Meeting Minutes and Sunset Review Presentations for the House Regulatory Affairs Committee of Reference

Summary

Minutes of an interim meeting of the Arizona House of Representatives Regulatory Affairs Committee of Reference, Fifty-fourth Legislature, Second Regular Session, held Thursday, January 16, 2020, with attached agenda, attendance record and presentation handouts. The agenda covers sunset reviews of the Residential Utility Consumer Office, the Arizona Department of Insurance and the Arizona Board of Library Examiners. The minutes record committee action recommending an 8-year continuation of the Residential Utility Consumer Office, a 5-year continuation of the Department of Insurance and an 8-year continuation of the Board of Library Examiners, each by voice vote. Attachments include the Residential Utility Consumer Office's presentation and the Auditor General's slides on Performance Audit and Sunset Review Report 19-110, which state the Department agreed with 16 recommendations.

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ARIZONA HOUSE OF REPRESENTATIVES
Fifty-fourth Legislature - Second Regular Session

HOUSE REGULATORY AFFAIRS COMMITTEE OF REFERENCE
Report of Interim Meeting

Thursday, January 16, 2020
House Hearing Room 5 -- 8:30 A.M.

Convened 8:32 A.M. MINUTES RECEIVED
Recessed CHIEF CLERK'S OFFICE
Reconvened {-lG6-AO

Adjourned 9:48 A.M.

Members Present Members Absent
Representative Grantham, Chairman

Representative Roberts, Vice-Chairman

Representative Blackman

Representative Powers Hannley

Representative Shah

Representative Teran

Representative Toma

Agenda
Original Agenda — Attachment |

Request to Speak
Attachment 2

Committee Attendance
Report — Attachment 3

Presentations
Name Organization Attachments (Handouts)
Jordy Fuentes Residential Utility Consumer Office 4
Rosa Ellis Office of the Auditor General 5
Holly Henley Board of Library Examiners 6

Committee Action

8-year continuation of the Residential Utility Consumer office by voice vote
5-year continuation of the Department of Insurance by voice vote

8-year continuation of the Board of Library Examiners by voice vote

evan. Hete.

Susan Hite, Committee Secretary
January 16, 2020

HOUSE REGULATORY AFFAIRS COMMITTEE OF REFERENCE
January 16, 2020
REVISED - 1/13/20 ’ REVISED - 1/13/20 REVISED - 1/13/20

Interim agendas can be obtained via the Internet at http:/Mwww.azleg.gov /Interim-Committees

ARIZONA HOUSE OF REPRESENTATIVES
Conv. 8°32

INTERIM MEETING NOTICE |
OPEN TO THE PUBLIC Aa, F498

HOUSE REGULATORY AFFAIRS COMMITTEE OF REFERENCE

Date: Thursday, January 16, 2020
Time: 8:30 A.M.
Place: HHR 5
AGENDA
1. Call to Order
; Roli Call
3.) Sunset Review of the Residential Utility Consumer Office
rs e Presentation by the Residential Utility Consumer Office

e Public Testimony
e Discussion and Recommendations
4. Sunset Review of the Arizona Department of Insurance
e« Presentation by the Office of the Auditor General
nd e Response by the Arizona Denartment of Insurance
e Public Testimony
e Discussion and Recommendations

5. Sunset Review of the Arizona Board of Library Examiners
e Presentation by the Arizona Board of Library Examiners
> e Public Testimony
e Discussion and Recommendations
6. Adjourn
Members:

Representative Travis W. Grantham, Chair Representative Amish Shah

Representative Bret Roberts, Vice Chair Representative Raquel Teran

Representative Walter Blackman Representative Ben Toma

Representative Pamela Powers Hannley . Attachment ;

01/08/20 —
JY

People with disabilities may request reasonable accommodations such as interpreters,
alternative formats, or assistance with physical accessibility. If you require accommodations,
please contact the Chief Clerk's Office at (602) 926-3032 or through Arizona

Page 1 of 1
HOUSE OF REPRESENTATIVES

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Name Dkacery C Naw pier Need to Speak? yd Yes LI No
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#4 ET VE-MINUTE SPEAKING LIMIT*** Attachment_2_
ARIZONA STATE LEGISLATURE
Fifty-fourth Legislature - Second Regular Session

COMMITTEE ATTENDANCE RECORD

COMMITTEE ON REGULATORY AFFAIRS COMMITTEE OF REFERENCE

CHAIRMAN: Travis W. Grantham VICE-CHAIRMAN: Bret Roberts

DATE 01/16/20 /20 120 120 /20

CONVENED $30 mM m m m m
RECESSED
RECONVENED
ADJOURNED g:4e
MEMBERS
Blackman /
Powers Hannley /
Shah v
Teran 4
Toma x
Roberts, Vice-Chairman A
Grantham, Chairman 4
Vv Present --- Absent exc Excused

Attachment_3
Sa NG
we

Arizona House Of Representatives

Committee on Regulatory Affairs

Jordy Fuentes

Director

January 15, 2020

Attachment 4
Our Mission Statement:

Professionally represent residential utility customers in regulatory
proceedings before the Arizona Corporation Commission, advocating for
fair and reasonable utility rates and quality utility services, in a dynamic
utility environment.

Our Stakeholders and Customers:

The Residential Utility Consumer Office’s stakeholders and customers are
the residential customers of public service corporations, regulated by the
Arizona Corporation Commission, excluding customers of member-owned
non-profit cooperatives.
oe

JORGE “JORDY” FUENTES
Director

VACANT

Deputy Direcior,’Policy Advisory

ALOLTCIND
¢ Not a General Fund Office

¢ 100% of Funding from Assessment

$757,700 $757,700
$250,100 $253,700
$189,800 $192,200
$145,000 $145,000

$1,342,600 $1,348,600
* RUCO intervenes formally in rate cases based ona
number of factors. These include:

Number of residential customers affected by the application
Relative magnitude of the requested rate increase

Duration of time since the utility’s last rate increase

Potential for the individual issues in the case to affect other
utilities (precedent)

Number and relative magnitude of potential issues in the
application

Consistency of the application with Commission precedent
Number of calls or complaints from the public concerning the
application

Level of available resources that can be devoted to the application
(current case load, staffing, consultant budget, etc.)

Potential for success in influencing the outcome of the case
(assess RUCO’s success rate on similar issues)

Novelty of potential issues apparent in the application
Rate Cases
¢ $560 million dollars in savings over last three fiscal years!!

“Total Savings are calculated based on the projected rate case cycle of each utility

Non Rate Case

° Tax Cut Refunds, Value of Solar, Johnson Utilities, Water
Policy, EV Policy, IRP, Demand Side Management, Retail
Choice, Energy Policy, Utility Disconnects
Arizona Department of Insurance

Performance Audit and Sunset Review
Report 19-110
Issued: September 2019

Presenter: Rosa Ellis ARIZONA

AuditorGeneral
Date: January 16, 2020 | ee nr

Licenses insurance companies and professionals
nvestigates consumer complaints
nvestigates reports of suspected insurance fraud

Reviews insurance policies, rates, and products

ARIZONA

AuditorGeneral

Making 9 Positive Difference

2019 consolidation:

¢ Arizona Department of Financial Institutions
¢ Automobile Theft Authority

Arizona Department of Insurance and Financial
Institutions effective July 1, 2020

ARIZ 0 NA
AuditorGeneral
Making a Positive Difference
- Issued licenses we reviewed to qualified applicants
- Resolved complaints we reviewed timely
- Reaccredited in April 2019 to license and monitor

insurance companies operating in Arizona and
facilitate reciprocal licensing

ARIZONA

AuditorGeneral

Making 9 Positive Differonce

2,659
2,496 2.370 2,576

3
2,290 2,211

2,074

125 142

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Number of referrals received ARIZONA

Number of referrals investigations completed AuditorGeneral

“a. Making 9 Positive Differonce

Utah

Pennsylvania

Arizona

Florida

California

25,159

334

304

231

2,108

1,226

Insurance department
Attorney General's Office

Insurance department

Financial services
department

Insurance department
- Public impa
of the fraud

¢ Estimated loss

over $10,000

Fiscal year 2019

Opened for
investigation
413 \

<f
PG ee
25

ie

Ne

Total: 3,500

Closed
Lack of investigative ?

resources
1,316
-Does not require specific, standardized referral
information

-Does not use referral data to identify fraud
trends and to inform future prioritization efforts

ARIZONA

AuditorGeneral

Making 9 Positive Difference

¢ Strengthen its referral prioritization process

-Evaluate the effectiveness of the process and
implement any needed changes

-Assess fraud investigative staffing needs

ARIZONA

AuditorGeneral

Making 9 Positive Difference
Statute requires public officers and employees to fully
disclose substantial interests and refrain from participating
in related decisions and matters

Can help deter self-dealing by public officers and employees
and promote transparency and public confidence

ARIZONA

AuditorGeneral

Making 9 Positive Differonce

- Department supports 3 boards, but Board members not
required to complete disclosures

- Employees not required to update disclosures

- Department directed employees—but not board
members—to complete a disclosure form. As of April
2019, 59 percent had a disclosure form on file for
public inspection.

ARIZONA

Auditor General

Making 9 Positive Difference

Implement conflict-of-interest policies that address:

- Annual disclosure requirements for employees and
ooard members

- Process for managing disclosed conflicts

- Process for maintaining completed forms for public
inspection

ARIZONA

AuditorGeneral

Making a Positive Difference

Rate filings received in 2018 averaged 250 days to complete
important review

ARIZONA

AuditorGeneral

Making a Positive Difference
- Department should research an appropriate time
frame and work with the Legislature to revise the
Statutory time frame

- Implement the national task force’s
recommendations for improving long-term care
insurance rate reviews, as applicable and
appropriate

ARIZONA

AuditorGeneral

Making 3 Positive Difference

¢ Insurance Consumer Advisory Board never formed

¢ Continuing Education Review Committee not met since

2005
Recommendation: The Department should determine whether

these public bodies are necessary and, if so, convene the
bodies to fulfill their purposes. If not, the Department should
work with the Legislature on statutory changes.

