El Paso Electric says its requested base rate increase is necessary to recover costs accrued from building new facilities… but critics say several alternatives were overlooked.
A recent proposal filed by El Paso Electric (EPE) could result in a 9 percent increase, on average, to total residential bills if approved by the New Mexico Public Regulation Commission (NMPRC). Over the last few years, El Paso Electric says it built $1.3 billion dollars in new facilities needed to meet customer demand.
The recovery costs related to those new assets are cited by El Paso Electric as the reason for its rate increase request. Utilities currently get compensated for a certain rate of return on the amount of assets they own.
And critics say….that means many viable alternatives are overlooked.
Steve Fischmann, a representative of the nonprofit organization Southwest Energy Alliance and chairman of the New Mexico Fair Lending Coalition, is one such critic who says the company could have explored other rate structures and methods of cost recovery.
“There’s lots of ways that utilities can provide electric resources that are adequate for a community. One of them is to create more capacity. The other is to use the current capacity more effectively and that involves energy efficiency, finding ways to get the same output out of less energy input. And it also includes cutting off peak demand. So there’s big peaks in electricity usage. El Paso Electric has done virtually nothing compared to many other utilities in the nation, in terms of using very cost effective ways of controlling how much electricity we use and how much we use at the peak. So that would be a much less expensive way to go than what they are currently doing which is just adding capacity.”
Fischmann went on to say the current regulatory scheme rewards utilities for building expensive new assets. He says…because shareholders want the biggest profits, EPE is going to load up on assets. For this reason, he says the current regulatory process needs to be changed.
Fischmann also discussed a few possible alternatives to the rate structure that include changing rates according to peak usage and tiered pricing.
He pointed out tiered pricing and cited El Paso’s water utility as an example of a utility implementing this method. He mentioned El Paso electric’s rates and how they do not provide incentive for users to change their usage habits.
Rocky Bacchus, owner of Las Cruces business One Hour Air Conditioning & Heating and an intervener in the rate case, echoed Fischmann’s sentiments regarding efficient capacity.
Bacchus said there are thousands of different ways that rates could have been structured that would have kept costs from going up. Bacchus brought up El Paso Electric making money by spending money on assets. He claims El Paso Electric is at 50% utilization of their capacity over the course of the year and yet El Paso Electric has been on a spending spree building new assets and making consumers pay for it.
Bacchus claims that El Paso Electric ’s utilization was once 65% in 2000 and has kept going down as more plants are built. He claims they have other options besides seeking a rate increase but their greed and desire for profit has pushed them to do what’s best for shareholders to the detriment of ratepayers.
Bacchus agreed that tiered pricing was an option El Paso Electric could have considered but he says it’s not the best option.
He says El Paso Electric has already installed meters on approximately 90% of the Las Cruces area that could enable conversion to time-of-use rates. He says that could give residents considerable savings in what’s called a customer choice program.
New Mexico PRC commissioner Sandy Jones responded to questions regarding possible alternatives for utility companies to avoid raising base rates in order to recover costs.
“Most of New Mexico’s utilities have time-of-use rates offered to customers. Time-of-use rates incentivize customers, both business and residential, to use less electricity during high peak time and more during off-peak time. That peak shaving is probably the biggest thing we can do for energy efficiency.”
New Mexico PRC commissioner Valerie Espinoza gave her take on possible alternatives that utility companies can explore before building new facilities to meet customer demand.
“Utilities are required to examine energy efficiency measures that might avoid the need to build new facilities and the utilities can also look into buying power from some other facility instead of building a new facility.”
If Las Cruces consumers want to get involved, Fischmann and Bacchus encourage them to call or email the PRC and the New Mexico Attorney General’s office with their concerns and attend public meetings regarding the rate case.
If the requested rate increase is approved, it could take up to a year for the new rates to take effect. EPE last filed for a non-fuel base rate increase in New Mexico in 2009.
El Paso Electric did not respond to KRWG’s request for comment for this story.