Journal of the House of Representatives
of the Second Session of the 110th General Assembly
of the State of South Carolina
being the Regular Session Beginning Tuesday, January 11, 1994

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| Printed Page 2490, Feb. 24 | Printed Page 2510, Feb. 24 |
Printed Page 2500 . . . . . Thursday, February 24, 1994
A. I have no idea.
MR. COUICK: Mr. Elam, if you would please stay, just stay with us for a while. We may have a couple of questions.
MR. ELAM: Thank you.
Q. Mr. McIntosh, what interested you in serving on the Public Service Commission?
A. Well, as you can see from the information I provided, my current employment, I've been an attorney with the Department of Consumer Affairs almost six years. During that period, I've argued cases before the Commission. I've argued cases in many areas including communications, electrical power, water and sewer, those cases that involve the setting of rates, terms and conditions of service for those various utility companies. Also transportation companies.

During that period of time, I don't know if you've followed any cases that I have been involved with or the Department has been involved in, there has been some major issues that have been presented. Our office has positions in those and on numerous occasions, those positions have been rejected by the commission. We've taken some of those cases up on appeal and many times we've been able to get those positions reversed.

And throughout that period, it has concerned me that there needs to be a commissioner or commission composed or the variety of individuals, especially individual -- an individual, at least one, that represents the consumer interests and at this point or at this time, I believe that it was a golden opportunity for someone with that background and I guess someone with my particular background that could be a member of the commission and add that type of experience and bring that type of experience to the commission.

I think in reading the legislation -- or the legislation or the Reorganization Act, it states that the Legislature should strive to get a diverse commission and it particularly says the commission or individuals with the background in Consumer Affairs and that is specifically in the legislation and I think I possess those qualities, that type of background in addition to my other -- my educational experience and my other experiences -- work experiences.

So I think I'm uniquely qualified to serve.
Q. Mr. McIntosh, what do you think are the one or two crucial issues pending before the commission at this time? Not specific cases so much, but you mention that they need consumer expertise or consumer representation, but other than that, what are one or two issues that you feel are very important?

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A. Well, it's hard to just pick one or two. There are so many before the commission right now, but I think probably the one that most people are concerned about or that you read about every day in the newspaper is probably what's going on in the telecommunications field.

As you're probably aware --
Q. Could you state specifically what you're talking about --
A. That's what I'm going to --
Q. Telecommunications?
A. As you're probably aware, there is a movement afoot in Washington to come up with or gather some concept called an Information Highway and that's a glorious term I think which pretty much means that the telephone system as you and I probably know it would be used to provide all sorts of information to end users, those telephone subscribers. There is quite a bit of movement afoot in Washington to get to that point, but what we're looking at is a deregulation of certain existing --
Q. At the current time give, is much of that responsibility given to the South Carolina Public Service Commission?
A. No, it's not. Our -- I'll take that back. The area is real cloudy right now. Right now, you've got pending legislation before Congress. We don't know exactly what form this is going to take.
Q. But right now where is cable television regulation resorted to?
A. Cable television pretty much is unregulated as we know it.
Q. Is it not regulated by franchise ordinances and by the FCC?
A. Well, the Franchise Ordinances pretty much just regulate it as far as what cable company serves what community and what their franchise territory is.
Q. They can't regulate customer --
A. As far as --
Q. -- service standards and franchise ordinances?
A. They can, but as far as there is very little of that going on. As far as rates, rates are pretty much deregulated except for basic service which local franchise authority has.
Q. I thought there were benchmark rates for even for that expanded hearings?
A. There are benchmark rates, but even with those benchmark rates there is a lot of leeway in there to -- for companies to raise their rates. But, again, I think the commission has no authority there. But --
Q. So in the area of telecommunications, where would you have an immediate impact?
A. The immediate impact would be hopefully helping to shape that legislation in Washington. It -- the legislation -- if telephone is

