Colorado Legislative Council Staff



TABOR Refund Impact

General Fund Revenue and Cash Fund Expenditure Impact

Local Revenue and Expenditure Impact

Drafting Number:

Prime Sponsor(s):

LLS 98-880

Rep. Owen

Sen. Ament


Bill Status:

Fiscal Analyst:

March 31, 1998

House Business Affairs

Will Meyer (866-4976)



Summary of Legislation

            The provisions of this bill would permit natural gas suppliers to file voluntary plans, subject to the approval of the Public Utilities Commission (PUC), for opening the market to competition in the supply of natural gas to consumers. The bill would require any such plans to contain specified provisions designed to preserve the integrity and reliability of service and unbundle the transmission component from the distribution or delivery component of natural gas service. It would allow natural gas public utilities to recover certain transition costs, as defined in the bill. The bill would authorize the PUC to adopt any necessary rules to implement the provisions of the bill. The bill would become effective upon signature of the Governor.


FY 1998/99

FY 1999/2000

State Revenues

General Fund

Other Fund

Potential Reduction in State Tax Revenues*

State Expenditures

General Fund

Fixed Utilities Cash Fund - Professional Services

$30,000 Contract*


FTE Position Change



Local Government Impact — Potential reduction in sales tax and franchise fee revenues.*

            * The potential impact of this bill to the state, as well as local governments, is conditional on public utilities submitting plans to the PUC for approval. It is not known when public utilities would submit a plan for opening the market to competition in the supply of natural gas.

State Revenues

            The state (and some local governments) collects sales tax revenues on the sale of gas and electricity. If consumers were to choose a supplier of natural gas that has no presence in Colorado, that company may not be required to collect and remit sales tax revenues because it has no nexus. However, consumers would be responsible for filing use tax in lieu of the sales taxes they currently pay.

            In FY 1996/97, the state collected about $18.6 million from public utilities in Colorado from the sale of natural gas and electricity. The amount of potential reduction in sales tax revenues collected on the sale of natural gas is dependent on several factors, including: 1) the number of customers (and their tax liability) that would shift to a natural gas supplier that does not have a nexus to Colorado; 2) the actual cost of the gas commodity as a percentage of the “taxable transaction” that currently includes the cost of distribution as well as the cost of the gas commodity; and 3) the level of voluntary compliance of consumers who would continue to be responsible for paying the use tax. It is not currently possible to accurately estimate the amount of the reduction in sales tax revenues that would result from the implementation of this bill.

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

            Voluntary natural gas unbundling has been investigated and studied by the PUC for more than a year. The provisions of the bill would require the PUC to promulgate necessary rules to implement natural gas unbundling. The promulgation of rules and the implementation of the other provisions of the bill would have a minimal impact on the PUC and could be absorbed within their existing appropriation.

            The Office of Consumer Counsel (OCC) however has not developed the necessary in-house expertise in the area of natural gas unbundling. The OCC would require an estimated 200 hours of consulting time at a cost of $150 per hour for a total of $30,000 to develop the essential expertise in this area. While this estimated expenditure is shown in this fiscal note in FY 1998/99, the actual timing of the expenditure is conditional on public utilities filing a plan with the PUC.

Local Government Impact

            The provisions of this bill would have an effect on the ability of local governments to collect sales taxes from natural gas suppliers that do not have a presence in Colorado and on their franchise agreements with public utilities providing services to their residents. The amount of potential reduction in tax revenues collected by local governments is dependent on a number of specific factors and cannot be accurately estimated at this time.

Spending Authority

            This fiscal note implies that the Department of Regulatory Agencies, Office of Consumer Counsel, would require an additional cash fund appropriation of $30,000 CF in FY 1998/99 for professional services contract.

Departments Contacted

            Regulatory Agencies               Revenue