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 Revenue Decreases)

Duplicates/Conflicts with/Companion to/Relates to

SOURCES OF INFORMATION

Public Regulation Commission (PRC)

Economic Development Department

Commission on Higher Education

Attorney General's Office (AG)

SUMMARY

Synopsis of Senate Floor Amendment #1

The amendments would permit a person to file complaints alleging monopoly coercion with a district court in addition to the PRC.

The amendments change the definition of "monopoly coercion" to include actions of a public utility which would cause a customer to believe that gas service, in addition to regulated service, will be affected by the acquisition of goods or services from a person other than an affiliate of the public utility.

The amendments would allow higher education to participate in the $4 million distribution from the "electric industry system benefits fund" that is designed to encourage the use of renewable energy through the initiation, development and evaluation of renewable technology projects.

The AG suggests amending page 8, line 1 to add "or gas" following "regulated" for uniformity; page 25, line 3, deleting "with the commission" after "coercion"; and on page 53, line 8, repealing Sections 13 and 15 effective June 30, 2004 to make the bill conform with the Senate floor amendments.

Synopsis of Senate Floor Amendment #2

Senate floor amendment #2 would extend the system benefits charge beyond June 30, 2004, and would expand the system benefits trust fund to require disbursement of funds to low income communities to improve service and allow Indian nations and tribal governments to share in the fund.

The amendment specifies that at least $6 million be spent annually on providing electricity for underserved, low-income communities. The amendment limits the application of such funds to renewable energy and transmission line extensions, both of which are cost prohibitive. The PRC notes that distributed generation may be a more cost effective solution as an alternative means of supplying energy, but which is currently excluded under the provisions of the bill.

The PRC notes the term "underserved, low-income communities" is not defined in the amendments.

The amendments provide for the systems benefit charge to increase from $.0003 per kilowatt-hour to $.0007 on January 1, 2005 and to continue at that level indefinitely.

The PRC also notes the proposed modifications to the system benefits charge are inconsistent with the delayed repeal provisions in Section 22 of the original bill, as amended. The delayed repeal of the system benefits trust fund on June 30, 2004 would mean the fund would be nonexistent when the wires charge is increased to $.0007as provided for in the Senate floor amendment. Additionally, there would be insufficient funds in the systems benefit trust fund until 2005 to fund the required disbursements.

Synopsis of SJC Amendments

The Senate Judiciary Committee amendments to SB428 as amended, provide for the following ([ ] indicates former language) :

• •add to the definition of "generation and transmission cooperative" to include a person with generation or transmission facilities organized in another state and providing sales of electric power to member cooperatives in this state;
• •change the definition of "open access" to mean non-discriminatory transmission and distribution services for the delivery of supply service by [to] all competitive power suppliers to facilitate customer choice;
• •change the definition of "regulated services" to mean bundled services as opposed to electric power supply services;
• •redefine "service customer" to mean a customer receiving supply service over a public utility's, distribution utility's or municipal utility's distribution or transmission facilities in areas served by the utility;
• •add to the definition of "stranded costs" to mean the net present value of the difference between the regulated revenue requirements for all utility-generation-related functions, including purchased power, fuel contracts and lease and lease-related obligations, which as of the date of open access, were being recovered in rates, or if not previously recovered in rates, which the commission determines would be recoverable in rates that have been determine by the PRC to be prudent, used and useful or otherwise recoverable in rates;
• •After notice and public hearing, the plan or approval for customer choice, stranded costs, open access, and competitive supply service for a public utility shall be confirmed, rejected or modified by the PRC on or before 11/30/99;
• •remove the review of transition plans to include action taken only by the new PRC after 1/1/99;
• •specify that the standard offer bid price for stranded costs may reflect the current market value;
• •specify that stranded costs recovery may not extend longer than 5 [4] years from the eligibility date of customer choice provided the PRC may separate nuclear decommissioning for recovery over a longer time period through a separate wires charge if in the public interest;
• •specify that nothing in the Act shall require the PRC to make an order regarding rates or wires charges that would result in a public utility losing its eligibility for accelerated depreciation or other tax benefits, or to use external sinking fund methods for decommissioning obligations;
• •specify that any person applying for a competitive power supplier license shall execute an agreement that all electricity sold to a customer in the state shall be delivered to that customer; and remove the stipulation that a distribution or transmission company is not required to purchase any reserve supply of electricity in mitigation or anticipation of a competitive power supplier's shortfalls in supply service;
• •specify the PRC may revoke or suspend the license or impose a penalty on a competitive power supplier if it is a delinquent taxpayer;
• •indicate that each public utility providing distribution service shall file and maintain tariffs providing rates and service conditions for distribution service available to competitive power suppliers, transmission companies, and customers on a non-discriminatory basis;
• •remove the requirement for public utilities providing distribution service to prudently arrange for back-up and emergency supply service;
• •indicate that the system benefits charge shall be separately identified on [distribution service] bills rendered to customers beginning on 1/1/01;
• •indicate that systems benefit charges shall be paid by each customer to a distribution cooperative utility or a municipal utility;
• •specify that a generation and transmission cooperative may [continue to] provide power and energy to its members and shall be [remain] subject to regulation by the PRC pursuant to the Public Utility Act [to the same extent as it was regulated prior to the effective date of the Electric Utility Industry Restructuring Act of 1999.];
• •direct the Legislature to examine safety, reliability, quality and performance standards for [generation] competitive power suppliers and distribution and transmission facilities; and
• •change the delayed repeal to include both Section 13 (System Benefits Charge--Recovery)and Section 15 (Electric Industry System Benefits Trust Fund Created--Support for Administration and Customer Information, Low-Income Customers and Renewable Technology).