ARIZONA

AuditorGeneral

Making 9 Positive Difference

Department agreed with 16 recommendations

Initial followup will begin in February 2020

ARIZONA

AuditorGeneral

Making a Positive Difference
Arizona Department of Insurance

Performance Audit and Sunset Review
Report 19-110

Issued: September 2019

Presenter: Rosa Ellis

ARIZONA

AuditorGeneral
Date: January 16, 2020 | _ srs te

Arizona Department of Insurance

Performance Audit and Sunset Review
Report 19-110

Issued: September 2019

Presenter: Rosa Ellis

ARIZONA

AuditorGeneral
Date: January 16,2020 ———_- | _ aren ote

_s

Attachment

Licenses insurance companies and professionals
nvestigates consumer complaints
nvestigates reports of suspected insurance fraud

Reviews insurance policies, rates, and products

ARIZONA

AuditorGeneral

Making 2 Positive Diff

2019 consolidation:
¢ Arizona Department of Financial Institutions
¢ Automobile Theft Authority

Arizona Department of Insurance and Financial
Institutions effective July 1, 2020

ARIZONA

AuditorGeneral

Making 8 Positive Difference

- Issued licenses we reviewed to qualified applicants
- Resolved complaints we reviewed timely
¢ Reaccredited in April 2019 to license and monitor

insurance companies operating in Arizona and
facilitate reciprocal licensing

ARIZONA

AuditorGeneral

Making 3 Positive Difference

| 89

2010

2011

2,474

1125
fos

2012 2013 2014 2015 2016

Number of referrals received

Number of referrals investigations completed

2,336

2017

2018

ARIZONA

\uditorGeneral

“Making o Positive Diference
Utah 972 334 Insurance department

Pennsylvania 2,008 | 304 Attorney General's Office
Arizona 2,576 231 Insurance department
Florida 15,593 2,108 Financial services

department

California 25,159 1,226 insurance department
Fiscal year 2019

Criteria used: Opened for
ee investigation
- Public impact 413 \

of the fraud

e Estimated loss |
over $1 0,000 Total: 3,500

Closed —

Lack of investigative
resources

1,316

Closed
No merit
1,771
-Does not require specific, standardized referral
information

-Does not use referral data to identify fraud
trends and to inform future prioritization efforts

ARIZONA

AuditorGeneral

Making a Positive Differance

¢ Strengthen its referral prioritization process

-Evaluate the effectiveness of the process and
implement any needed changes

-Assess fraud investigative staffing needs

ARIZONA

AuditorGeneral

Making 2 Positive Difference

Statute requires public officers and employees to fully
disclose substantial interests and refrain from participating
in related decisions and matters

Can help deter self-dealing by public officers and employees
and promote transparency and public confidence

ARIZONA

AuditorGenera!

Making a Positive Difference

¢- Department supports 3 boards, but Board members not
required to complete disclosures

¢ Employees not required to update disclosures

¢ Depariment directed employees—but not board
members—to complete a disclosure form. As of April
2019, 59 percent had a disclosure form on file for
public inspection.

ARIZONA

AuditorGeneral

Making o Positive Difference

Implement conflict-of-interest policies that address:

- Annual disclosure requirements for employees and
board members

- Process for managing disclosed conflicts

-Process for maintaining completed forms for public
inspection

ARIZONA

AuditorGeneral

Making 3 Positive Difference

Rate filings received in 2018 averaged 250 days to complete
important review

ARIZONA

AuditorGeneral

Making a Positive Oitference
- Department should research an appropriate time
frame and work with the Legislature to revise the
statutory time frame

- Implement the national task force’s
recommendations for improving long-term care
insurance rate reviews, as applicable and
appropriate

ARIZONA

AuditorGeneral

Making 3 Positive Difference

¢ Insurance Consumer Advisory Board never formed

- Continuing Education Review Committee not met since

2005
Recommendation: The Department should determine whether

these public bodies are necessary and, if so, convene the
bodies to fulfill their purposes. If not, the Department should

work with the Legislature on statutory changes.

ARIZONA

AuditorGeneral

Making 5 Positive Difference

Department agreed with 16 recommendations

Initial followup will begin in February 2020

ARIZONA

Au

ditorGeneral

Making 3 Positive Difference
Arizona Department of Insurance

Performance Audit and Sunset Review
Report 19-110

Issued: September 2019

Presenter: Rosa Ellis
2020

ARIZONA

AuditorGeneral

Ma

king a Positive Difference

Date: January 16
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