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

SPONSOR Cervantes

DATE TYPED 3/10/05 HB 903/aHBIC/aHJC

SHORT TITLE Utility Construction & Location

SB

ANALYST Wilson

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

Duplicates SB 847

Relates to SB 627 and HB 748

SOURCES OF INFORMATION

LFC Files

Responses Received From

Environment Department (ED)

Energy, Minerals & Natural Resources (EMNRD)

Department of Cultural Affairs (DCA)

Public Regulation PRC (PRC)

SUMMARY

Synopsis of HJC Amendment

The House Judiciary Committee amendment removes the entire HBIC Amendment.

The amendment also states that a public utility subject to the jurisdiction of the PRC may elect

to file an application pursuant to this section with the PRC for location approval for of an electric

transmission line or associated facilities designed for or capable of operation at a nominal volt-

age of 115 kilovolts or more but less than 230 kilovolts.

If the public utility files an application for construction, extension, rebuilding or improvement of

the electric transmission line or associated equipment under any applicable county or municipal

land use statute, ordinance or administrative regulation and the agency, board or PRC of the

county or municipality disapproves the application.

House Bill 903/aHBIC/aHJC -- Page 2

The amendment further sets out procedural requirements and provides definitions. For purposes

of this subsection, "disapprove" means the failure of the county or municipal agency, board or

commission to issue a final order approving the application within 240 days of the public utility's

filing of a complete application with the agency, board or commission. An application shall be

deemed complete if within 15orking days of the public utility's filing of the application, or a sup-

plement or amendment thereto, the agency, board or commission fails to send written notice to

the public utility enumerating the specific requirements under the applicable county or municipal

land use statute, ordinance or administrative regulation that the application fails to satisfy.

In addition, the amendment states that the PRC upon consideration of the application and the

standards set forth in this section, may authorize construction, extension, rebuilding or improve-

ment of the transmission line or facilities notwithstanding the prior disapproval of the county or

municipal agency, board or commission. The judgment of the PRC shall be conclusive on all

questions of siting, land use, aesthetics and any other state or local requirements affecting the

siting.

Synopsis of HBIC Amendment

The House Business and Industry Committee amendment to House Bill 903 adds that a public

utility subject to the jurisdiction of the PRC may elect to file with the PRC for location approval

for construction, extension, rebuilding or improvement of transmission lines and associated fa-

cilities, if the public utility has filed an application with the local jurisdiction for approval and

the local jurisdiction disapproved or failed to act on the public utility's application within six

months.

Synopsis of Original Bill

House Bill 903amends the Certificate of Public Convenience and Necessity (CCN) and the Loca-

tion Control statute of the Public Utility Act. The modifications provide time limits for PRC ac-

tion on CCNs and location approvals, enunciation of ratemaking principles at the time a CCN is

given, separation of CCN and location approvals for regulated utilities, establishing factors to be

considered when approving applications for location approvals and minor language corrections.

Significant Issues

The PRC provided the following:

This bill applies to both generation and transmission facilities and appears to provide addi-

tional certainty for utilities of rate recovery of the costs associated with facilities that are

placed into service after a CCN is received, irrespective of future changed circumstances and

public interest. Currently, in order to protect the public interest, the PRC has been able to

evaluate the continuing need of generation and transmission facilities and remove them from

rates, if warranted, following proper notice and public hearing. To limit the PRC’s authority

in this area, in the manner proposed in this bill, may jeopardize the ability of the PRC to pro-

tect the public interest in the future.

CCN approvals by the PRC will bind future PRC actions over the 40+ year life of generation

and transmission facilities. Utilities will gain certainty with regard to future regulatory treat-

ment of such facilities.

House Bill 903/aHBIC/aHJC -- Page 3

The PRC may specify future rate treatment to be the same as exists today, incorporating lan-

guage such as: “rate recovery shall be allowed only while the facility is considered used and

useful to ratepayers and, in the future, if the facilities are not found to be used and useful, no

rate recovery will be allowed from that time onwards.”

Depending upon how PRC approvals are drafted, future PRC’s ability to protect the public

interest may be compromised.

EMNRD provided the following

This

bill provides a mechanism by which a public utility may seek greater certainty from the

PRC regarding the ratemaking principles and treatment that will be applied to the utility’s

proposed generation and transmission facilities. This will better inform and assist a utility in

determining how the costs of a proposed project will be handled by regulators, thereby help-

ing it estimate the impacts of such costs on ratepayers or shareholders throughout the pro-

ject’s useful life.

The bill also streamlines the PRC regulatory process for permitting and siting of transmission

facilities in New Mexico. In essence, it affords a utility the opportunity to have the PRC de-

termine whether a new electric plant or transmission line is needed before seeking approval

of the specific location or route of such facilities. The intent of these provisions appears to

be to avoid a situation such as what happened to Public Service Company of New Mexico

when it proposed the Ojo Line Extension (OLE’) project. In that case, PNM spent in excess

of $12 million on activities relating to a transmission project that was ultimately rejected by

the PRC.

The ED provided the following:

Construction of a transmission line that creates a disturbance that is one acre or greater in

size, must be done in accordance with an individual or general construction storm water per-

mit issued by the U.S. Environmental Protection Agency pursuant to the federal Clean Water

Act. Construction storm water permits are designed to ensure that sediment generated during

construction activities is contained on site, so as to prevent an impact to surface water qual-

ity.

There is no obvious link between the ratemaking principles added and air quality. The addi-

tion of specific important environmental values that the PRC can consider is significant envi-

ronmentally. The additions to the statute are: (1) existing plans for other development; (2)

fish, wildlife and plant life; (3) noise emission levels and interference with communication

signals; (4) the proposed availability of the location to the public for recreation; (5) existing

scenic areas, historic, cultural, archaeological or religious sites; (6) additional factors that re-

quire consideration under applicable federal and state laws pertaining to the location.

This bill provides specific factors that are considered to be significant environmentally and

allows the PRC to consider these in approving locations of transmission lines. While further

clarification will assist in interpretation of the statute, some of these factors would require

further detail in any regulation adopted pursuant to this statute. This amendment would not

substantively affect the air quality bureau.

House Bill 903/aHBIC/aHJC -- Page 4

The DCA provided the following:

Cultural resources, as well as the environmental values that are called out specifically in the

bill, can be impacted by public utility approvals. The language within this bill should iden-

tify cultural resources more clearly and separately from environmental values.

Potential impacts of the location of a generating plant to environmental values including cul-

tural resources are not considered.

Sufficient time during the application and approval process must be provided for adequate

cultural resource investigations and review and coordination required under current state and

federal statutes.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

HB 903 duplicates SB 847 and relates to SB 627 and HB 748, Renewable Energy Transmission

and Storage Act.

TECHNICAL ISSUES

The PRC suggests on page 4, line 2 following “notice is given” insert “pursuant to PRC order.”

DW/lg:yr