City Council backs off on rate increase

August 22, 2001
By Christopher Schurtz
Las Cruces Sun-News

The Las Cruces City Council opted to table an ordinance Monday night during its regular meeting that would have raised utilities bills by an estimated $1.04 for the average customer.

The increase represents the city's electric costs for providing water and wastewater services to city residents.

The city's -- as well as city residents' -- electric bills went up after the El Paso Electric Company raised its rates this summer to reflect its increased fuel costs related to high gas prices.

In June, the State Public Regulation Commission issued a preliminary order which in effect allowed El Paso Electric to increase its rates by a total of $19.4 million to cover its costs.

But PRC Chairman Tony Schaefer, D-Las Cruces, said the PRC has not yet formally approved El Paso Electric's request to increase its rates. He said the PRC will hold at least one public hearing in Las Cruces, scheduled for Sept. 5, to address the proposed increase.

Schaefer said the PRC may end up ruling in El Paso Electric's favor by approving the increase, or it may decide through studying the company's real costs that the increase was either too large or too small.

If the PRC decides the increase was too large, the company will have to rebate customers' money paid to El Paso Electric since June. If the increase was in fact too small, additional increases would be allowed.

In June, the City Council declined to rule either way whether to approve of an electric rate increase when the issue came before the council. The council could have contested the proposed increase, which city staff said would likely end up costing the city at least $200,000 in legal fees.

But the council was hesitant to approve the increase and exercised its third option, which was not to decide at all, allowing the rate increase to go through.

Since that time, El Paso Electric customers have seen their monthly bills jump.

El Paso Electric spokesperson Teresa Souza said the average utility user uses approximately 500 kilowatt hours of electric power a month. The increase raised rates 14.65 percent, or an average of $7.60 per month.

Souza said the average bill went from $51.70 before the increase was to $59 after the increase.

"Obviously there are people who use a lot more than that and there are those who use a lot less," Souza said. "(Amount of usage) runs the gamut."

Souza said those with larger houses and who are heavy users of electricity have naturally seen a larger increase in their bills than those who use less. She said usage peaks during the summer, as swamp coolers and refrigerated air units work overtime.

The city is one of El Paso Electric's biggest customers in the area. According to the Utilities Department staff, the city's cost for providing water and wastewater will increase $278,000 for the year for both utilities.

Councilor Tommy Tomlin said the increase El Paso Electric stuck to its users in June was more of a surcharge passed on to users.

"I don't blame customers for being unhappy," Tomlin said.

Finance Director Mark Sutter said the city may recoup some of its initial costs for the year from the franchise fee it gets from El Paso Electric.

The city receives 2 percent of El Paso Electric's gross revenue earned within the city. The city charges El Paso Electric for the right of way to use the infrastructure, which the city owns, enabling the company to transmit electric power throughout the city.

But Sutter said more money is needed than what the franchise fee provides just to pay for additional costs for utilities in parks and city buildings.

The council voted unanimously to table the ordinance Monday night, pending the outcome of the PRC hearings. Tomlin said any increase the City Council passes now would likely have to be reconsidered after the PRC rules on the increase.

There is a possibility, if the PRC rules against the increase -- and therefore the city's surcharges -- the city would then owe city utilities users a rebate.

Schaefer said in June electric rates for most of the 50,000 El Paso Electric customers in New Mexico have been artificially low for years. He said the low rates were a result of a stipulated agreement signed in 1998 -- which the city opposed at the time -- that froze rates without an adjustment clause that would consider increased fuel costs.

El Paso Electric has claimed the frozen rates cost them more than $45 million as fuel costs began to increase last year and into 2001.

El Paso Electric was originally going to pursue a more than $50 million increase, with $45 million of it reflecting what it claimed was its actual fuel costs. But El Paso Electric eventually reduced the amount it was seeking to $19.4 million.

Schaefer said even with the current increase, New Mexico residential electric users will pay some of the lowest, if not the lowest, rates in the country.

The PRC regulates the rates a utility may charge for its service. But under a state regulatory compact, utilities companies are guaranteed a certain rate of return, as well as being protected from competition.

In return, utility companies must agree to conditions of service set by the PRC as well as having "an obligation to provide service" more or less regardless of that company's costs.

But as a home-rule municipality, the city is not under the regulation of the PRC and can decide to raise its rates itself.