SOLID WASTE Background. Solid waste jurisdiction in Washington is fragmented. The UTC regulates solid waste collection statewide except cities can choose to provide (directly or by contract) solid waste collection and counties can choose to contract for residential recycling collection. The Department of Ecology (DOE) prepares and implements the state’s solid waste management plan. Counties, and a few larger cities, prepare and implement local solid waste management plans. Most cities provide solid waste collection service either directly or by contract. EXTERNAL Industry. The industry continues a trend of consolidating local and regional companies into larger regional and national companies. However, I do not expect that will affect the UTC’s work in the near future. Acquiring companies have maintained the local hauler’s separate operating areas and trade names. Although staff will deal with fewer companies, as a practical matter, the number of operating service areas and associated rate case filings will not change. Consolidations should result in improved, centralized accounting, increased ownership expertise and better access to capital markets. Rate filings will require additional work on overhead allocations and affiliated interest transactions. Economic / Operating Environment. A healthy state / local economy supports growth in both commercial and residential services, which tend to stabilize solid waste collection rates and postpone the need for regulated companies to increase rates. At the national level, higher levels of inflation will drive costs up and require regulated companies to file more frequent rate cases. The state solid waste management plan proposes many new recycling programs that the UTC will need to work with regulated companies and counties to implement. Political environment. Sen. Rasmussen and, most recently, Rep. Campbell Some members of the Legislature have criticized UTC regulation and regulated solid waste collection companies for…?. Sen. Rassmussen – regulated haulers own the company that built the 304th Avenue landfill in her district. Rep. Campbell made broad statements about LeMay (operates in his district) and I got the impression that he thought the regulated companies make too much money. Rep. Mielke because he had a close connection to a company in Clark County that the commission took action against for collecting solid waste without a certificate. Former Rep. Mielke (Clark County) introduced The Legislature also briefly considered a bill several years ago to deregulate solid waste. Counties are sometimes interested in authority to provide service directly or by contract. Clark County is the only county I know of that is currently interested in that authority. Clark County is the only county that currently contracts for residential recycling. Kitsap County contracted for residential recycling in the past. The Washington State Association of Counties has not taken a position on this issue. Partners. The Department of Ecology (DOE) prepares and implements the state solid waste management plan. Regulated solid waste collection companies are key players in solid waste collection statewide. Although DOE staff frequently view the UTC and solid waste regulation in general as barriers to accomplishing specific recycling goals, etc., we have developed a good working relationship with DOE staff. Local governments prepare and implement local solid waste management plans. The UTC requires regulated haulers to comply with county solid waste management plans and implementing ordinances. We also work with counties to implement recycling revenue sharing programs. There are no key initiatives or dependencies / connections between UTC, DOE and local governments. INTERNAL Funding. Current regulatory fees are set at 0.19 percent of gross revenue. The statutory maximum is 1.0 percent. Puget Sound area companies provide the greatest percentage of regulatory fees. If the legislature passed a county “option” to provide (directly or by contract) solid waste collection and the larger Puget Sound area counties “opted” out of the regulated system, the UTC would lose a significant amount of funding. That could result in an underfunded program. Internal Capacity. The UTC has a staff of knowledgeable, experienced analysts who work on the solid waste industry. Unlike other regulated industries, the solid waste industry’s structural, financial, and operational environment is stable. Several of the current employees are nearing, of eligible for, retirement. The greatest challenges for the section will be retaining the current employees, succession planning succession planning for retirements and recruiting qualified staff in the future. WATER Background. The UTC regulates private water companies that serve 100 or more customers or charge more than $471 average annual revenue per customers. The UTC regulates 61 companies that operate about 700 water systems and serve less than five percent of the state’s population. EXTERNAL Industry. The water industry is an increasing cost industry. Small water companies generally have limited technical, managerial and financial capacity. The water systems are generally characterized by aging and failing infrastructure. Additional Safe Drinking Water Act requirements for water quality require new investment in treatment and filtration facilities. All of these are driving the need for significant capital investment in the