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deregulated, I think the State would lose a lot of control over the rates that you and I now pay for it.
Q. Let me stop you there because it's interesting about what you're saying, but I take it as a consumer advocate on the Public Service Commission, you would envision one of your responsibilities or one of your capabilities would be at lobbying to shape the Federal legislation?
A. That is correct and I think there needs to be a --
Q. Let me ask you --
A. -- federal-state partnership.
Q. Let me ask you one other question on that, if Falcone Hawkins was dissatisfied with the Federal Sentencing guidelines, should he go lobby the Senate Judiciary Committee to have that changed?
A. I don't work in that area. I can specifically tell you what goes on in the telecommunications industry.
Q. But I mean is it appropriate as a person in a quasi-judicial position to be lobbying a legislative body to change the shape and form of the laws that they're called upon to enforce and interpret?
A. I won't call it lobbying, but as far as providing information and as far as providing what the experiences in South Carolina, those who are in the know, I think, have a responsibility to let those decision makers know what the experience is or what the consumers need, the ordinary citizens in those particular states are up against.
Q. Are you not in the best place to do that now, Mr. McIntosh?
A. I don't think so. I think as a member of the Public Service Commission, you have certain authorities that I don't currently have. Right now, I just basically am there to represent the consumer's interests. As a Public Service Commissioner, you're actually a regulator. You actually will determine what the terms and conditions of that particular service is, what the rates are and actually have a key role in making the decisions and setting law. I have no authority as far as making law at this time.
Q. Let me ask you this, perhaps we, and this is my own personal viewpoint and not necessarily the viewpoint of the committee, but perhaps we disagree upon the function of these folks that serve on the Public Service Commission. Are they activists or are they quasi-judicial officials?
A. They are, but as far as if you get back to your issue of lobbying, they currently have an association, a national
-- National Association of Regulatory Utility Commissioners. And that national organization actually lobbies Congress.
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They are a member of a national organization that has a lobbying wing and actually proposes resolutions that are submitted to members of Congress.
Q. Do you think it would be appropriate for you to be in Washington lobbying on an issue perhaps not even --
A. Well, I wouldn't be in Washington lobbying. It would be the national association, but you have input into the national association and direct them to carry out whatever the goals and aspirations of the members of the body.
Q. How about the concept of wheeling, what would be your position on that?
A. Are you talking --
Q. Wheeling to the retail level?
A. You're talking wheeling in the terms of electric power?
Q. (Nods in the affirmative)?
A. That's an issue that has come up in our agency. It's something that's being debated on a national level. Generally, what that is for large industrial users, in the first instance, it would give them the power to choose a particular power company that may be outside its service territory to obtain electric power from. Say, I'm in industry here in Columbia --
Q. What would be your position on that, though?
A. I think it's a good concept. I think there should be greater competition among the power companies. I think --
Q. Do you think the residential --
A. A greater choice.
Q. And the reason -- I'm not trying to interrupt you, but we're trying to move forward quickly.
A. Okay. But it's a complicated issue.
Q. If an industry has that option and residential consumers don't, isn't someone going to lose in that and the person that's going to lose going to be the residential consumer?
A. That's why the regulator has to be very careful with retail wheeling as you're describing it. In some instances, you're going to have stranded investment. Right now, you've got utility companies are investing to serve industrial customers, residential customers. If that industrial big user should purchase power from another company, you've got stranded investment. And who pays for that stranded investment, that's something that the commission has to seriously consider. There is a lot of national debate on that.
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Our office has been involved in it. I don't have a firm position. I'm in favor of wheeling if it can be on a retail level to industries and individuals. I think that would be fine, but those are issues that are left for the commission and if you can do it in such a way that it is fair for all parties and give the end user that power, just as the end users you have right now on the telecommunications.

You have a choice of long distance service, even the small long distance user has a choice. I think the same thing should apply in the electric services. If the big customers have a choice, the smaller customers should have that choice also. I think the technology is moving in that direction, so that will ultimately happen and everyone would have a choice. But right now there is a big question of stranded investment and who pays for that.
Q. And, Mr. McIntosh, in terms of fiberoptic technology and telecommunications, I believe you participated or probably your department has participated in cases that were related to inclusion of that in the rate base?
A. That is correct.
Q. What is your position on that?
A. If the fiberoptics is used or if it has -- if it's used or useful to the end user, then the end user should pay for it. If fiberoptics is only going to benefit, say, a big customer as is the case right now. We've got several subdivisions around the state even here in Columbia where the builder wanted fiber in the subdivision, Bell Telephone has told the subdivision builder or the contractor that it will bring fiberoptic in if the contractor pays for it, if the individual home owners pay for it.

In a case like that, that's fine because the actual user of it is paying for it, but if you've got fiber to the home that an individual is not using, I don't think that individual should pay for it. The cost causer should pay the cost of the service.
Q. But isn't the theory behind the fiberoptic cable is to allow telecommunications to grow and if we had decided 50 years ago that we were not going to allow telecommunications to grow --
A. Well --
Q. -- there still may be an operator in every other home?
A. Well, I think if you look at the research with a copper wire, a lot of things that you can do with fiberoptics can be done with the current copper system and even video signals can come across the copper. And in many instance you don't need fiber in the home to provide the same services that many companies are saying you must have fiber to provide.

