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F I S C A L   I M P A C T   R E P O R T

 

 

SPONSOR:

Jennings

 

DATE TYPED:

2/12/03

 

HB

 

 

SHORT TITLE:

Damages for Franchise Fee Overcharges

 

SB

463

 

 

ANALYST:

Maloy

 

REVENUE

 

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY03

FY04

 

 

 

 

Indeterminate

 

Recurring

Local  Municipal General Funds

 

 

 

 

 

 

SOURCES OF INFORMATION

 

Responses Received From

The Construction Industries Division, Regulation and Licensing Department

 

SUMMARY

 

Synopsis of Bill

 

Senate Bill 463 amends existing law.  The bill adds the following language to New Mexico’s municipality / utility franchise laws: 

 

“G.  A utility shall not overcharge its customers franchise fees it may pass through pursuant to a contract with a municipality.  Upon the complaint of a customer, a municipality may require an overcharge to be refunded to the customer plus damages in the amount of three times the overcharge per customer.”   

 

 Significant Issues

 

  • The existing law provides that a municipality may, by ordinance, grant a franchise to any person, firm or corporation for the construction and operation of any public utility. 

 

    • Citizens of the municipality may challenge the granting of a franchise by petition.  Upon receiving a petition signed by 20% of those who voted at the last municipal regular election, the governing body shall submit the question of granting the franchise to a vote of qualified electors.

 

    • If successful at election, the franchise ordinance duration is capped at 25 years.  During those 25 years, the municipality may contract with the utility for such services as are necessary for the health and safety of the municipality.

 

    • The municipality may pay a sum agreed upon by the contracting parties (the governing body and the utility).

 

  • SB 463 provides that should the utility pass on costs to its customer that should be charged to the municipality under the franchise agreement, the utility shall be required to reimburse the customer for the overcharge PLUS pay damages in an amount of 3 times the overcharge.

 

  • With regard to the receipt of a customer complaint and the reimbursement of an overcharge plus triple damages, the following should likely be clarified in the language of the new provision:

 

    • The utility is entitled to some sort of due process in adjudicating the complaint.

 

    • The triple damages, like the base overcharge reimbursement, are to be paid to the customer and not the municipality.   (If this is what is intended.)

 

    • What should be done if the costs (wrongly overcharged to the customer) were not charged to the municipality at all?  Should the utility forfeit the right to collect the costs from the municipality under the franchise agreement?  Or, should the utility still be allowed to collect the costs from the municipality? 

 

    • Should there be a penalty paid to the municipality by the utility (in addition to that which is paid to the customer via the overpayment reimbursement and the triple damages)?

 

FISCAL IMPLICATIONS

 

SB 463 does not contain an appropriation.  The bill should not affect the state general fund.  However, it will affect local, municipal general funds. The amount of the local effect is indeterminate.

 

ADMINISTRATIVE IMPLICATIONS

 

Any administrative effects will be at the local, municipal level.  For instance, the local governing body will be responsible for handling the proposal of a franchise agreement, any required elections, the negotiation and administration of the contract, and (now with SB 463) the resolution of complaints, any legally required due process, and enforcement.

 

SJM/njw