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

SPONSOR SCORC

DATE TYPED 3/12/05

HB

SHORT TITLE PRC Clean-up

SB CS855/aSFl#1

ANALYST Wilson

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

$0.1

Recurring

GF

Relates to SB 847

SOURCES OF INFORMATION

LFC Files

SUMMARY

Synopsis of SFl Amendment #1

The Senate Floor amendment #1 to the Senate Corporations and Transportation Committee Sub-

stitute for Senate Bill 855 clarifies and expands the definition of affiliated interest to mean a per-

son who directly or indirectly, through one or more intermediaries, controls or is controlled by or

is under common control with a public utility. Control includes instances where a person:

1.

is an officer, director, partner, trustee or person of similar status or function;

2.

owns directly or indirectly or has a beneficial interest in 10% or more of voting class se-

curities of a person;

3.

has

a level of ownership of securities other than voting securities that the commission es-

tablishes as creating a presumption of control; and

4.

posseses the power to direct or cause the direction of the management and policies over a

person notwithstanding the lack of ownership of 10% or more of the person's voting se-

curities;

The amendment also defines voting securities to mean securities that carry the present right to

vote for the election of directors or other members of the governing body ultimately responsible

for the management of the organization.

Senate Bill 855/SCORC/aSFl#1-- Page 2

Synopsis of Original Bill

The Senate Corporations and Transportation Committee Substitute for Senate Bill 855

amends

the Public Utility Act (PUA) in several ways. It adds a new section authorizing the PRC to com-

mence an action in district court for the appointment of a receiver to assume possession of

property and operate facilities of a public utility that is unable or unwilling to service its custom-

ers or consistently violates the rules or orders of the PRC. The new language allows the receiver,

upon order of the court, to issue certificates to provide funds to operate, repair, improve or

enlarge the utility. Payment of the certificates is a first lien on the real and personal property of

the affected public utility.

The bill changes the time frame over which average annual operating revenues of small water

and sewer utilities are calculated for purposes of determining whether a proposed change in rates

warrants a hearing. Whenever there is filed with the PRC any schedule proposing any new rates

by any public utility with equal to or fewer than an aggregate of 1500 service connections in any

utility operating district or division in New Mexico averaged over the previous three consecutive

years, the rates shall become effective as proposed by the utility without a hearing; provided that

the utility shall be required to give written notice of the proposed rates to the ratepayers receiving

service from the utility at least 60days prior to filing the proposed rate change with the PRC.

The bill sets out further hearing procedures and change of rate requirements for small water and

sewer utilities The PRC shall enter upon a hearing concerning the reasonableness of any pro-

posed rates filed by such a utility when a rate increase will have the effect of increasing the rates

50% or more in a 12 month period or upon the filing with the PRC of a protest seeking review of

the proposed rates signed by10% or more of the ratepayers or 25 ratepayers, whichever is more,

receiving service from such a utility if the PRC determines there is just cause for reviewing the

proposed rates.

Whenever there is filed with the PRC a schedule proposing new rates with more than an aggre-

gate of 1500 service connections and fewer than an aggregate of 5,000 service connections in

any utility operating district or division in New Mexico averaged over the previous three con-

secutive years, the rates shall become effective as proposed by the public utility without a hear-

ing; provided that the public utility shall be required to give written notice of the proposed rates

to the ratepayers receiving service from the public utility at least 60 days prior to filing the pro-

posed rate change with the PRC; and provided further that the PRC shall enter upon a hearing

concerning the reasonableness of proposed rates filed by such a public utility when a rate in-

crease would have the effect of increasing rates more than 8% in a 12 month period, or upon the

PRC staff's motion or upon the filing with the PRC of a protest seeking review of the proposed

rates signed by10% or more of the ratepayers receiving service from the public utility, if the PRC

determines there is just cause for reviewing the proposed rates. The petition shall be signed by

the person in whose name service is carried. The petition shall be filed no later than 20 days after

the filing with the PRC of the schedule proposing the new rates. If a public utility provides both

water and sewer service, the service connection revenues attributable to the provision of water

service only shall determine whether the procedure specified in this subsection shall apply to a

schedule proposing new rates for water service, and the service connection revenues attributable

to the provision of sewer service shall determine whether the procedures specified in this subsec-

tion shall apply to a schedule proposing new rates for sewer service. Nothing in this subsection

shall prevent a public utility from filing for a rate change pursuant to any other rule or procedure

Senate Bill 855/SCORC/aSFl#1-- Page 3

of the PRC.

