NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

The LFC is only preparing FIRs on bills referred to the Senate Finance Committee, the Senate Ways and Means Committee, the House Appropriations and Finance Committee and the House Taxation and Revenue Committee. The chief clerks are responsible for preparing and issuing all other bill analyses.

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(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to SB210

SOURCES OF INFORMATION

LFC Files

Energy Conservation and Management Division, Energy, Minerals and Natural Resources Department

SUMMARY

Synopsis of HAFC Amendment

The House Appropriations and Finance Committee amendment would correct the HENRC amendment by identifying the Commission on Higher Education as reviewing authority for guaranteed utility savings contracts at post-secondary educational institutions. The amendment also deletes the HENRC amendment which was primarily technical clean up language.

Synopsis of HENRC Amendment

The House Energy and Natural Resources Committee amendment cleans up language and adds a new paragraph to existing statute. The added language, which amends the existing "Contract Approval Required" section, is slightly ambiguous. The problem is that this section identifies the reviewing authority for state institutions. The purpose of the amendment is to identify, specifically, post-secondary educational institutions, yet the language does not define who the reviewing authority for these contracts would be for post-secondary educational institutions.

Synopsis of Bill

House Bill 425 would amend the Public Building Energy Efficiency and Water Conservation Act primarily by clarifying and correcting the existing provisions of the Act. Currently, the Act allows public institutions to enter lease-purchase agreements of up to 10 years to implement energy efficiency and water conservation projects. House Bill 425 would implement energy performance contracting in institutions of higher learning and state agencies. Essentially, the bill would allow the use of "special funds" and "utility savings" for payments on guaranteed utility savings contracts.

Significant Issues

Guaranteed utility savings contracts allow universities and state agencies to reduce its utility costs and install energy-saving appliances and improvements. Normally, the contracts can range from as low as $200,000 and as high as $2.5 million and cover a 10-year period. Currently, New Mexico institutions have entered into 29 contracts totaling more than $23 million. In New Mexico, two companies, generally, serve as contractors: Honeywell and Johnson Controls.

According to the Energy Conservation and Management Division, energy performance contracts have not been implemented because of restrictions on funds that are used to pay for long-term leases, because state courts have defined long-term leases as debt. The state constitution prevents the creation of debt unless the citizens vote on the matter. However, the restriction does not apply to special funds.

The bill would allow any special fund be used for payment on these long-term leases and lease purchase agreements. The bill would also allow utility savings to be used for payment of the guaranteed utility savings contract, but would be dependent on the original revenue source (i.e, general fund or special funds).

FISCAL IMPLICATIONS

House Bill 425 does not contain an appropriation. There would be no fiscal impact.

ADMINISTRATIVE IMPLICATIONS

There would be no administrative impact.

DUPLICATION

House Bill 425 duplicates Senate Bill 210.

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