Colorado Legislative Council Staff

STATE and LOCAL

FISCAL NOTE

TABOR Refund Impact

State Cash Fund Revenue and Cash Fund and Cash Fund Exempt Expenditure Impact

Revenue and Expenditure Impact


Drafting Number:

Prime Sponsor(s):

LLS 98-007

Rep. Schauer

Date:

Bill Status:

Fiscal Analyst:

February 11, 1998

House Business Affairs

Will Meyer (866-4976)

 

TITLE:            CONCERNING THE RESTRUCTURING OF THE RETAIL ELECTRIC MARKET IN COLORADO.



Summary of Legislation


            The provisions of the bill would allow the retail price of electricity to be set by the market, instead of being set by regulation as it is under the current system of a regulated monopoly. It would require that by July 1, 2000, the provision of competitive energy services be subject to market forces. The bill would establish governing principles to be applied by the Public Utilities Commission (PUC) and by the governing bodies of utilities in implementing a competitive retail electric market in Colorado. The application of these governing principles would have a fiscal impact on the PUC to implement them, on the Office of Consumer Counsel (OCC) to represent consumers in hearings before the PUC, and on the Department of Law to provide legal assistance to the PUC. The bill would become effective upon signature of the Governor.


STATE FISCAL IMPACT SUMMARY

FY 1998/99

FY 1999/2000

State Revenues

General Fund

Fixed Utility Cash Fund



$590,087



$640,169

State Expenditures

General Fund

Fixed Utility Cash Fund

Department of Law Cash Fund Exempt*



$519,230

$72,000



$548,381

$72,000

FTE Position Change

6.6 FTE

7.5 FTE

Local Government Impact — Potential change in revenues and expenditures.

              * The cash fund exempt expenditures of the Department of Law are included in the expenditures out of the Fixed Utility Cash Fund, Department of Regulatory Agencies, as identified above.


            The bill would allow cooperative electric associations and municipal utilities to elect not to provide their customers with the option to choose an electric supplier. Any such cooperative or municipal utility that does not elect to provide customer choice would be prohibited from selling electric supply to customers outside of areas certificated to the utility or in the case of a municipal utility outside of its incorporated limits and any other areas certificated by the PUC.



State Revenues


            Fixed utilities assessments are made annually based on the appropriation to the PUC for work related to fixed utilities. The FY 1998/99 and FY 1999/2000 assessments would be increased to cover the increased costs of both the PUC and the OCC. Revenues to the Fixed Utilities Cash Fund would increase by $590,087 in FY 1998/99 and $640,169 in FY 1999/2000, an amount sufficient to cover the costs of the bill as well as those costs not included in this fiscal note pursuant to the Joint Budget Committee’s budget policies.



TABOR Refund Impact


            Section 20 of Article X of the Colorado Constitution, limits the maximum annual percentage increase in state fiscal year spending. Once total state revenue from all sources that are not specifically excluded from fiscal year spending exceeds these limits for the fiscal year, the state constitution requires that the excess shall be refunded in the next fiscal year unless voters approve a revenue change as an offset. Based on the current Legislative Council economic forecast, it is projected that the state will be in a TABOR refund position during each of the next five fiscal years. Any increase or decrease in state revenue from changes in fees, fines, licenses, or other revenue sources will affect the amount of the state revenue to be refunded.



State Expenditures


            The following provisions of the bill would have an impact on the expenditures of the PUC, the OCC, and the Department of Law. The bill provides that customers would have a choice, and in order to provide a choice, the bill would require all electric utilities to functionally unbundle all competitive energy services from their transmission and distribution operations on or before July 1, 2000. The bill would require the PUC to be responsible for adopting rules and regulations to ensure the following:

  

               providers of electric distribution services unbundle their services so customers can choose from several providers, but continuing their obligation to connect all customers in their service territory on non-discriminatory terms and conditions. It is estimated that the PUC would require 0.1 FTE each Financial Analyst III, Economist IV, and Professional Engineer II in FY 1998/99 to develop rules and 0.15 FTE of each in FY 1999/2000 to implement the regulations;

  

               standards of conduct between the distribution utility and its affiliate are consistent with specified principles that prohibit the distribution utility from granting an advantage to its affiliate. It is estimated that this would require 0.1 FTE each Financial Analyst III, Economist IV, and Professional Engineer II in FY 1998/99 (only) to develop rules;

 

               consumer protection, including informing customers of choices, registration and certification of all competitive providers, prohibition of customer slamming, protection from abusive, anti-competitive conduct, efficient resolution of disputes, reliability and safety of electric service, and the authority to require that some or all of the competitive energy services be provided through an affiliate. It is estimated that the PUC would require 0.5 FTE each Financial Analyst III, Economist IV, and Professional Engineer II in FY 1998/99 to develop rules and 0.5 FTE for each in FY 1999/2000 to implement the regulations;

