Strong Opposition To El Paso Electric Rate Hike

Aug 30, 2015


It’s summertime in Las Cruces and increased air conditioner usage has many residents expecting high electric bills.  But those bills could be even higher next summer if a proposed rate increase is approved.

Residents in Las Cruces can expect as much as a 9% rate increase, or $8.6 million dollars, if a recent proposal filed by El Paso Electric (EPE) is approved by the New Mexico Public Regulation Commission (NMPRC). El Paso Electric cites $1.3 billion dollars in new facilities to meet customer demand and the recovery costs related to those new assets as the reason for the rate increase request.

What has many residents angry about the proposed rate increase is the fact that there is no request to raise rates for businesses. According to information on EPEs’s website, the proposed rate change and bill impact for major customer classes includes increases for residential customers, street lighting service and outdoor recreational lighting, irrigation and seasonal agricultural services, and in state university services.

Eddie Gutierrez, the Vice President in charge of public affairs for El Paso Electric, stated during a town hall meeting in Las Cruces earlier this year that the increase is needed for residential customers specifically due to the uneven amount of equity involved for cost of service.   

“If you think of a scale from 0-1, think of it like a percentage. If you think 1 represents the full cost of service. So think about what it takes to provide electricity for you every day and then the cost of service for providing that and you paying for that portion. In our current rates in New Mexico, for residents we are at .71. So think of it like for every 1 means full cost of service so 71% is what you are paying for the really full cost of service.”

Critics find El Paso Electric’s reasons for a rate increase dubious and say a 9% increase for residential customers is unfair and unwarranted despite claims to the contrary.

Stephen Fischmann, a representative of the nonprofit organization Southwest Energy Alliance and chairman of the New Mexico Fair Lending Coalition, is one of the outspoken critics opposed to El Paso Electric’s requested rate increase.  

“They’re a very profitable company, I think there’s a lot of question about whether financially they truly need it. And I think it’s excessive. I think maybe the most interesting thing is that the proposal for the increase would put rates in Las Cruces, overall, 20% higher than the rates are in El Paso. El Paso just had a rate case. And actually they went in asking for an increase and they walked out with a decrease. This happened in the last year. So why our rates should be 20% higher than the city of El Paso, for the same utility, that’s a tough one to swallow.”

Fischmann then mentioned the fact that El Paso residents get their electricity from plants in New Mexico as well as the Palo Verde Nuclear Generating Station located in Arizona, which is closer to Las Cruces than it is to El Paso. Fischmann points out that electricity has to be transmitted further “so one would think it might be a little more expensive in El Paso than it might be in Las Cruces”.

He also stated that he thinks “El Paso Electric went in with a rate structure designed to buy the support of the business community”. He says EPE knows where the political influence of the community is, it’s with the money in the business community and that EPE was trying to “buy” support. He says businesses should not support the rate increase and should support an efficient operation of the local utility.

Another opponent of the rate increase is Rocky Bacchus, owner of Las Cruces business One Hour Air Conditioning & Heating, which has filed as in intervenor in the rate case.  “I think it’s an unfair and improper increase that should not be happening. They should be doing a decrease instead.”

Bacchus cited a page from EPE’s audited filing with the Federal Energy Regulatory Commission ("FERC") that showed UTEP was charged 31% less than NMSU which meant NMSU would pay about $843 thousand dollars more a year than UTEP would pay for the same amount of electricity. He stated that “triple the power New Mexico uses comes from Arizona through New Mexico to Texas, there is no justification for this higher price to NMSU”.

Fischmann and Bacchus also say….despite claiming a need for cost recovery, EPE makes big profits. According to financial statements, EPE made approximately $91.4 million dollars in 2014 and approximately $88.6 million in 2013.

While they were not able to comment on EPE’s case specifically, KRWG-FM spoke with New Mexico PRC commissioners Valerie Espinoza and Sandy Jones to ask how the PRC evaluates utility rate cases and what factors are involved in making a final determination.  Espinoza, representing District 3 which includes the Santa Fe area, said recovery costs do include a fair rate of return to shareholders, but did not define what’s fair.  

“The commission looks at the utility’s cost of service and the cost incurred to provide reasonable and proper utility service including a return on capital necessary to incentivize investors to invest in utility plant and property. So the cost includes a fair rate of return to the shareholders.”

Espinoza then confirmed that a utility’s profits and the money they allocate into things like advertisements are things that are taken into consideration when it comes to the PRC making a decision on a rate case.

Sandy Jones, the PRC commissioner representing District 5 which includes the Las Cruces area, responded to comments regarding utility companies placing the burden of cost recovery on consumers and little or none on businesses.  

“I think its standard in the industry, certainly standard across the nation and expected that cost of service is born by the class of the rate. In other words, a residential rate, those folks in the residential rate class, should cover the cost of service to that rate class. Businesses should accomplish theirs. Now I will tell you, it’s not a perfect world in that, and I’ll say this carefully, I don’t want to say this in a critical way. There are those that think business bears an unfair burden and there are those that say residential bears an unfair burden. The truth of the matter is, the cost of service is very highly litigated and I think in New Mexico, at least in the past, has been pretty fairly allocated. I think business pays their share and residential pays theirs. I think it’s fair."

Jones then responded to critics who say the PRC essentially rewards utilities for building expensive assets which in turn puts the responsibility of cost recovery on consumers.

If Las Cruces consumers want to learn more or have their voice heard, 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.