for several years. She said the PUC would like to change the decision unit to delete two of those positions but would like a lesser amount, perhaps $50,000, to be placed into the consultants category to provide the financial services for the missing position. She explained there is a change in the types of positions that the commission needs to keep on staff, so the commission has made tremendous use of the consultants category. She said the authority in the consultants category amounts to $1.4 million and it is likely the PUC will spend most of that. She said contractual resources are used both for staff and for the commission, and though they cost more on an hourly basis, once the consultant has completed a specific task the contract concludes. Senator Raggio asked the staff to take note of the request.

Ms. Sheldrew noted the first enhancement decision unit, E-125, will provide for upgrades of software, and the next decision unit, E-126, was inserted by the Budget Division to continue the contract with Underground Services Alert regarding the "call before you dig" campaign. She said a federal grant was received in 1998 and the remainder of the grant funds, already within the budget, are reflected as a balance forward instead of a continuation of or loss of a federal grant. She explained training seminars are held for contractors regarding the requirement to call before digging.

Senator Jacobsen wanted to know whether similar training might be provided to firefighters in the rural areas since they are the first responders. He suggested it would be helpful to have such training for the fundamentals. Ms. Sheldrew responded there are opportunities for federal grants for such purposes, and she agreed to look into the matter. She pointed out the current training is aimed at informing contractors of the requirements to call.

Senator Jacobsen indicated most first responders know how to handle butane tanks during emergencies, but they often have no knowledge of how to handle underground utilities. Ms. Sheldrew reiterated her offer to seek help for first responders.

Continuing, Ms. Sheldrew said the Buildings and Grounds Division requested that the PUC relocate from the Grant Sawyer State Office Building in Las Vegas, and estimated funds for the move are included in decision unit E-276. She acknowledged no new location has been found as yet, but she surmised the move will take place in October.

Senator Raggio inquired why additional furniture will be needed for the move. Ms. Sheldrew said the original budget requested a 10,000-square-foot expansion of the existing space to accommodate the staff counsel position and a legal case manager in Las Vegas. The new equipment was requested for those positions.

Ms. Sheldrew noted the requests for new laptops are spread between two decision units. She explained those requested in decision units E-710 and E-720 will provide for staff members participating in meetings off site. She added several new desktop units are included in the request.

Ms. Sheldrew explained decision unit E-805 requests major reclassifications in order to compete with salaries offered by utilities and competitive providers. She acknowledged the PUC has been fortunate in attracting a large number of dedicated staff members who she averred are not being compensated fairly. She said the request asks that salaried positions be entitled correctly in the unclassified pay bill, and it also asks for increases tied to existing salaries. She indicated the major reclassifications will change a Senior Financial Analyst position to a Financial Analyst who receives higher pay. She added there is a request to convert a Financial Analyst to a Legal Case Manager, which she characterized as a significant downgrade, and another request asks that the salaries of two Utility Rate Specialists who perform the same work but whose compensation is approximately $2,000 apart be equalized. She stated the most important request will change a Senior Analyst in the Safety Division to a Gas Pipeline Engineer. She explained the safety personnel are outside the office, whereas the senior analyst is an office position subject to more supervision.

Senator Raggio inquired whether Ms. Sheldrew would care to comment on the assessment for the Office of Consumer Protection. He wanted to know whether it will be necessary to collect .75 mills. Ms. Sheldrew acknowledged she is unsure what figure was used by the Consumer’s Advocate, whether it will be .65 or .75 mills, which is the maximum he can use to fund his office. She noted the PUC collects the funds and then transfers the funds into the Consumer’s Advocate’s account. She was unable to explain why that budget is increasing.

Public Utilities Comm – Admin Fines – Budget Page P.U.C.-9 (Volume 2)

Budget Account 224-3921

Ms. Sheldrew addressed the collection of fines. She reminded the committee additional fining authority was granted to the PUC as it relates to electric restructuring, and the commission has authority to collect fines on "call before you dig." She reported the PUC has collected nearly $46,000 in fines this year through settlements reached with contractors.

Senator Raggio asked for an explanation of the projected reserve. Ms. Sheldrew responded the reserve equals the balance forward from the previous year in the agency request for FY 1999-2000. She noted the Governor’s recommendation places all collections into the reserve in the absence of any specific explanation as to how the funds will be spent. Senator Raggio asked what expenditures are most likely from those funds. Ms. Sheldrew replied the funds could be used to increase consumer awareness or for prosecution of anticompetitive conduct. She said the fines are sometimes received via settlement between the staff and the accused in which the settlement provides for expenditure of the funds. She acknowledged those are only examples of potential uses and she was not certain how the funds will be used.

Senator Neal requested that the committee be provided with a letter regarding the involvement of the PUC and how it learned about the transportation of nuclear materials through the state. Ms. Sheldrew agreed to comply.

Senator Raggio suggested the amendment to S.B. 190 should be authorized. Hearing no objections from committee members, he authorized staff to obtain an amendment including language proposed by Mr. West.

