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

SPONSOR Grubesic

ORIGINAL DATE

LAST UPDATED

2/22/07

HB

SHORT TITLE Low Income Energy Assistance Act

SB 546

ANALYST Earnest

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Human Services Department (HSD)

SUMMARY

Synopsis of Bill

Senate Bill 546 (SB 546) creates the “Low-Income Energy Assistance Act" to ensure that

electric and gas rate increases do not force low-income New Mexicans to discontinue necessary

services and to preserve the affordability of necessary energy services for low-income New

Mexicans by providing assistance to meet their costs.

1.

A public utility may provide assistance in the form of reduced rates for electric and

gas service for persons meeting the eligibility criteria of one or more need-based

assistance programs administered by HSD;

2.

A public utility may provide assistance in the form of cost-effective conservation and

efficiency programs and home weatherization services targeted specifically to persons

meeting the eligibility criteria of one or more need-based assistance programs

administered by HSD;

3.

Public Regulation Commission (PRC) shall promulgate rules and regulations for the

implementation the Act; and

4.

Nothing in Chapter 62 NMSA 1978, including Section 62-8-6 NMSA 1978, shall

prohibit the commission from approving reduced rates for persons who meet the

eligibility criteria of one or more need-based assistance programs administered by

Senate Bill 546 – Page

2

HSD.

FISCAL IMPLICATIONS

None identified, but there may be some administrative impact on the Human Services

Department if their data is required to implement the bill.

SIGNIFICANT ISSUES

SB 546 is similar to SB 480, although this does not contain definitions of the terms used

throughout the Act. It is assumed that the commission in SB 546 is the Public Regulation

Commission, although it is not expressly stated. In addition, SB 546 uses the term “may

provide" assistance while SB 480 uses “permit" assistance.

PRC, in its analysis of SB 480, indicates:

Utilities have reported to the Commission that it will be burdensome for them to identify

and verify on an ongoing basis which customers are eligible for reduced rates. The

Commission would have to evaluate the cost-effectiveness of any such low income

program proposed by a public utility.

The objective of traditional utility rate design is to promote just and reasonable rates

under which each class of customers (e.g., residential, small commercial, etc.) is

responsible for its fair share of the costs incurred by the utility to provide services. Great

effort is taken to prevent, or to minimize in situations to reduce rate shock, cross

subsidies within and across utility customer classes. Existing statutes reflect traditional

rate design principles, under which discrimination in utility rates charged to consumers

within customer classes is not allowed without an express exception.

One concern of offering reduced rates to low income customers is it may be necessary for

the utility to charge all other customers higher rates to recover all its costs. A "hidden

tax" on utility ratepayers may not be the most effective or fairest way of supporting

access to utility services among vulnerable populations.

Proponents of low income affordability programs have reported that such programs can

be cost-effective and provide system benefits by reducing the costs associated with

arrearages and bad debts.

If low income rates are reduced significantly, it is feared that the financial incentives on

these customers to engage in energy efficiency or conservation measures will be reduced

if affordability programs are not accompanied by an education component.

HSD is concerned that because SB 546 uses the term “may provide", public utilities would not

opt to charge a reduced rate to low-income customers.

HSD indicates that it is unclear how individuals would qualify and apply for this new program.

“Eligible

" for needs-based program administered by HSD may be different from receiving

or

eligible and receiving

a needs-based program administered by HSD. It is unclear whether utility

companies would be making the determination of eligibility under SB 480 so that they may

apply the discount or whether there would be some HSD involvement. Any eligibility

Senate Bill 546 – Page

3

determinations will be extremely complicated, time-consuming and problematic since there are

over 40 needs-based programs administered by HSD ranging in eligibility from 85% of Poverty

in the Temporary Assistance to Needy Families (TANF) Program to the Breast and Cervical

Cancer Medicaid Program at 250% of poverty. HSD caseloads are quite extensive. Any

automatic data match through an information technology system would be limited to current

recipients rather than those that could be “eligible".

SB 546 would expand the utility assistance services currently available under the Low Income

Utility Assistance Act, §§ 27-6-11 to 27-6-16 NMSA 1978 (the “Act"). Depending on how the

eligibility requirements of SB 546 are interpreted, SB 546 may also increase the services to

indigent persons already eligible for services under the Act, particularly in the area of

weatherization.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Senate Bill 546 relates to Senate Bill 480.

TECHNICAL ISSUES

SB 546 does not contain definitions of the terms used throughout the act. SB 546 does not

identify the administrating agency.

PRC notes that Section 62-8-6 prohibits any unreasonable preference or advantage to any

corporation or person as to rates or service. The statute expressly allows the commission’s

approval of “economic development rates and rates designed to retain load." For consistency the

inclusion of low-income energy programs into NMSA §62-8-6 might be considered.

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