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committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

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

SPONSOR Lujan, B.

ORIGINAL DATE

LAST UPDATED

2/13/07

3/12/07 HB

538/aHCPAC/aHAFC/

aSCONC

SHORT TITLE Moratorium on Winter Utility Service Disconnections SB

ANALYST Earnest

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to SJM3, HB372, SB323, HB121, and HB593

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

$60.0* $60.0* $120.0* Recurring General

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

*HSD estimates an administrative impact from the bill, as amended. See “Synopsis of SCONC

Amendment"

SOURCES OF INFORMATION

LFC Files

Responses Received From

Human Services Department (HSD)

Department of Finance and Administration (DFA)

Public Regulation Commission (PRC)

SUMMARY

Synopsis of SCONC Amendment

The Senate Conversation Committee (SCONC) amendment strikes the HAFC amendments

specifying eligibility and would amend current law from “if the customer meets the

qualifications for LIHEAP" to “if the customer meets the qualifications to receive assistance

pursuant to the LIHEAP administrating authority during the programs current heating season."

House Bill 538/aHCPAC/aHAFC/aSCONC – Page

2

The SCONC amendment also includes language to require a utility to offer payment plan options

to customers pursuant to the rules adopted by the Public Regulation Commission.

If a customer has not paid past due charges by the next winter heating season, the customer does

not qualify for protection against utility disconnect.

Fiscal and Administrative Impact:

HSD notes that the bill, as amended, creates an additional

burden to the department and the 5 tribes/pueblos that run their own LIHEAP programs. HSD

will shift resources in order to absorb this additional work without additional funding. HSD

estimates the operating budget impact estimated to be approximately $60,000 to issue an

eligibility-protection-notice each month for six months. Depending on whether utility companies

screen their customers to determine if the household meets the qualifications for LIHEAP instead

of referring all individuals with disconnect notices to HSD for that determination, then the

number of individuals turning to HSD for assistance could dramatically increase, resulting in

further fiscal impact to the Department.

HSD reports that several other LIHEAP-related bills, such as HB 121, HB 372, HB 267 and SB

323, make general fund appropriations. HSD must be able to utilize up to 10% or $60,000 to pay

for these related administrative costs.

Synopsis of HAFC Amendment

The House Appropriations and Finance Committee (HAFC) amendment strikes the requirement

that the state appropriate money to HSD for the LIHEAP program for the moratorium to be in

effect. The amendment’s “clean-up" language in Section 1, specifying payment plan options,

has a significant change in the how customers qualify for the moratorium on service

disconnection.

The amendment changes the qualifying language from “the customer has been qualified to

receive assistance pursuant to the low-income home energy assistance program by the

administering authority" to “the customer meets the qualifications to receive assistance pursuant

to the low-income home energy assistance program from the administering authority . . . ."

Fiscal and Administrative Impact

: According to HSD, the HAFC amendment doesn’t specify the

administering agency (HSD) or the utility as the responsible party for determining eligibility for

protection from utility service disconnection. If HSD is required to determine eligibility for

protection, there are significant fiscal impacts on the agency. HSD estimates the need for an

additional $1 million for new field staff to determine whether utility customers in disconnect

status “meet the qualifications" to receive LIHEAP. If the utility is required to determine

eligibility, there is no additional fiscal impact on HSD.

Synopsis of HCPAC Amendment

The House Consumer and Public Affairs Committee (HCPAC) amendment changes the state

appropriation requirement for the moratorium to be effective. Under the amendment, for the

utility disconnect moratorium to be in effect, the state must have appropriated at least $4 million

to the Human Services Department for the low-income home energy assistance program. If less

than $4 million is appropriated, only Section 27-6-17 NMAC would be in place to protect the gas

and electric utility residential consumers.

House Bill 538/aHCPAC/aHAFC/aSCONC – Page

3

The amendment also changes the payment plan required from the customer, as follows: the

customer must agree to pay a minimum of 25 percent of current charges for each month during

the heating season in addition to any assistance provided by the low income home energy

assistance program and past-due charges in monthly installments in addition to the current

monthly charges due based on a monthly payment plan entered into with the utility. The option

remains for the customer to enter into a budget billing program offered by a utility.

Synopsis of Original Bill

House Bill 538 revises the Gasoline and Home Heating Relief Act, passed in the 2005 special

session, which included language regarding a utility disconnect moratorium for low income

customers from November 15 – March 15 each year. The bill adds a new section, specifically by

adding section 27-6-18.1, to include definitions and limitations to the previously enacted

moratorium bill. The moratorium on disconnections for low income customers would be limited

to clients who have applied for and been deemed qualified for the Low Income Home Energy

Assistance Program (LIHEAP) with the Human Services Department (HSD). HB 538 requires

low income customers to adhere to strict re-payment plans in order to avoid utility disconnection.

HB 538 requires that the customer pay 25% of current charges and an ongoing monthly or

budget payment plan resulting in full payment of any debt prior to the start of the next year’s

heating season. If the customer does not meet their obligations under the payment plans, the

customer loses their protection from the disconnect moratorium in the next heating season. HB

538 disallows a moratorium unless recurring state funding equals the federal funding for the

program.