Budget Account 226-3922

John F. Mendoza, Chairman, Transportation Services Authority, Department of Business and Industry, described the history and general purpose of the Transportation Services Authority (TSA). He reminded the committee the authority regulates buses, limousines, taxicabs, tow trucks, household-goods movers, and warehouses within the state.

Mr. Mendoza said that 2 years ago, when the transportation functions were transferred out of the jurisdiction of the Public Service Commission (PSC) (which later became the PUC), the Legislature provided the authority to impound vehicles that had not been licensed by the state. Since that time, he said, there have been a number of lawsuits testing the legality of the provision, and the issue is presently on appeal. He reported that so far every case which has been subject to judicial review has been decided in favor of the state, in effect saying the judgment of the authority was correct and there was sufficient evidence upon which to impound and fine. He noted a constitutional issue has been raised over the matter.

Mr. Mendoza state the TSA is concerned with safety for both the public and for drivers. He said when the TSA split off from the PUC, it revised regulations which were inappropriate to the operation of the TSA.

Mr. Mendoza indicated the TSA also reviews the ability of applicants to function as certified carriers. He explained that by statute the applicants must be financially fit as well as operationally fit. He said the authority is entrusted with the duty and obligation to ensure that tourists receive fair and equitable treatment and service. He opined the rates in Nevada are reasonable.

Mr. Mendoza acknowledged an area of concern has been that insurance be maintained and that it be adequate. He said many individuals operating illegal limousines do not carry insurance, and at times they have been found carrying forged or false insurance policies. He reported illegal operators generally settle most claims in order to avoid lawsuits.

Mr. Mendoza voiced optimism that the TSA is fulfilling the needs of those it regulates, especially considering the size of the agency staff. He stated there are just 20 employees with a staff that includes law enforcement officers, an auditor, transportation management, and the three members of the administrative commission.

Mr. Mendoza noted the performance indicators are delineated in a booklet (Exhibit E). The indicators show there have been over 2,000 complaints filed during the 21 months that the TSA has been operational. He pointed out there have been approximately 6,000 telephone and counter requests for information during that time. He said there were 650 requests for records and searches, primarily from persons wanting to file applications and forms, or preparing for hearings. He noted that between October 1997 and June 1998 the TSA conducted 279 investigations of and stings on unlicensed and illegal activities, and the activity increased from July 1998 through December 1998 to 620 investigations. He explained many investigations occur during major conventions or boxing matches in Las Vegas. Mr. Mendoza stated other carriers are the best source of information on illegal carriers, and the legitimate carriers are very supportive of efforts to limit illicit operations.

According to Mr. Mendoza, the numbers of safety and certification inspections have remained static during the periods involved, as have the numbers of out-of-service notices. He explained the latter apply to vehicles which should not be operating. He said there have been 220 new applications for authority filed, and there have been 181 administrative and justice court citations, approximately the same as in the past. Lastly, he said, the number of hearings and pretrial conferences has dropped significantly. He opined the operational effect of the TSA since inception has raised awareness of its presence, largely due to the press notices generated as a result of enforcing impoundment provisions of the statutes.

Mr. Mendoza noted the TSA has participated in several conferences and workshops, and there have been extensive hearings regarding the regulations in both ends of the state. He asserted the agency has been successful in imparting its concerns to the industry and to the general public.

Mr. Mendoza reported that since the TSA’s inception in 1997, at which time it received 82 open PSC files, it has received an additional 149 dockets which the agency has worked diligently to reduce. He said the TSA presently has 60 open dockets. He indicated the process of streamlining has required a continued effort due to limitations imposed by the Administrative Procedures Act. He said efforts to expedite hearings have been slow, especially using intervenors. He explained another carrier may intervene in TSA proceedings if it can establish a need and a reason for being involved. As a result, the time in which matters can be heard has been extended. Also, Mr. Mendoza said, much of the delay can be attributed to the license applicants themselves, who often have incomplete paperwork and difficulty responding to data requests. He cited one case which took over a year to complete because six amendments were made to the application.

Mr. Mendoza reported procedures have been worked out to facilitate getting all parties together.

According to Mr. Mendoza, the TSA has made every kind of attempt to advise people not to use "gypsy" limousines. He stated actions have been filed to fine and otherwise prohibit the operators from continuing. He related illegal operators have worked with false license plates, have used intoxicated drivers, have employed drivers with suspended licenses and outstanding warrants, and have been active in prostitution, and their drivers have been found carrying firearms or narcotics.

Senator Raggio suggested the Transportation Services Authority and the Administrative Fines budgets be addressed together.

B&I, Transportation Services Authority Admin Fines – Budget Page B&I-202

Budget Account 226-3923

Senator Raggio commented the most noteworthy item in the budgets relates to the transfer of funds due to the budget being higher than the sources of revenue available. Mr. Mendoza concurred there are a number of ways in which to raise funds.

Senator Raggio recalled there had been a judicial review component for the Taxicab Authority, which is one reason why the agency funding was transferred. Mr. Mendoza responded two areas were covered at the Interim Finance Committee (IFC) meeting, the appeal process and the use of illegal limousines. He said based upon those two factors the Legislature authorized the transfer of funds from the Taxicab Authority trust account. He noted there was only one appeal, which came from the taxicab company that is now before the Authority. He reported that company just finished filing all its briefs and the decision will be forthcoming. He said it was the first taxi company in some years to appeal to the Authority.

