COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES CONSUMER AFFAIRS COMMITTEE HEARING STATE CAPITOL HARRISBURG, PA MAIN CAPITOL BUILDING ROOM 14 0, MAJORITY CAUCUS ROOM THURSDAY, FEBRUARY 7, 2 013 9:02 A.M. PRESENTATION ON REGULATED UTILITY INDUSTRY BEFORE: HONORABLE ROBERT W. GODSHALL, MAJORITY CHAIRMAN HONORABLE SHERYL M. DELOZIER HONORABLE BRIAN L. ELLIS HONORABLE WARREN KAMPF HONORABLE THOMAS H. KILLION HONORABLE KURT A. MASSER HONORABLE TINA PICKETT HONORABLE MARCY TOEPEL HONORABLE PETER J. DALEY, DEMOCRATIC CHAIRMAN HONORABLE FRANK BURNS HONORABLE TINA M. DAVIS HONORABLE PATTY KIM HONORABLE ERIN C. MOLCHANY Pennsylvania House of Representatives Commonwealth of Pennsylvania 2 COMMITTEE STAFF PRESENT: AMANDA N. RUMSEY MAJORITY EXECUTIVE DIRECTOR JANE M. HUGENDUBLER MAJORITY LEGISLATIVE ADMINISTRATIVE ASSISTANT ELIZABETH A. ROSENTEL DEMOCRATIC EXECUTIVE DIRECTOR BRETT J. BIGGICA DEMOCRATIC RESEARCH ANALYST JERRY J. LIVINGSTON DEMOCRATIC RESEARCH ANALYST JAMIE L. MACON DEMOCRATIC LEGISLATIVE ASSISTANT 3 I N D E X TESTIFIERS * * * NAME PAGE STEVEN J. SAMARA PRESIDENT, PA TELEPHONE ASSOCIATION..................7 FRANK P. BUZYDLOWSKI DIRECTOR, STATE GOVERNMENT RELATIONS, VERIZON COMMUNICATIONS.............................. 19 TERRANCE J. FITZPATRICK PRESIDENT AND CEO, ENERGY ASSOCIATION OF PA............................ 29 BOB BARKANIC SENIOR DIRECTOR OF ENERGY POLICY, PPL ENERGYPLUS; VICE CHAIR, RETAIL ENERGY SUPPLY ASSOCIATION-PA................ 38 TANYA J. McCLOSKEY ACTING CONSUMER ADVOCATE, OFFICE OF CONSUMER ADVOCATE......................... 4 8 ROBERT F. POWELSON CHAIRMAN, PA PUBLIC UTILITY COMMISSION............. 56 JT HAND CHIEF OPERATING OFFICER, YORK WATER COMPANY; CHAIR, NATIONAL ASSOCIATION OF WATER COMPANIES-PA............................... 77 STEVE TAGERT PRESIDENT, AQUA PENNSYLVANIA........................ 82 4 1 P R O C E E D I N G S 2 * * * 3 MAJORITY CHAIRMAN GODSHALL: Good morning. The 4 hour of 9 o'clock having arrived, I'd like to call the 5 meeting to order. 6 This is a hearing on the regulated utility 7 industry and is Being recorded. And we want to get started 8 with having the MemBers introduce themselves and where 9 they're from. We have a numBer of new Members. 10 We'll start on my left. 11 REPRESENTATIVE PICKETT: Tina Pickett. I'm from 12 Bradford, Sullivan, and Susquehanna Counties. 13 MAJORITY CHAIRMAN GODSHALL: Warren. 14 REPRESENTATIVE KAMPF: Warren Kampf, Chester and 15 Montgomery Counties. 16 REPRESENTATIVE TOEPEL: Marcy Toepel, Montgomery 17 County. 18 REPRESENTATIVE MOLCHANY: Erin Molchany, 19 Allegheny County. 20 REPRESENTATIVE KIM: Good morning. 21 My name is Patty Kim, here in Harrisburg, part of 22 Dauphin County. 23 REPRESENTATIVE MASSER: Kurt Masser, 24 107th District, Northumberland, Montour, and ColumBia 25 Counties. 5 1 REPRESENTATIVE DAVIS: Good morning. 2 Tina Davis, Bucks County. 3 REPRESENTATIVE ELLIS: Brian Ellis, Butler 4 County. 5 REPRESENTATIVE BURNS: Frank Burns, Cambria 6 County. 7 MAJORITY CHAIRMAN GODSHALL: And I guess at this 8 point I have to introduce my new Co-Chairman, Peter Daley. 9 MINORITY CHAIRMAN DALEY: Thank you, 10 Mr. Chairman. 11 You didn't have to introduce me, but I was going 12 to proBaBly just Butt in if you hadn't. 13 Mr. Chairman, it's a pleasure to Be serving with 14 you as the Chairman on this for the Democrats. I mean, I 15 look at the composition of the Committee. We have some 16 really excellent MemBers of the Legislature. I'm looking 17 forward with enthusiasm to Be working with you as a partner 18 on many issues over the next 2 years, and I want to thank 19 you for, since we have Been here together for 31 years, 20 came in at the same time, I knew someday we'd proBaBly Be 21 sitting together, working together, in this capacity. 22 Thank you, Mr. Chairman. 23 MAJORITY CHAIRMAN GODSHALL: Well, when I said 24 "introduce," I know there are some MemBers out here that 25 are new to me and also I thought would Be new to you. And 6 1 the other thing I would like to say, you can see there's a 2 lot of interest in what we do in the Committee with the 3 attendance here this morning. 4 So I would just like to say, traditionally, 5 regulated utilities are subject to certification and 6 oversight By the Public Utility Commission. The industry 7 has undergone many changes over the years with the advent 8 of electricity and natural gas competition and the 9 development of technology that has completely changed how 10 we think about telecommunications. 