 

               a standard-offer service bidding process is made available for customers who have not chosen a competitive provider and wish to continue to receive bundled service, to assure the adequacy of the bundled service at the best competitive price and to assure nondiscriminatory treatment of all bidders. The PUC would require 0.1 FTE each Financial Analyst III, Economist IV, and Professional Engineer II in FY 1998/99 to develop rules and 0.1 FTE for each in FY 1999/2000 to implement the regulations;

 

               recovery of stranded costs are consistent with specified provisions of the bill and to review, approve or modify each plan and to identify circumstance where the market value of an asset exceeds costs and determine the manner in which the excess would be credited to customers. It is estimated that the PUC would require 0.1 FTE each Financial Analyst III, Economist IV, and Professional Engineer II in FY 1998/99 to develop rules and 0.2 FTE for each in FY 1999/2000 to implement the regulations;

 

               environmental and social programs are adequate, including low-income assistance, universal service, weatherization, or renewable resource development programs, and if they are not adequate, allows the PUC to establish a surcharge to fund the inadequately funded programs. The PUC would require 0.1 FTE each Financial Analyst III, Economist IV, and Professional Engineer II in FY 1998/99 to develop rules and 0.1 FTE for each in FY 1999/2000 to implement the regulations;

 

               a restructuring plan is submitted by each distribution company to the PUC by January 1, 1999 to implement the legislation: including a plan to functionally unbundle distribution service from transmission and competitive energy services; a tariff governing the provision of distribution service; acceptance of procedures for implementing the standards of conduct applicable to distribution utilities; procedures for the required competitive bid process provisions; proposed recovery mechanism regarding stranded cost recovery; and the PUC to approve or modify each plan by January 1, 2000. The PUC would not be required to adopt any rules. However, the PUC would require 0.2 FTE each Financial Analyst III, Economist IV, and Professional Engineer II in FY 1999/2000 to implement the provisions; and

 

               overall PUC authority for electric industry restructuring, including the coordination and linkage of the electric grid in Colorado with the region and the rest of the country are maintained and improved. The PUC would require 0.1 FTE each Financial Analyst III, Economist IV, and Professional Engineer II in FY 1998/99 to develop rules and 0.1 FTE for each in FY 1999/2000 to implement the regulations The PUC would require additional 1,500 hours of legal services primarily to assist the commission with proceedings related to the provisions of the bill.


            The workload of the OCC, which represents consumers before the PUC, including residential, small business, and agricultural consumers would increase as the result of the provisions of the bill. It is assumed that two plans would be submitted by utilities to the PUC by January 1, 1999 and that the PUC would hold and complete hearings within 12 months. It is estimated that the OCC would require an additional 1.0 FTE Rate Examiner Analyst V, 1.0 FTE Rate Financial Analyst III, and 0.5 FTE Administrative Assistant II. It also would contract for additional expertise required.


            The additional costs to the PUC, OCC, and Department of Law are as follows:


ADDITIONAL COSTS TO THE PUC, OCC, AND DEPARTMENT OF LAW

Personal Services: PUC TOTAL FTE - 3.3/4.2 FTE

FY 1998/99

FY 1999/2000

  Rate Financial Analyst III - 1.1/1.4 FTE

$59,772

$76,073

  Economist IV - 1.1/1.4 FTE

62,754

79,868

  Professional Engineer II - 1.1/1.4 FTE

69,180

88,046

Personal Services: OCC TOTAL FTE - 2.5/2.5 FTE

 

 

  Rate/Financial Analyst V (1.0 FTE)

69,342

69,342

 Rate/Financial Analyst III (1.0 FTE)

54,338

54,338

 Administrative Assistant II (0.5 FTE)

11,602

11,602

  Contract Consultant

75,000

75,000

Operating Costs: PUC & OCC

18,242

20,912

Capital Outlay (Including ADP) - PUC & OCC

25,800

 

Centralized Data Processing PUC & OCC

1,200

1,200

Legal Services: (0.8/0.8 FTE) PUC only

72,000

72,000

TOTAL EXPENDITURES - 6.6/7.5 FTE

$519,230

$548,381

 


Expenditures Not Included


            Pursuant to the Joint Budget Committee’s budget policies, the following expenditures have not been included in this fiscal note:

 

               health and life insurance costs;

               short-term disability costs;

               inflationary cost factors;

               leased space; and

               indirect costs.



Local Government Impact

 

            The fiscal impacts to local governments would be conditional on their choosing to implement the provisions of the bill. While there may be some short-term costs to implement the provisions of the bill, it is expected that these would be offset by long-term reductions in the cost of electricity. The net impact to local governments could only be determined on a case by case basis, and cannot be accurately estimated at this time.



Spending Authority


            The fiscal note implies that the Department of Regulatory Agencies would require additional cash spending authority of $519,230 (CF) and 6.6 FTE in FY 1998/99. Out of that amount, the Department of Law would require additional cash spending authority of $72,000 CFE and 0.8 FTE.


Departments Contacted


            Regulatory Affairs