So the commission has got to really look at that and as I said, the cost causer should pay the cost of the technology. But if copper wire can give

Printed Page 2505 . . . . . Thursday, February 24, 1994
you the same benefits as fiber, why do we need to bring copper (sic) in the home so fast? We've got to be real careful because the cost of fiber is enormous.

You've got copper wire in the home, let's exhaust all possible uses of what's already available before we sink a lot of money into it or force individuals who may not use that new technology to pay for fiber. But my bottom line is let the cost causer pay for it.
Q. What is the environmental role of the PSC?
A. Well, I guess we -- in the environmental role, we may have to go water and sewer. On the water and sewer side, those are the big environmental issues right now. As far as the PSC is concerned, it regulates rates, terms and conditions of service of water and sewer companies. On the environmental side, there is quite a bit of testing that's been mandated by the Environmental Protection Agency and Department of Health -- and Health and Environmental Control in South Carolina.
Q. What is the role for the PSC directly whether it be water, sewer, electric or whatever?
A. Well, let's look at water and sewer, the role of the PSC would be to analyze what are actually those costs that are being borne by that particular water and sewer company and why with those regulations -- and if those costs are being borne, rates must be set to pass those costs on to the customer.

But we have to be very careful because there are certain technologies that will bring you beyond what are the minimum requirements by the Environmental Protection Agency and DHEC and then there are certain costs to be in minimum compliance, so you've got to determine what is the best -- and, again, that's water and sewer, but we can go -- if you want to go into it by industry, I can do that.
Q. Well, let's stop at water and sewer. Is it ever appropriate to go into demand side management for environmental purposes with water and sewer?
A. Well, demand side management and environmental -- that's possible. We haven't done much of that in South Carolina, but I think there is going to move -- be a movement to do that.

In the demand side management in water and sewer, there might be some things like requiring customers to purchase low shower heads. Use less water therefore creating less waste to be treated. So I think that would be appropriate, but our commission hasn't moved in that direction.
Q. Would you feel that would be appropriate if you were a commissioner?

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A. I think it would. It's just something that has not been explored by our -- to my knowledge, by our commission. It's been more on demand side management on the electric --
Q. How about --
A. -- side and natural gas.
Q. How about rate setting to dissuade use or overuse of water?
A. I think we've got that right now. And if you look at some of the private utilities, they generally have the highest rates in South Carolina. And from my involvement with homeowner associations, every time those rates go up, they're use goes down, so rates do have an impact on demand.

As -- I mean you have that demand elasticity, as the price of the service goes up, but it decreases --
Q. But in that case, rates are not risen with the expressed purpose of managing demand side, is it not?
A. It's -- it's not a primary purpose, but it is, and I think any economist -- and I have a background in economics. Any economist knows for certain goods, if the price goes up, demand is going to go down and in talking with many of the executives with these water and sewer companies, they realize that.
Q. But would you advocate a position that you would make rates punitive enough that there would be less waste of water by residential consumers?
A. Oh, no. What we have tried to do in my office, if you look at the water and sewer companies regulated by this commission, generally they've got some of the highest rates in the state and some of the poorest quality of service in the state. And something that I've taken upon myself in many instances is to find or if the utility company -- water and sewer company is close to a municipal company, we've tried to work out arrangements whereby municipal would take over those customers and in every instance, we've been successful. Rates have gone down, the quality of service has gone up.
Q. Have those rates been subject to regulation by the Public Service Commission?
A. They are not.
Q. Who is the oversight mechanism then?
A. The --
Q. What happens ten years from then, will they go up?
A. When they're no longer regulated by the Public Service Commission?
Q. Right. Who --
A. You've got city council's. You've got --

Printed Page 2507 . . . . . Thursday, February 24, 1994
Q. Who is the oversight then?
A. Excuse me?
Q. What is the method of oversight then?
A. What type of oversight? I'm not following you.
Q. For rates in a municipality, if it's not regulated by the Public Service Commission?
A. Currently, those rates are regulated by the mayors and town councils and --
Q. How do folks have an impact on that?
A. Well, if they live within the city limits, we have situations -- I've had several -- have had several situations where you had a private water company operating inside the city limits.
Q. How about if your folks like in the County of Orangeburg where your electrical power is supplied by the City of Orangeburg, but you don't have any participation?
A. That's an issue that's before the General Assembly and I get calls about that all the time that individuals who live out in the county and they are served by a municipal system, they have -- they call it taxation without representation.