A public utility with fewer than an aggregate of 5000 service connections in any utility operating

district or division in New Mexico averaged over the previous three consecutive years, that is

currently in good standing with all applicable requirements of the PRC, may adjust its charges

for commodity and service by up to 2% in any calendar year without a hearing; provided that the

public utility shall not have changed its rates in the prior 12 month period; and provided further

that the public utility shall be required to give written notice of the proposed rate adjustments to

the ratepayers receiving service from the public utility prior to its effective date. The increased

rates shall not become effective until at least 30 days after notice and filing with the PRC. If a

public utility provides both water and sewer service, the service connection revenues attributable

to the provision of water service only shall determine whether the procedure specified in this

subsection shall apply to any schedule proposing any new rate or rates for water service, and the

service connection revenues attributable to the provision of sewer service shall determine

whether the procedures specified in this subsection shall apply to any schedule proposing any

new rate or rates for sewer service.

In this bill, a service connection means a metered hookup to the utility's water system or a sewer

tap to the utility's wastewater system, and each person who receives a separate bill equals one

ratepayer and each person who receives multiple bills equals one ratepayer. The petition shall be

signed by the person in whose name the service is carried.

The bill clarifies the definition of affiliated interest to mean a person who directly or indirectly,

through one or more intermediaries, controls or is controlled by or is under common control with

a public utility. Control includes instances where a person is an officer, director, partner, trustee

or person of similar status or function or owns directly or indirectly or has a beneficial interest in

10% or more of any class of securities of a person and instances where the possession of the

power to direct or cause the direction of the management and policies of a person exists in fact,

notwithstanding the lack of ownership of 10% or more of the person's voting securities.

This bill moves the deadline by which a public utility must pay the inspection and supervision

fee from the last day of February to the first day of April each year. It also prohibits quarterly

payments of the utility and carrier inspection fee, stipulating that the fee must be paid annually

on or before April 1 each year. When a fee is not paid on time, the bill requires that interest be

charged on the amount due; the rate of interest is set at 15% per year, computed at a rate of

1.25% per month. A penalty in the amount of 2% of the amount of the fee due is also imposed.

The attorney general is designated as the entity charged with bringing suit to collect all fees, in-

terest and penalties. The timing of the fees and the late payment penalty and interest require-

ments will be synchronized for the inspection and supervision and the utility and carrier fees.

Each utility and carrier doing business in this state subject to the control and jurisdiction of the

PRC shall pay annually to the PRC a fee in performance of its duties as now provided by law.

This sum shall be payable annually on or before April 1 in each year. No similar fee shall be im-

posed upon the utility or carrier. In the case of utilities or carriers engaged in interstate business,

the fees shall be measured by the gross receipts of the utilities or carriers from intrastate business

only for the preceding calendar year and not in any respect upon receipts derived wholly or in

part from interstate business. As used in this section, "utility" includes telephone companies and

transmission companies but does not include public utilities subject to the PUA.

Senate Bill 855/SCORC/aSFl#1-- Page 4

Finally, the bill authorizes the PRC to reject an application for location approval of an electric

generating plant or transmission line if such facilities are determined to unduly impair power sys-

tem reliability.

Significant Issues

SB 855 provides the authority and additional mechanisms for the PRC to ensure the needs of

public utility customers are met.

This bill also clarifies that new electric generation and transmission facilities should not be built

if they impact negatively on overall system reliability—a big concern throughout the nation in

recent years.

ED provided the following on the original bill:

The development of a mechanism to allow the appointment of a receiver is a significant

benefit for the assurance of appropriate operation of drinking water systems that are un-

der the jurisdiction of the rules of the PUA and the orders of the PRC. At this time in

New Mexico, PUA regulated entities are estimated to include 45 public water systems.

There are at least another estimated 375 water cooperatives, private, non-profit and mu-

tual domestic water consumer associations for which there is no current mechanism to

appoint a receiver, and such a mechanism is needed in New Mexico.

This bill states that the receiver may issue receiver’s certificates to provide funds to oper-

ate, repair, improve or enlarge the public utility. This “improving or enlarging” may not

be possible to achieve through appropriate rate increases and this section of the act may

need to define the authority of the receiver to authorize indebtedness through loan or to

apply for grant funding through eligible state or federal programs.

FISCAL IMPLICATIONS

The bill also stipulates that interest and penalties are imposed on late payment of fees by utilities;

this will provide an incentive for utilities to make timely payment of all applicable fees. This

may result in a very slight increase in revenues to the general fund.

ADMINISTRATIVE IMPLICATIONS

The PRC can handle the provisions of this bill with existing staff.

RELATIONSHIP

Relates to SB 847, Utility Construction & Location

DW/lg:rs