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

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ORIGINAL DATE

LAST UPDATED

2/03/06

HB

SHORT TITLE PRC Order Appeal Settlement Restrictions

SB 638

ANALYST Earnest

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Senate Bill 638 duplicated House Bill 600.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Public Regulation Commission (PRC)

Attorney General’s Office (AGO)

Administrative Office of the Courts (AOC)

SUMMARY

Synopsis of Bill

Senate Bill 638 restricts the authority of the PRC to accept a compromise settlement of an ap-

pealed PRC order by a telecommunications company prior to a decision by the Supreme Court,

unless specific conditions are met. Senate Bill 638 creates the “telecommunications settlement

fund” in the state treasurer. The bill contains an emergency clause.

If a PRC final order compels a telecommunications company to pay fines, make refunds or cred-

its, or make infrastructure investment, the PRC is specifically prohibited from settling the case if

it is on appeal to the New Mexico Supreme Court, unless:

•

the company agrees to comply with the original final order, or the company and the PRC

agree to a “monetary payment” under one of two conditions:

o

the amount must be refunded to the company’s customers pursuant to an equita-

ble distribution agreement; or

Senate Bill 638 – Page

2

o

the money is placed in the newly created “telecommunications settlement fund”

for future appropriation by the legislature “to benefit customers of the payor tele-

communications company.” The fund does not revert to the General Fund and

the PRC is charged with recommending the best way to appropriate monies.

SIGNIFICANT ISSUES

This bill addresses the situation existing between Qwest Corporation and the Public Regulation

Commission. A PRC audit found that Qwest will be $200 million short of the $788 million AF-

OR (Alternative Form of Regulation) investment agreement by the March 2006 deadline. In

April 2005, PRC ordered Qwest to invest the full amount or return it to customers as rebates.

Qwest appealed the order to the state Supreme Court, which is scheduled to hear the case Febru-

ary 14.

Qwest’s proposed an $85 million investment settlement offer, which PRC determined to be in-

sufficient.

According to the AGO, because litigation has started there would be significant due process con-

cerns when trying to apply this statute to the current situation. Furthermore, HB 600 would limit

the PRC’s discretion in settling high profile cases. It may result in additional funds to be appro-

priated by the Legislature, but it is impossible to determine how much. Hampering PRC discre-

tion to settle cases may have unintended consequences.

The PRC indicates that the bill, if enacted, might so limit the Commission’s regulatory authority

that it could neither vigorously defend its orders on appeal nor engage in appropriate oversight of

stipulations among parties before it.

According to the PRC, SB 638 would require that a single final order on appeal be treated differ-

ently, depending on the court in which the appeal is brought. In essence, this would require a

bifurcation of the Commission’s appellate efforts. For example, a telecommunications carrier

may appeal a given Commission order to two different courts simultaneously. (This is far from

unusual; in fact, it is currently the case with the appeal of Commission Case No. 04-00237-UT

involving, in substance, the Qwest Alternative Form of Regulation, which the Commission is

defending in both the New Mexico Supreme Court and Federal District Court.) Thus, the Com-

mission would — in addition to defending its orders in the parallel appeals — be required to ap-

ply to the pending state court appeal the procedures outlined in the bill. In addition, the Com-

mission might well have to devise a separate appeal strategy for the state court proceeding in or-

der to accommodate the bill’s procedural requirements.

As a general matter, the Commission has the authority to interpret and enforce its own orders,

and the Commission retains continuing jurisdiction to make any subsequent orders or determina-

tions regarding any matter decided by the Commission as the factual situation before it, the pub-

lic interest and due process may require. See, e.g, Public Service Company v. New Mexico Pub-

lic Service Commission, 92 N.M. 721, 594 P.2d 1177 (1979); e•spire v. New Mexico Public

Regulation Comm’n, 392 F.3d 1204 (10th Cir. 2004), reh’g denied.

The bill would preclude any non-monetary alternatives. For example, there may be exceptional

occasions when, due to significantly changed circumstances such that a specific requirement of

the Commission’s original order no longer makes practical sense. Although such occasions are

Senate Bill 638 – Page

3

quite rare, to limit the Commission’s ability to modify its own orders in the exceptional case

where such modification might be warranted would appear to preclude practical outcomes and to

run counter to established law and precedent.

ADMINISTRATIVE IMPLICATIONS

While the administrative impact is not clear, PRC finds that procedural changes brought by this

legislation could be complicated and time-consuming. Because of the potentially large amount

of money involved, and its tracking and allocation, an additional FTE might be needed at a pro-

fessional level.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Senate Bill 638 duplicated House Bill 600.

OTHER SUBSTANTIVE ISSUES

According to the PRC, this bill appears to assume that the Commission always has an option to

settle a pending appeal with a telecommunications company independently of other interested

parties. However, this is not the case, for at least three reasons. First, although the Commission

may be the respondent in an appeal, it finds itself in that position as a regulator, not as a party in

a contractual relationship with the appellant (as might be the case in an ordinary civil appeal be-

tween private parties.)

Second, any settlement that takes place between and among the parties before the Commission.

As a practical matter, most, if not all, telecommunications cases that have public interest signifi-

cance involve more than one party. Typical interveners would include the Attorney General,

non-profit organizations, and other (usually competitively situated) telecommunications carriers.

The Commission’s procedural rules required that settlements be stipulated in writing and brought

before the Commission for consideration. The Commission may, but is not required to, accept a

stipulation.

Third, Commission final orders have the force of law as prescribed under the Commission’s con-

stitutional authority and state statute. A Commission final order may not be modified except by

reopening the case to which the order pertains. The Commission’s procedural rules preclude the

reopening of a final order unless exceptional circumstances warrant it. Rarely, if ever, are

Commission final orders reopened — and then only according to formal (and well-scrutinized)

procedures.

BE/nt