There have been bills -- I think that's a function of the General Assembly. There was a bill, I know last year that would have -- those rates would have been regulated by the Public Service Commission, if they were passed.

But I know the large municipals, including the City of Columbia, most of their customers live outside the City of Columbia and I know they put up with something like that.
Q. Would it be part of your job as a Public Service Commissioner who is also a consumer advocate to lobby for passage of those laws or laws like that?
A. Well, if the General Assembly should request someone from
-- or an opinion of the commission and I know they request opinions of the Department of Consumer Affairs if all we would do was need to supply -- I would be in one of seven to formulate what the agency's opinion is, and if I were called or a staff member were called to testify, they would testify as to what the agency's position is. But it's left up to the members of the General Assembly to formulate legislation in our form of government.
Q. And maybe I misunderstand that, Mr. McIntosh, but I take from your earlier testimony that you're an agent for change and agents for change don't wait for consensus, they make things happens?

Printed Page 2508 . . . . . Thursday, February 24, 1994
A. Well, sometimes change can make things happen. Sometimes change can improve what you're already doing.
Q. I know, but are you going to be the single person willing to come forward if you're elected --
A. Oh, no.
Q. -- to the Public Service Commission --
A. No.
Q. -- despite six other folks voting against you to come over here?
A. Oh, no. No, no, no. And I think they work as a consensus right now and what I would hope to do would be there able to build a consensus, and -- but I'm bringing to the group some unique circumstances whereas each of the seven members are bringing different perspectives to the same issue, and with those different perspectives, I think you can hammer out a consensus among the seven.
Q. Do you believe in majority rule?
A. I do believe in majority rule.
Q. What branch of government does the Public Service Commission fall under, Executive, Judicial or Legislative?
A. It's one of those as you said earlier, quasi-judicial branch, but under the way it was created, the setting of rates, terms and conditions of services for utilities was in the hands of the Legislature, so this is an extension of the Legislature. The Legislature has given the Commission this permission like in other areas, the Legislature has that responsibility, but it has chosen to create the commission as an expert body to hear such cases and to rule on those cases.
Q. What role would the PSC staff play after you got there?
A. Pretty much the same role that it plays right now. It advises the commission. Also it acts as a participant or a party in proceedings before the commission.

Staff actually has a set of attorneys, professional engineers, accountants, people with other backgrounds who actually present cases and present testimony by -- expert testimony before the commission. So they present their own position, but at the same time, which is I think quite unique, they also advise the commissioner, so they have dual hats.
Q. And some housecleaning matters very quickly, do you own any utility stock?
A. I do not.
Q. Does anyone in your household own any utility stock?
A. They do not. Now when you say utility, I mean I have mutual funds and there may be utilities in the mutual funds.

Printed Page 2509 . . . . . Thursday, February 24, 1994
Q. Do you have a mutual fund that is oriented toward the holding of utility stock?
A. I do not.
Q. Mr. Chairman, we've reviewed Mr. McIntosh's credit and SLED reports. They are both -- indicate no negative entries. Have you had an opportunity to review your Personal Data Questionnaire Summary, Mr. McIntosh?
A. Briefly. Briefly.
Q. Were there any errors or --
A. Yeah, there was one error. You have Spring, 1985 for my law degree. It was actually Fall '85 when I finished the program.
Q. Do you have any plans to seek other office if -- should you be elected to this position or would you serve the full term?
A. I would serve the full term. No plans to run for any other elected office.
Q. And, finally, do you have any recommendations for improving the current system of screening for election to the Public Service Commission, what you're participating in today?
A. None that I can think of.
Q. Thank you, Mr. Chairman.
THE CHAIRMAN: Any questions? Representative Wilkes.
EXAMINATION BY REPRESENTATIVE WILKES:
Q. Mr. McIntosh, I'm impressed with your obvious knowledge of this area.
A. Thank you.
Q. And also with the zeal with which you've approached this hearing today. One question does come to my mind that I would ask you to think about and answer and if the answer is no, then elaborate on that for me, if you would, please and the question is, is the ultimate consumer advocate, the ultimate business adversary?
A. No. No. They both can work hand in hand and I think if you look at my resume, I've worked both the consumer side and I've worked on the business side. There is one entry that -- in my fact -- the facts that are presented before you, when I worked for Congressman Derrick, I did a lot of industrial development work and Anderson County actually named a street after me for work in the industrial development area for attracting industry to South Carolina.

And I think in my role as a consumer advocate, we played a major role, I think, in the economic development of South Carolina by keeping rates low which has attracted industry. It's made it a good climate for industry to come in.

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