Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance

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

if they are used for other purposes.

Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).

Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and

attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

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

SPONSOR McSorely

ORIGINAL DATE

LAST UPDATED

2/21/07

HB

SHORT TITLE Affordable Energy Rates

SB 895

ANALYST Earnest

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

0.0

$195.0 $188.5

$380.0 Recurring General

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Human Services Department (HSD)

Energy, Minerals, and Natural Resources Department (EMNRD)

SUMMARY

Synopsis of Bill

Senate Bill 895 (SB 895) would enact the Affordable Energy Rates Act to create electricity and

natural gas programs for low-income utility customers. The Public Regulation Commission

(PRC) would be charged with ensuring that low-income utility customers are not overburdened

by monthly energy expenditures. Different rates and energy efficiency programs would be

provided by utilities to their low-income customers. Eligibility criteria for receiving assistance

as a low-income utility customer would be established.

FISCAL IMPLICATIONS

The bill carries no appropriation, but the PRC estimates a significant administrative impact,

including the need for 3 FTE and recurring funding of about $188.5 thousand. See the

administrative implications section for more detail.

SIGNIFICANT ISSUES

The bill delegates new powers to the PRC. Notably, the PRC would have the authority to

Senate Bill 895 – Page

2

approve different rates for low-income ratepayers or other rate assistance so that qualified

ratepayers are able to afford gas and electric services.

PRC finds that:

The bills requirement that PRC “shall ensure that low-income ratepayers are not

overburdened by monthly energy expenditures" creates a significant oversight function

which may be un-obtainable. No guidelines, parameters, or definitions are provided for

overburdened. The commission does not have oversight over ratepayer’s expenditures or

revenues, so this mandate is not an achievable task.

The proposed statute changes will require the commission to “establish a program of

assistance by public utilities." Data is not currently available to the commission for

identification and verification on an ongoing basis of which customers would be eligible

for reduced rates. Because of the additional responsibility, additional FTEs would be

required by the commission to establish, track, and implement programs required under

this proposed bill.

The bill (page 2, lines 22 – 23) would allow for the shifting of utility costs to other

residential customers and other classes of customers. Great effort is taken to prevent, or

to minimize in certain situations, rate shock and cross subsidies within and across utility

customer classes. At the same time, the utilities’ “duty to serve" is recognized through

laws and rules that limit their ability to discontinue service because service is

unprofitable or because a particular customer has not paid his or her bill.

EMNRD indicates that the total monthly utility bill is affected by rates and consumption

(kilowatt-hours for electricity, therms for natural gas). Consumption, in turn, is affected by

several variable factors, including equipment efficiency, equipment operating time, and occupant

knowledge. Low-income utility customers have control over consumption, but not rates.

According to HSD, some natural gas and electric utilities are not regulated by the Public

Regulation Commission. SB 895 does not state if all such utilities operating in the state would

be included in the program of assistance.

Moreover, HSD finds that it is unclear how “customers who satisfy eligibility criteria for

assistance" will be identified for this new program. “Eligibility criteria" is not defined. It is

unclear whether utility companies would be making the determination of eligibility under SB

895 so that they may apply the different levels of rate assistance or whether there would be some

HSD involvement.

ADMINISTRATIVE IMPLICATIONS

Two additional FTEs (2 utility economists) are estimated to be needed to implement the

establishment of the low-income program and to track the utilities’ compliance with that

program. One additional FTE (1 Utility Compliance Officer) is estimated to be necessary to

coordinate the programs established with the department designated to pursuant to the provisions

of § 27-6-13 NMSA 1978.

The annual recurring salary and benefits cost for each economist – advanced position (range 80)

Senate Bill 895 – Page

3

is a total of $71,000 [salary and benefits], plus $1,500 annual recurring operating costs for office

supplies, telecommunications and training. Two utility economist FTE = $145,000.

The annual recurring for a compliance officer – advanced position (range 65) is $42,000 [salary

and benefits], plus $1,500 annual recurring operating costs for office supplies,

telecommunications and training. Subtotal for compliance officer FTE = $43,500.

Three computers with peripheral equipment and office furniture will need to be purchased for the

first year of operation as a one time start up cost of $2,150 per FTE. Subtotal for one-time start

up cost for all three FTE = $6,450.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

This bill relates to SB480 and SB546 which would amend the Public Utility Act to allow the

PRC to approve different rates for low-income ratepayers from other residential ratepayers.

TECHNICAL ISSUES

According to PRC, an amendment to NMSA 1978, § 62-8-6 establishing an explicit exception for

low-income ratepayers would be needed. SB 480 and SB 546 would amend the PUA to this

effect and are currently pending.

OTHER SUBSTANTIVE ISSUES

PRC indicates that the commission considered low-income programs as a part of its energy

efficiency rule, 17.7.2 NMAC. This Rule reflects the importance of making energy efficiency

programs widely available to all members of the residential rate class, regardless of income. It

does not preclude the utility from designing and proposing low-income programs.

ALTERNATIVES

EMNRD suggests a more aggressive approach to energy conservation and efficiency in low-

income housing, statewide, could be implemented to reduce utility bills. A comprehensive

retrofit and education campaign could be mounted to address the same issue. This would have a

more permanent effect on reducing utility bills than reducing rates. It would also create

economic development opportunities throughout New Mexico and foster community

involvement.

BE/mt