Regarding impounds and illegal limousines, Mr. Mendoza said there were 50 citations issued in FY 1998, and there have been 32 in FY 1999. As a result of those, he said, $212,000 in fines has been collected.

Senator Raggio wondered whether the staffing ratio for supervisors is high in the TSA compared to other executive agencies, and whether that should be reviewed. Mr. Mendoza responded there is a need to review the total number on staff, because it appears the staff needs to be increased in the law enforcement area. He explained that has presented a problem because there are areas which the authority has been unable to investigate, such as household-goods movers, due to lack of staff.

Senator Raggio reiterated his concern is over the ratio between supervisors and employees. He pointed out the ratio is one supervisor to two employees, which he questioned. Mr. Mendoza acknowledged the situation and opined that would have been corrected had the merger bill gone forward during this session.

Senator Raggio asked what recommendations should be made for restructuring and whether the supervisory staff should be reduced. Mr. Mendoza reiterated the need for more law enforcement personnel, but said he does not believe the supervisory staff should be reduced.

B&I, Taxicab Authority – Budget Page B&I-224

Budget Account 245-4130

Robert G. Anselmo, Administrator, Taxicab Authority, Department of Business and Industry, asserted the agency is unique in that it is totally funded by the taxicab industry in Clark County alone. Senator Raggio inquired whether the Taxicab Authority (TA) will be able to continue the subsidized program for seniors. Mr. Anselmo said $216,000 is budgeted in the upcoming biennium for the senior program, and the TA believes if the income continues to grow as anticipated, additional reserve may be available for the program. He acknowledged those figures will not be available until October or November 1999.

Mr. Anselmo declared the industry is very healthy, with over 17 million trips last year, and he asserted the opening of new resorts such as Mandalay Bay and the Venetian should increase business.

Senator Raggio inquired about expansion of regulation into Laughlin and Mesquite. Mr. Anselmo replied the TA has always had authority there or anywhere within Clark County. He noted there may be a need to send investigators to check a situation developing in Laughlin.

Paul J. Christensen, Commissioner, Transportation Services Authority, Department of Business and Industry, interjected taxicabs pay approximately $2,700 each for fees and charges in order to operate. He said limousines are not assessed any fees or charges, and he noted the limousine business is growing rapidly. He asserted there is a possibility some fees may be charged to limousines, but he opined that may have an adverse effect upon a merger bill under consideration this legislative session. He pointed out that spreading those fees would cover many of the expenses of the authority and its programs.

According to Mr. Christensen, household-goods movers pay very little, although they, too, are regulated. He asserted it is an area where consumers are often taken advantage of.

Senator O’Donnell requested that the authority develop a funding mechanism to include household-goods movers and limousines to replace appropriations from the Highway Fund. Mr. Mendoza indicated the commission would address the issue.

Senator Neal referred to the organizational chart in the booklet (Exhibit E). He noticed the Deputy Commissioner position is equal to the Manager of Transportation position. He wondered why one is called a deputy and the other a manager. He surmised the manager should have more responsibility than the deputy. Mr. Mendoza responded the Legislature denominated a position in the TSA as a Deputy which is comparable to a Commission Secretary of Policy position in the PSC. He added the Secretary of the PSC was transferred, and that incumbent was placed into the Deputy Commissioner position.

Senator Jacobsen reported the audit committee has been very concerned over uncollected fines. He invited comment. Mr. Mendoza responded that people who act illegally are not responsible people. He said many of them have several citations, and one has 16 outstanding citations. Mr. Mendoza explained the operator in question had a fleet of 10 to 25 limousines at a time, with contracts for various conventions amounting to several hundred thousand dollars. He said another individual had 12 outstanding citations, and that operator is not even a resident of the state; he brought the limousines in from out-of-state.

Mr. Mendoza said the authority has reviewed those cases and presumes they will not be collectible. He verified those operators are now out of business.

Daryl E. Capurro, Lobbyist, Nevada Motor Transport Association, pointed out there are a number of bills pending, including one that will create the merger of the TSA and the TA. He noted that bill should be available for consideration this session. He added there is also a bill to deregulate bus operations in line with what was required in the federal transportation budget, which mandated that the state not be permitted to regulate a significant portion of bussing. He noted there are three agencies involved with the Las Vegas airport, including the airport authority, the TSA with respect to limousines, and the TA with respect to taxicabs. He said the TSA has adopted statewide rules and regulations for taxicabs and limousines that mirror the authority of the TA in Las Vegas.

Mr. Capurro suggested it is time to consider merging the operations of the two agencies which should result in a savings to the Highway Fund.

Senator Raggio agreed the taxicab problem has never been resolved. He recollected addressing the problem when the Taxicab Authority was first established.

There being no further testimony, Senator Raggio adjourned the meeting at 10:22 a.m.

RESPECTFULLY SUBMITTED:

Judy Jacobs,

Committee Secretary

APPROVED BY:

Senator William J. Raggio, Chairman

DATE: