TITLE: CONCERNING THE REDUCTION OF AIR POLLUTANT EMISSIONS, AND, IN CONNECTION THEREWITH, PROVIDING FOR THE VOLUNTARY REDUCTION OF STATIONARY SOURCE EMISSIONS AND RECOVERY OF EMISSIONS REDUCTION COSTS.

STATE FISCAL IMPACT SUMMARY	FY 1998/99	FY 1999/00	FY 2000/01
State Revenues General Fund Stationary Sources Control Fund	$10,000 *	$5,000
State Expenditures ** General Fund Other Fund Federal Funds			** First year of potential increase in electrical costs for the portion of the plan operational and in use
FTE Position Change	None	None	None
Local Government Impact — Potential increased electrical utility rates

*Estimated cost for one moderate and one complex voluntary plan presented to the Air Quality Control Commission.

** Potential increase in state and local government expenditures for electrical consumption. If the proposed Public Service Company Plan were to proceed as planned and no delays were experienced and the plan was completed in CY 2003, it is possible that some increase in electrical rates would occur in FY 2000-01. The amount of the increase would depend upon the amount of equipment that would be used in the electrical generation process at that time and what expenditures the Public Utilities Commission would allow as recoverable. The state may experience the estimated increase of $200,000 annually in FY 2002-03 or FY 2003-04 based on the proposed rate of seven and one half tenths of one mill. Should the entire one and one-half mills be allowed by the PUC, the state cost could be approximately $400,000 annually.

The reengrossed bill, as amended by the House on Second Reading and with the proposed amendment SB0142_L.040, would allow an owner or operator of a stationary source to obtain a voluntary agreement to reduce emissions of air pollutants. The Air Pollution Control Division would be required to negotiate and structure emissions limits to minimize the costs and maximize the operational ability of the owner. The division would be required to evaluate the limitations to determine if they would result in a reduction, if the reduction would be earlier than current regulations, or if the reduction would be greater than current regulation. The division would also evaluate the assurance period to determine the environmental benefits, time, capital, operating costs, and energy impacts of the agreement. The division could reject any proposal that did not meet the requirements in the bill. The Air Quality Control Commission would have to approve the agreement unless substantial evidence is found that the agreement is inconsistent with the provisions of the bill.

The commission could not impose additional state requirements during the assurance period. The agreement could not be made federally enforceable. Owners of a coal-fired power plant that reduce uncontrolled sulfur dioxide by an average of 70 percent would be provided an assurance period of 15 years. The bill states that the commission should consider a coal-fired power plant achieving a 70 percent reduction to be in compliance with any emission limit that is based on a technology requirement in the federal act unless the commission determines that different emissions limits are necessary to meet federal requirements. The General Assembly would have to approve the different limitations. Stationary source owners would not lose benefits of regulatory assurances by selling emissions credits. Fees would be set for negotiating agreements and would be capped at $5,000. The fees would be deposited into the Stationary Sources Cash Fund.

If an owner or operator is a utility, it would be allowed to recover prudently incurred air quality improvement costs through rate increases to retail consumers. The Public Utilities Commission would approve rate increases that recover costs over a fifteen-year period or less and which results in a charge of no greater than one and one-half mills per kilowatt hour. This bill would become effective July 1, 1998.

The bill would allow the Air Quality Control Division to assess a $50 an hour fee up to $5,000 for each voluntary plan submitted. The fiscal impact to the state is dependent upon a company submitting a voluntary plan to the Department of Health. Therefore, this bill is assessed as having a conditional fiscal impact. The number of hours the division would take to review these plans has been estimated to be 225 hours for a moderate proposal, 367.5 hours for a complex proposal, and 524.5 hours for an extremely complex proposal. For purposes of this fiscal note, it is assumed that two proposals would be submitted in the first year and one each year thereafter. This would generate approximately $10,000 in Stationary Sources Control Funds in FY 1998-99 and $5,000 in FY 1999-00.

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.

The division would have some additional costs as a result of this bill from reviewing the voluntary plans presented. It is assumed that the plan’s proponent would have already completed the research to determine if the plan would result in an emission’s reduction, if the reduction would be earlier than current regulations, or if the reduction would be greater than under current regulation. The division would just be reviewing the plan to verify the proponent’s claims. It is assumed that one moderate and one complex plan would be submitted in the first year and one moderate plan each year thereafter. A moderate plan would require 225 hours of division staff time and a complex plan would require 367.5 hours of division staff time. The division’s workload attributable to this bill would be the time identified by several staff members in the Air Quality Control Division. It would appear that the estimated workload would not require additional appropriations to the department. The additional workload could be absorbed within existing FTE by adjusting workloads and priorities within the division.

The Public Utilities Commission would not have a fiscal impact as a result of this bill. The Commission would review a utility’s newly submitted rates during the normal review process.

If an owner or operator submitted a proposal to the DPHE, DPHE determined that the proposal would meet the conditions specified in the bill, and the proposal received adequate financing, the owner or operator could submit a rate change to the PUC. If the PUC determined that the owner or operator had prudently implemented the approved proposal and allowed a rate increase, the PUC would be able to determine how the rate would be assessed. If the rate were assessed in a manner acceptable to the owner or operator, the PUC, and other interested parties, the bill could increase electrical rates paid by retail customers. The state, as a retail customer may experience an increase in the cost of electricity at some future date.

The amount of potential future investment made by an entity, the amount the PUC would allow the entity to recover, the amount of the increase in the rate, and when this may happen has not been determined at this time. However, the state currently pays Public Service Company approximately $20,000,000 annually for electric services. The total electrical costs the state currently pays may be as high as $25,000,000 annually. This bill would allow Public Service Company to implement an emission reduction plan it proposed to the PUC last fall. If Public Service Company were to implement the plan and the plan is approved as provided in the bill, the state may experience an increase in the cost for electrical service by approximately $200,000 annually based on seven and one-half tenths of one mill. This may be less than a 1.0 percent increase in the state’s electrical costs. Should the entire one and one-half mills be allowed, the state’s electrical costs could increase by $400,000 annually. The potential increase in costs would be spread out among all state departments, including colleges and universities served by the utility. The PUC would not allow increased costs to be passed on to the consumer until the costs and benefits are known and measurable. The increased costs may begin to be assessed in FY 2000-01. The increased cost may also be incrementally increased as equipment for different plants is completed. The total increase in costs would not be anticipated until FY 2002-03.

The amendment SB0142_L.040 would not change the fiscal impact of this bill. The potential costs identified with Public Service Company’s proposed plan in the previous paragraph was based on the assumption that retail consumers would pay the full costs of plan. The potential fiscal impact to the state is the maximum estimated increase based on the estimated allowable costs recovered.

Local government entities may also experience increased utility costs if they are in the service area of a company that complies with the provisions of this bill. The amount of the increase would vary depending upon the entities current electrical demand.

This fiscal note implies that the Department of Public Health and Environment would not require additional spending authority for FY 1997-98 to implement this bill.