The New Mexico Public Regulation Commission will hold a public comment hearing at The Doña Ana Government Center on Wednesday June 22 to discuss a possible rate increase for El Paso Electric. KRWG's Noah Raess spoke with former New Mexico State Senator and former New Mexico Public Commissioner Stephan Fischmann.
Noah Raess:
You know, there's this meeting, the public comment hearing, that's coming up on Monday, where the Public Regulation Commission is going to talk about the rate changes that El Paso Electric is proposing. I was wondering, can you just kind of remind everybody what that rate change is looking like and how will that kind of affect people in Las Cruces?
Stephan Fischmann:
Well overall, they're proposing a rate increase across all customers of about 50%. That's the base rate that doesn't include some of the riders that people have on their bills. But for the average residents, what they're proposing would create an additional $500 a year of cost. So it's essentially a $500 a year rate increase for the average residential customer.
Noah Raess:
I was doing some research into this topic for the interview, and it just seems everywhere is experiencing high electric rates right now. And a lot of people have been throwing around the word historic to describe the kind of electric rates that are happening across the country. Is there something special about the time we're living in or why are rates getting that high?
Stephan Fischmann:
Well, there's a whole bunch of reasons. You know, there has been some inflation, there have been some supply chain problems when it comes to getting equipment in place and those costs have gone up. But honestly, I think a really big part of it is utility ownership. And the structure of the utility business which is sort of morphed from, in my opinion, from public service orientation to basically let's go out there and maximize our profit orientation. And, you know, there's a lot of factors that have created that both legal, and I guess cultural, if you will. But there's a lot of profiteering in this proposal by EPE. I mean I think regulators need to take a good, hard look at what they're doing so we start to get a handle on it.
Noah Raess:
And speaking of regulators, you said on the Public Regulation Commission. How do you expect this to play out and what can the public expect to see over the course of this discussion and kind of the end result?
Stephan Fischmann:
I never predict how it will play out, because it's just an unknown. I don't think that they will get anywhere near the increase that they're asking for, but I do think it will be substantial.
Noah Raess:
I hopped on to the El Paso Electric website as well just to kind of see what they're talking about, the rates change. They're saying this money is needed for infrastructure and they haven't gotten a rate increase in New Mexico since I think it was 2015 that they said on their website, you know, is that a fair point? Do they need more money for infrastructure upgrades?
Stephan Fischmann:
That remains to be seen. And it will be one of the core issues in the rate case. One of the things that's particularly scary about this is, you know, they're doing this increase based on a lot of investment between now and the last rate case. That was in 2020, 2021. So it's only been 5 or 6 years since their books got a thorough review, and they had a rate case. So the claim that there's no rate increase for 15 years it really doesn't hold water. It was just 5 or 6 years ago that they got a very thorough review, and they got a fair deal. They're just supposed to charge as much as it takes to keep their business going, not to charge so much that they make a huge profit. And what they're doing in this rate case is they're asking for ten and a half, 10.7% annual return, which is just ridiculously high. They won't get that. They're claiming even after this rate increase, that they're going to do $5 billion worth of investment over the next 4 to 5 years. God knows what that means for another potential rate case coming up in 3 or 4 years. So it's not just this rate case that looks kind of grim. It's what the future looks like and put in terms of potential cost. Looks very grim.
Noah Raess:
Earlier you talked about the 10.5% return. So I was wondering if you could expand on what that is, what a normal number looks like and, how does that kind of play into how an electric company functions?
Stephan Fischmann:
So, if I look at the market as a whole and survey all the big Wall Street investment firms and investment advisors, their projections for the next ten years for the average company, the competitive company that's out there is 6.7, maybe 7% return. A utility, legally, is required to charge as much as it takes to keep the business going but really no more. And that's what the regulatory structure is set up theoretically to do. So the idea of a 10.7% return for a monopoly where your revenues are basically locked in is ridiculous. And it's interesting because you look at utility stocks, they trade at a level that gets investors about a 5% return. So the actual investment community there, whatever the utilities charge, they're basically at a bid price that they get a 5 or 6% return. So all of this excess profit that utilities make is, what can I say, unnecessary. And 60% of it goes to dividends. So the excess profit isn't reinvested back into equipment. 60% of it goes out each quarter to investors. So the idea that the excess profit helps build the grid of the future. No, there's much better ways to finance that. So, what I said there just probably sounds complicated to a lot of listeners, but, the basic point is, what they're asking for is way out of line with the marketplace.
Noah Raess:
I think those were kind of all the questions I had. Was there anything else you wanted to add?
Stephan Fischmann:
Well, I will say there's a lot of issues at play here in this rate case, other than the actual rate increase that gets determined. And, a lot of it has to do with the structure of how they charge rates. A lot of issues about, are they allocating a lot of data center costs from Texas over to New Mexico? And the structure rates themselves. So the big users like data centers, don't waste energy and exert extra costs on the rest of us. So, when you're looking at a rate case, there's a lot of future policy involved and that's going to have a huge impact on customers as well.