near future. Small companies generally cannot access traditional capital markets. The companies generally have limited funding sources and the owners have little equity. Economic / Operating Environment. Several external factors will cause the UTC to regulate more small water companies in the future. A healthy economy supports both commercial and population growth. Stand-alone water systems serve most of the growth in rural areas. More water systems likely means more regulated water systems. Because the water industry is an increasing cost industry, average water bills will increase faster than inflation and drive more water companies above the jurisdictional revenue threshold. The jurisdictional revenue threshold increases by an inflation index. The Municipal Water Law requires Department of Health to adopt rules on water use efficiency. The rules will require all companies to consider conservation programs, including installing meters and using conservation (inverted) rate designs. These programs will likely drive additional investment and higher water bills, resulting in more jurisdictional companies. Political environment. Water has been an important topic in the legislature the last several sessions. The Municipal Water Law will require all water systems to address water use efficiency and conservation. Those activities cost money and will increase rates. Every year, the UTC staff works with legislative staff regarding nonregulated water companies that charged customers higher bills. As water companies move from “flat rate” (no limit on the amount of water) pricing to metered rate pricing, customers are shocked by high water bills (up to $400 per month). Angry customers call their legislators and the UTC. Staff works with customers and legislative staff during our investigations to determine whether the UTC has jurisdiction over the company and its rates. Most customers end up paying higher water bills for less water and they are not happy. Partners. Our primary partner in water regulation is the Department of Health (DOH) Drinking Water Program. DOH regulates water quality and quantity for all water systems. Although the UTC has statutory jurisdiction over water quality and quantity, the UTC has a Memorandum of Understanding (MOU) with DOH stating that DOH takes primary responsibility for water quality and quantity issues. Staff is currently reviewing and redrafting the MOU with DOH. The Public Works Board, Department of Community, Trade and Economic Development (CTED), administers the drinking water State Revolving Fund. Staff works with the board and DOH on issues related to regulated water companies. Staff works with both DOH and the county when a regulated water company is failing. Counties are the receiver of last resort in a receivership proceeding. Several regulated water companies have failed and the courts appointed the county as receiver. There are no key initiatives or dependencies / connections between UTC, DOH and CTED. ((NOTE: We have a MOU and we are rewriting it, so this statement is at least too broad, if not inaccurate.)) I understand this is a scoping document for the near future. However, we are close (weeks?) to completing the MOU and, so far, there are very minor changes to current MOU. INTERNAL Funding. The water program is severely underfunded. The UTC collects about $32,000 in regulatory fees and spends about $500,000 regulating the industry. Energy companies subsidize water regulation. Although staff frequently discusses the need to propose legislation to increase funding, the UTC has not yet made any proposals. Employee Capacity. The UTC has a staff of knowledgeable, experienced analysts who work on the water industry. Because of funding limitations, our work is bare bones. Although there are many changes in the water industry, those changes do not generally affect our work. The greatest challenge for the UTC will be to retain current employees and maintain current service levels in the face of continued severe funding deficits. TRANSPORTATION Background The UTC, Department of Licensing and the State Patrol share responsibility to regulate private transportation providers. Some local jurisdictions choose to regulate taxis. The transportation industry is not limited to private sector providers. The Department of Transportation and numerous local and regional transportation jurisdictions also fund or directly provide transportation services. Because regulation and ownership of the transportation industry is so fragmented, the agency’s external environment is extremely complex. Background. In addition to solid waste collection, The UTC regulates: Ferries – entry, rates and service. Airporters - entry, safety, rates and service. Scheduled Intercity Bus - entry, safety, rates and service. Nonprofit Special Needs - registration and safety. Charter and Excursion – registration and safety. Household Goods – limited entry regulation, safety, limited rate regulation (rate bands) and service. Oil Pipe Lines – safety, rates and service. Low Level Radioactive Waste Disposal – rates. EXTERNAL Industry. None of the industries face significant structural or operational changes. Bus and airporter companies face increasing competitive pressures from a public transportation system that is expanding service and improving coordination. The Department of Transportation was recently mandated and funded to encourage public transit agencies to coordinate service and otherwise fill in the gaps in public transportation. Sound Transit is making progress in developing light rail that will eventually serve SeaTac Airport and its commuter rail program and rapid bus transit program will provide consumers alternatives to buses and airporters. The Legislature restructured regional transportation governance in the Puget Sound this session, which will only encourage the above trends. We do not know how the bus and airporter industry will respond to these pressures. The Washington State Ferries marginalized the commercial ferry operators up until a few years ago, relegating the operators to the routes WSF did not serve or did not plan to serve. In 2003, the Legislature created an opening for competition by the commercial ferry operators on major commuter routes. Some operators began service or applied to provide service on three of the four major potential routes. In 2006, the Legislature created a funding program that limits the involvement of both the Washington State Ferries and the commercial ferry operators in providing commuter-oriented passenger- only service, and encourages county ferry districts to become the primary providers. If the new program is successful, commercial ferry operators will only be able to serve low volume routes that the state or local governments do not wish to serve. Private for-profit special needs transportation providers are transporting a significant share of special needs consumers. The agency does not regulate these providers, because when the law passed, private for-profit providers were non-existent or a very small share of the market. The agency is being encouraged to support legislation to extend regulation to the for-profit providers. Economic / Operating Environment The public sector provides passenger transportation through public transportation benefit areas, municipal transit, and Sound Transit. The Department of Transportation develops plans for and funds public transportation, with special emphasis on “filling gaps” in service or funding provided at the local level. The private sector provides passenger transportation through airporters, scheduled intercity bus companies, charter and excursion companies, and non-profit special needs providers regulated by the UTC. The private sector also provides service through limousines and “for hire” taxis that are regulated (to a lesser degree) by the Department of Licensing. Passenger transportation service is provided by: Public Entities - public transportation benefit areas, municipal transit agencies, and Sound Transit. UTC-Regulated Private Companies - airporters, scheduled intercity bus, charter and excursion companies, and nonprofit special needs providers. Nonregulated Private Companies - limousines and “for hire” taxis. The Washington State Ferry System, county ferry districts, transit agencies, tribes and UTC-regulated commercial ferries provide ferry service. Many different state and local government entities are engaged in transportation planning. The Washington Transportation Plan provides a high-level goal-oriented overview of a 20-year horizon. Washington State Department of Transportation’s (WSDOT) system plans are detailed for state-owned elements and address local or private elements in “state-interest” goals and programs. Specific WSDOT offices and other agencies focus attention and provide coordination: Freight Office, Transit Mobility Office, Public Transportation and Rail Office, Freight Mobility Strategic Investment Board, and the Agency Committee for Coordinated Transportation. These offices are not necessarily comprehensive or systematic in their approach. Regional Transportation Planning Organizations produce regional plans, mostly oriented toward highway investment with some incorporation of public transit, ferries and rail. The Regional Transportation Investment District in the Central Puget Sound has planning and funding functions intended to complement state and local plans and investments. Local jurisdictions produce transportation plans for those segments of the system that they own or operate. Ad-hoc organizations provide input with their own proposal, such as the “Farmhouse Gang” in the North Sound region. They tend to develop proposals that are folded into larger plans to the degree they prove useful. There is not a single central document that provides a detailed, systematic, comprehensive plan for who will provide what transportation services, at what level of service and how to fund it. Airporters operate to and from airports, on schedule or on demand door-to-door. The industry claims because it faces substantial competition from private automobiles, nonregulated private transportation companies (limos and taxis) and public transit, the UTC should not regulate fares. The industry claims the competition from alternative transportation modes will adequately regulate fares. Rising fuel prices adversely affect all transportation companies. Airporter operators use a greater amount of fuel compared to other transportation industries, so rising fuel prices have a greater impact on that industry. Economic and national issues that reduce airline travel also affect this industry. After the September 11, 2001, terrorist attacks, airline traffic decreased significantly and this industry lost many passengers. Political Environment. Both the UTC and the private transportation operators function in a planning and