Synopsis of SCORC Amendments

The Senate Corporations and Transportation Committee (SCORC) amendments to SB428 provide for the following:

• •eliminate the requirement for the PRC to give notice and hold a hearing prior to initiating an inquiry into an approved transition plan's implementation and operation;
• •change the "system benefits charge" from being imposed on distribution service provided by public utilities and distribution cooperative utilities to being imposed on all retail kilowatt-hour sales in the state billed by public utilities, municipal utilities and distribution cooperative utilities;
• •specify that a distribution cooperative utility is not a public utility for the purposes of the Electric Utility Industry Restructuring Act of 1999;
• •specify that a distribution cooperative utility organized pursuant to the laws of another state and providing bundled services in NM to less than 20% of its total customers may file an application with the PRC to be governed by the electric restructuring laws of the other state;
• •remove the requirement to have the prior written consent of the distribution cooperative utility prior to converting or permitting the conversion of a retail service delivery point on its system to a wholesale service delivery point;
• •add that the PRC is directed by the Legislature to further examine how power may be purchased from qualifying facilities, including facilitating net metering.

Synopsis of Bill

Senate Bill 428 creates the Electric Utility Industry Restructuring Act of 1999. The Act proposes to restructure the electric utility industry to allow customer choice of energy suppliers; provide co-operatives and municipal electric utilities the option of participating in electric industry restructuring; set the range for the amount of stranded costs to be recovered from customers; provide for standard offer service for the protection of residential and small commercial customers who choose not to participate in the competitive electric market; and create an electric industry system benefits fund to be administered by the Environment Department to be utilized for the development of renewable energy projects and for assisting low-income consumers.

FISCAL IMPLICATIONS

The Act would create the "electric industry system benefits fund" (EISBF). The fund's revenue would be generated by assessing electricity users a "wire charge" of $.0003 per kilowatt hour. The electricity users consist of each public utility customer and each distribution cooperative utility customer in the state on distribution service. The revenue would be collected monthly by the public utility or the distribution cooperative utility billing the customer and paid quarterly to the Environment Department by the public utility and the distribution cooperative utility. Any unexpended or unencumbered balance remaining in the EISBF at the end of any fiscal year shall be transferred to the general fund.

Revenue in the EISBF would be distributed annually for the following:

1) A maximum of $100.0 to the Environment Department for administration of the EISBF;

2) $500.0 to the PRC for consumer education and information, and to administer the Act;

3) A minimum of $500.0 for low-income energy assistance; and

4) A maximum of $4,000.0 to encourage the use of renewable energy by school districts, incorporated cities, towns, villages or counties.

The Environment Department shall submit to the Legislative Finance Committee prior to each regular legislative session a list of the recipients of fund disbursements from the EISBF.

Annually through 2002, the Legislative Council shall refer questions and issues related to the amount of state and local tax revenues derived from previously regulated electric utility service to the Legislature's interim Revenue Stabilization and Tax Policy Committee. The Legislative Council shall report to the Legislature annually on the changed impact to state and local government tax revenues resulting from restructuring and competition in the electric industry.

On or before January 1, 2003, the Revenue Stabilization and Tax Policy Committee shall recommend legislative changes, if any, to establish comparable state and local taxation burdens on all market participants in the supply of electricity.

Under the provisions of the bill, the PRC may impose a minimum administrative fine of $100.00 with a maximum of $1,500,000.00 for each violation of the Act by any person subject to regulation or licensure pursuant to the Act; or for any act or omission that the person knew or should have known was a violation of any provision of the act or rule or order of the PRC pursuant to the Act. Each day of a continuing violation shall be considered a separate violation.

ADMINISTRATIVE IMPLICATIONS

The PRC indicates it will require additional staff to accomplished the required studies, reports, customer education, rule promulgation, adjudications and appeals associated with the implementation of the Electric Utility Industry Restructuring Act of 1999.

The Environment Department may not be able to sufficiently administer the electric industry system benefits fund with the $100.0 annual appropriation from the EISBF, particularly given the department's lack of experience in administering a fund of this type.

TECHNICAL ISSUES

The PRC indicates on page 19, line 15, the phrase "after notice and hear" should be deleted because it is unnecessary and confusing. The phrase as it is drafted could be interpreted to require a notice and hearing in order to initiate an inquiry.

The PRC indicates that under Section 7(D), other interested parties besides just the PRC and the public utility should be allowed to seek reconsideration or modification of wires charges for transition costs.

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