FISCAL IMPLICATIONS

None identified, but the moratorium on utility disconnect is only effective when state

appropriations to HSD for LIHEAP match federal funding. HSD provided the following

breakdown of federal funding:

Year

HSD Federal

Base Grant

HSD

Federal

Emergency

HSD

Federal

Leverage

Total Federal

Funds to HSD

HSD State

Total

2006 $9,392,231 $ 523,567 $ 15,881 $ 9,931,679 $21,260,000 $31,191,679

2005 $8,934,013 $ 982,691 $ 9,714 $ 9,926,418 $ 0 $ 9,926,418

2004 $8,474,722 $ 191,282 $ 319 $ 8,666,323 $ 0 $ 8,666,323

2003 $8,469,606 $ 583,707 $ 176 $ 9,053,489 $ 0 $ 9,053,489

2002 $8,043,979 $2,245,669 $ 0 $10,289,648 $ 0 $10,289,648

2001 $6,600,853 $2,380,284 $ 0 $ 8,981,137 $ 2,000,000 $10,981,137

HSD indicates that changes in federal appropriations are extremely difficult to anticipate. If

federal appropriations are significantly increased, the state would be expected to appropriate an

equal amount. Federal appropriations are tied to funding formulas established at a national level.

The current funding formulas have placed western states at a severe disadvantage and are

expected to be revised resulting in increased appropriations to many states. With the new

funding formula, HSD could receive a considerable increase in funding from the federal source

which will place NM in a difficult position to have to fund LIHEAP at an equal level when NM

may not have the resources to do so.

House Bill 538/aHCPAC/aHAFC/aSCONC – Page

4

SIGNIFICANT ISSUES

LIHEAP is a grant from US Department of Health and Human Services (HHS) that helps NM

low-income families meet the costs of home heating and cooling one time per year and increase

energy self-sufficiency and reduce vulnerability resulting from energy needs. HSD is a recipient

of federal LIHEAP funds for NM, along with several Tribes/Pueblos. In federal fiscal year

(FFY) 2006, 71,794 clients received benefits through the program.

According to HSD, HB 538 does away with the winter heating disconnect moratorium safety net

for low-income NM households that meet

the qualifications for the LIHEAP program. HB 538

requires millions of dollars in 50/50 state matching funds in order to continue the moratorium. If

the State meets the match, HB 538 takes away the guarantee for protection against utility

disconnect when -

1.

the customer meets the qualifications

for LIHEAP but has not yet been certified to

receive

LIHEAP; and

2.

the customer qualifies for protection under the winter heating disconnect moratorium

in the first year but does not meet the terms in the re-payment plans as detailed in HB

538 and loses the disconnect moratorium protection in the second year.

The re-payment plans detailed in HB 538 will be difficult for any low-income household to

make. According to 2006 Fisher, Sheehan & Colton publications, the Home Energy

Affordability Gap for low income households is $600.00. This means that low-income

households require a subsidy of $600 annually to pay for home energy needs. In order to pay the

25% current bill and the re-payment plan, households will be making decisions between paying

for food, health care and other obligations rather than their utility bill therefore losing their

protection under the winter heating disconnect moratorium. Depending on the temperatures

especially for the very young or old, or medically fragile, it could be a matter of life and death.

According to Community Action New Mexico, a non-profit advocacy association, HB 538

would cut the number of households protected under current law by 75%, and would deny

protection to the households that need it most. Under current law, all households that “meet the

qualifications for the low income home energy assistance program" – about 196,000 households

– are protected from discontinuation of utility service. Under HB 538, the number eligible for

protection would range from 40,000 to 70,000, the numbers of households that received LIHEAP

in Fiscal Years 2005 and 2006, respectively.

HSD notes that HB 538 does not give oversight authority to any agency to monitor compliance.

The low income population is especially vulnerable to economic hardships caused by unexpected

changes in fuel prices. Any oversight which protects the interest of the low income population

should be considered.

PERFORMANCE IMPLICATIONS

HSD finds that Section G of the proposed bill would burden the department and tribes and

pueblos. The section requires the utility to report any customer’s need for payment assistance to

HSD, and the department would have to act promptly to evaluate the customer’s eligibility for

LIHEAP. Utility companies that do not screen each request for assistance for LIHEAP

eligibility will overwhelm administering agencies. Letter H in HB 538 requires utilities under

this section to provide to the public LIHEAP applications and information referrals to the

House Bill 538/aHCPAC/aHAFC/aSCONC – Page

5

appropriate HSD office. Based on letter H, letter G should be deleted.

ADMINISTRATIVE IMPLICATIONS

PRC indicates that, by rule (17 NMAC 5.410 F), the commission addresses discontinuation of

service to a residential customer for nonpayment during the period from November 15 to March

15. If HB538 is enacted, the commission may need to review and revise this rule to assure it is

consistent with the existing §27-6-18 NMAC language.

Although PRC finds their rules can be revised, Community Action New Mexico finds that HB

538 is at odds with current commission rules on payment plans and unfairly disadvantages low-

income customers. “Pursuant to 17.5.410.41 NMAC, reasonable payment agreements should

consider the multiple factors that determine a customer's ability to pay. By prescribing the terms

(duration and amount), HB 538 requires that a customer enter into a payment agreement in

advance of knowing the terms to which he is committing."

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

The Legislative Finance Committee recommendation for the general appropriation act included a

$4 million appropriation to HSD ($2 million in the base budget and $2 million as a special

appropriation) for LIHEAP and the Executive recommended $1 million in HSD’s budget.

House Bill 372 and Senate bill 323 appropriate $9 million to HSD for LIHEAP to the gasoline

and home heating relief fund, a fund already established for distribution of heating assistance.

Senate Joint Memorial 3 calls on the Federal government to maintain and increase funding for

LIHEAP.

House Bill 539 and Senate Bill 325 establish continuing appropriations for the LIHEAP

program, estimated at $22 million in FY08.

TECHNICAL ISSUES

For clarity, PRC suggests that the bill should reference “gas or electric utility" rather than simply

“utility", as used in the preceding section of statute.

BE/mt