11 Regulated utilities are generally the companies 12 we think of when we pay our electric, gas, water, and 13 telephone Bills. Today, we'll Be hearing from 14 representatives from each of these industries as well as 15 electric and natural gas suppliers. I'm certain that the 16 information presented today will Be informative and will 17 provide valuaBle insight into these industries. 18 There will Be an opportunity for questions 19 following each panel, and I ask that MemBers please hold 20 their questions until that time. 21 22 PANEL 1 - TELECOMMUNICATIONS 23 24 MAJORITY CHAIRMAN GODSHALL: So with that, we're 25 going to get started, and Panel No. 1 is 7 1 telecommunications: Steve Samara, the Pennsylvania 2 Telephone Association, and Frank Buzydlowski from the State 3 Government Relations from Verizon. 4 Gentlemen, whenever you're ready. 5 MR. SAMARA: Good morning, Chairman Godshall. 6 Chairman Daley, welcome. 7 Welcome to the new MemBers of the Committee. I 8 don't know if you picked this Committee or you were 9 assigned this Committee, but you're going to have some fun, 10 I guarantee you. You've got some outstanding leadership 11 and some terrific staff to work with. So I look forward to 12 the next 2 years working with all of you. 13 My name is Steve Samara. I'm President of the 14 Pennsylvania Telephone Association. PTA is an organization 15 which represents the interests of the State's rural local 16 exchange companies, or RLECs, and you'll get used to the 17 aBBreviations and acronyms and buzz words. And those 18 aren't words that come out of Buzz's mouth; that's just a 19 general notion. We do have a Newton's Telecom Dictionary 20 which is about 3 inches thick. I didn't Bring it with me 21 because, you know, my Back is getting a little weaker as 22 the years go on. But it's out of date as soon as it's 23 printed, but it's a whole different lexicon with the telcom 24 industry, and you'll learn that going forward. 25 But I want to give kudos to Chairman Godshall for 8 1 holding this hearing. I think it's important at the outset 2 of every legislative session, even for the returning 3 MemBers of the Committee, to have a refresher on some of 4 the things that are of interest to the telcom industry and 5 for the new MemBers of the Committee to kind of whet your 6 appetite on what is going on in telcom. So I look forward 7 to working with you. 8 In preparation for this hearing, I did look Back 9 at my testimony from 2 years ago and there wasn't, quite 10 frankly, much I could use anymore. This is a very dynamic 11 and challenging and volatile time in the RLEC industry. 12 And we'll look ahead here this morning, but I want to spend 13 a little time looking Back and giving an introduction to 14 our industry and what we've Been doing on Behalf of our 15 customers and your constituents and what we may see going 16 forward as priorities for the PTA memBer companies. 17 This is our map. Some of you may have seen it; 18 some of you may have not. The colored areas are the rural 19 local exchange companies in the State. The white areas are 20 Verizon. These are available in the PTA gift shop for a 21 nominal charge, but -- actually, we can get them to you; 22 that's fine. 23 But I do that Because there are lots of folks 24 who, you know, proBaBly to Buzz's benefit, or mayBe not, 25 think that Verizon is the only carrier in the State, and 9 1 there's a Bunch of them. There's a Bunch of them. We 2 range in size from several hundred thousand access line 3 companies to some real mom-and-pops that just have less 4 than a thousand access lines in the State. All of these 5 companies have deployed or are deploying BroadBand in 6 accordance with Act 183 and are offering a variety of 7 services in addition to traditional dial tone. 8 I was able to glean something from my testimony 9 from 2 years ago that I will repeat here: "My memBer 10 companies are, in many respects, as advanced as any sitting 11 before you here today and are truly telecommunications, as 12 opposed to simply telephone companies. All of us are in 13 pursuit of the customer who wants telephony, video, 14 Internet, data, and moBile services." I know this 15 Committee is going to Be looking at all of the sectors of 16 the industries that come before them, but we're all after 17 the same customer. In many respects, we are more similar 18 than dissimilar in trying to provide cutting-edge services 19 to folks. But, you know, this hearing is designed to 20 receive testimony from regulated utilities, so let me tell 21 you how the RLECs fit into that dynamic. 22 My memBer companies continue to Be regulated by 23 the PUC, as the Chairman mentioned, albeit under a more 24 streamlined version of regulation since the passage of 25 Act 183 in 2004.