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

SPONSOR Gonzales, R.

ORIGINAL DATE

LAST UPDATED

2/08/06

HB 799

SHORT TITLE PRC Jurisdiction over Generation Cooperatives

SB

ANALYST Earnest

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

None

(Parenthesis ( ) Indicate Expenditure Decreases)

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY06

FY07

FY08 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

($0.1)

($0.1)

($0.1) Recurring General

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Public Regulation Commission (PRC)

Attorney General’s Office (AGO)

Energy, Minerals and Natural Resources Department (EMNRD)

SUMMARY

Synopsis of Bill

House Bill 799 amends existing law, Section 62-6-4 NMSA 1978, concerning the New Mexico

Public Regulation Commission’s (PRC) supervision and regulation of utilities. HB 799 would:

1)

Expand the regulatory authority of the PRC to include generation and transmission coop-

eratives;

2)

Extend the protest period from 20 days to two months member utilities may file protests

to notice of rate changes; and

3)

Allow member cooperatives to generate or obtain their own power from sources other

than the generation and transmission cooperative without penalty.

House Bill 799 – Page

2

FISCAL IMPLICATIONS

None identified.

SIGNIFICANT ISSUES

The rates and resource decisions of generation and transmission cooperatives are currently made

with little state or federal regulatory oversight. This leaves approximately 100,000 rural electric

ratepayers in New Mexico without effective review of the rate decisions made by generation and

transmission cooperatives. HB 799 eliminates the exemption of generation and transmission co-

operatives to PRC regulation and oversight.

Tri-State Generation and Transmission Association, Inc. (Tri-State) provides power to 12 New

Mexico electricity distribution cooperatives (co-ops). Since their merger of Plains Electric Co-

operative in 2000, which resulted in 25 percent rate reductions, there have been significant rate

increases. Under current law co-ops have 20 days to file a protest after Tri-State issues an advice

notice on proposed rates. According to EMNRD, the Tri-State rate filings have not included

adequate cost-of-service information upon which Tri-State’s investment and rate decisions can

be evaluated. HB 799 would require Tri-State, and any other generation and transmission coop-

erative, to file with PRC a cost-of-service report when issuing an advice notice. Furthermore,

HB 799 would also remove the penalties levied by Tri-State should a member co-op obtain or

generate power from other sources.

At its January 24, 2006, hearing, the PRC issued a resolution supporting passage of legislation to

increase oversight of Tri-State. PRC heard testimony that co-op member power contracts with

Tri-State do not prohibit member cooperatives from obtaining up to 5% of its power from alter-

native sources. However, members may be penalized pursuant to Tri-State board policy for pur-

chasing renewable energy. Tri-State opposed the resolution.

ADMINISTRATIVE IMPLICATIONS

Although the impact on the operating budget is unclear, there would be additional administrative,

legal, and oversight work for the PRC.

TECHNICAL ISSUES

PRC notes that the two-month protest period raises a potential problem. Under the Public Utility

Act, advice notices can go into effect after thirty days notice. Therefore, under HB 799, the rates

could go into effect before the two-month protest period expires. Tri-State would need to file its

advice notices ninety-days in advance (when federal law currently requires coops receiving cer-

tain federal funds to file new rates) to avoid uncertainty and billing confusion. PRC suggests

further amending Section 62-6-4(D) NMSA 1978 to require advice notices be filed ninety (90)

days in advance of a proposed rate change.

The impact on Tri-State posed by PRC’s proposed change is unclear.

PRC further recommends specifying contractual obligations and cross-referencing the Renew-

able Energy Act, as follows in their alternative to Subsection (F):

House Bill 799 – Page

3

“A member utility of a generation and transmission cooperative may generate a percent-

age of its own power or obtain a percentage of power from a source other than the gen-

eration and transmission cooperative without penalty by the generation and transmission

cooperative if the generation or receipt of that power does not violate any legally en-

forceable contract term between the member utility and the generation and transmission

cooperative. Purchase power contracts may specify the proportion of the energy portfolio

that member utilities may purchase from alternative sources. However, agreements that

prohibit or penalize the generation of power by a member utility or the purchase of re-

newable energy by a member utility from another member utility, otherwise within the

limits set by contract, shall be contrary to the public policy of the Renewable Energy Act

and, for this reason, unenforceable.”

OTHER SUBSTANTIVE ISSUES

The AGO notes a question to the authority of a state to review wholesale rates, but there is

precedent for such state review in the context of a cooperative.

EMNRD indicates that it is implementing renewable energy projects—e.g., wind, solar, biomass,

geothermal—through a Clean Energy Grants program to demonstrate the potential of renewable

energy throughout New Mexico. The clean energy project sites include service territories of the

12 co-ops affected by HB 799. Should the bill be enacted, the adoption of renewable energy

would progress faster.

BE/mt