funding environment that is fragmented. Regulators and operators find it difficult to make informed decisions when the public sector transportation system (which provides the bulk of passenger transportation) is unpredictable. Examples of the environment in which the UTC and the operators have to operate within include: The Transportation Commission adopts a high-level, goal-oriented plan with a 20-year horizon. The Department of Transportation develops system plans within that context, but while they are detailed for the state-owned (highways, ferries) programs, they lack detail for the “state-interest” programs (public transportation, rail, local ferries, etc.). The Department also has “modal offices” that advocate for and fund specific programs and projects in the “state-interest” arena. Regional planning and funding entities, such as regional transportation planning organizations and the Regional Transportation Investment District, develop more detailed plans which are required to be consistent with the state plan. Local governments and agencies develop their own plans and funding programs. From July 1, 2005 through June 30, 2007, state law prohibits the commission from considering applications from private companies to provide passenger-only ferry service between Kitsap County and King County. The moratorium provides public entities the opportunity to develop and implement passenger ferry operations before private companies initiate service. While the laws that created all of these entities and processes requires consultation and coordination, there is no oversight of all the planning and funding efforts, and participants report examples of conflicts and gaps. Further, the public and private operators do not always communicate well when making planning and funding decisions. Finally, the public sector’s planning and funding decisions are subject to substantial and frequent changes in the political climate. The state legislature has struggled the last two sessions over the question of whether public entities (state or local governments) or private companies should provide ferry service. The UTC has two applications for ferry service pending, but they are on hold until July 1, 2007, due to a statutory moratorium designed to allow public entities time to start ferry service. Sen. Haugen announced her interest in transferring UTC transportation regulation functions to other state agencies. She has not yet introduced any legislation. The UTC collects approximately $2.4 million through the Single State Registration System (SSRS). Federal legislation eliminates the SSRS effective January 1, 2007, and replaces it with the new Unified Carrier Registration (UCR) program. However, the US DOT has not yet taken any action to start the development of the UCR program and states are worried that the UCR program will not be operational before the SSRS program expires. The National Association of Transportation Specialist (NCSTS), the National Association of Utility Regulatory Commissioners (NARUC), the UTC and other affected states, and various industry groups are working to delay the change by one year until January 1, 2007. A delay will give the US DOT enough time to develop and implement the UCR program and give states additional time to adopt enabling legislation and change their programs. The UTC is also working internally to consider what actions the state could take if the federal UCR program is not in place before the SSRS program expires. Partners. The Department of Transportation conducts substantial passenger transportation planning and administers grant programs to subsidize and develop passenger transportation operations within and between communities that do not have adequate transportation services. The UTC’s statutory regulation of inctercity bus passenger transportation companies conflicts is not consistent with WSDOT’s goal of using desire to use its grant program to select which private company should provide passenger transportation service. The Seattle Port Authority (SeaTac Airport) manages the traffic flow of passengers into and out of SeaTac International Airport. The port authority has always been interested in deciding which private transportation companies it would allow to operate into and out of SeaTac. The Washington State Patrol does not inspect the passenger motor carrier vehicles regulated by the UTC, but shares its interest in the safe operation of all motor vehicles on the state highways. INTERNAL Funding. With the exception of Oil Pipe Line and Low Level Radioactive Waste Disposal, all of the transportation industries fail to cover operating expenses at the current regulatory fee level. Revenues collected from the SSRS program subsidize all of those programs. The UTC needs to review funding options for these industries. Employee Capacity. The current UTC staff are knowledgeable and experienced in the various regulatory functions for all of the different transportation industries. There is much uncertainty regarding the near term future of regulation for these industries. In addition to funding issues, public policy reviews and political interest may lead to deregulation of some industries or transferring regulatory functions from the UTC to a different state agency. The UTC’s challenge will be to retain current experienced employees and maintain current service levels in the near term.
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