New Mexico Gas Co. seeks rate increase

February 27, 2018 GMT

For the first time in six years, New Mexico Gas Co. is seeking a rate increase.

The utility announced Monday it submitted a request for an $8 million increase in annual base revenues, which, the company says would mean the average residential gas bill would go up about 1.4 percent.

“Investments to maintain and improve the Company’s natural gas system and business are the primary reasons for the revenue request,” company president Ryan Shell said in the news release.

The state Public Regulation Commission will decide whether to allow the hike. The company expects the new rates would not go into effect until January 2019 following the commission’s approval process.

The company says that since 2012 it has invested more than $250 million in upgrading and maintaining its gas systems and business operations. “Over the same period,” the statement says, “the company has been successful at containing its operation and maintenance costs, which are actually lower now than they were in 2012.”

The gas company says corporate tax cuts passed by Congress late last year helped to keep the rate request low. Without those tax cuts, the statement said, the utility would have sought $17.6 million, or more than twice as much, from ratepayers.

The tax cuts also helped bring down the recent electrical rate increase for Public Service Company of New Mexico, approved last month by the commission. That increase is expected to be about 1.4 percent phased in over two years, PNM has said. PNM originally sought a 14 percent increase.

The gas company said in its Monday announcement that “If approved, the requested revenue increase would provide a fair and reasonable return on equity of 10.2 percent, which would enable the company to attract new capital on reasonable terms and bring its return on equity in line with other natural gas providers.”

In addition to the rate request, the utility proposes changes to its rate design. These changes are aimed at allowing the company to better recover costs and expenses “and to promote economic development in the state.”

These proposals include:

• A “weather normalization adjustment” intended to “even out year-to-year variability resulting from warmer than usual or colder than usual weather.”

• Allowing the gas company to annually recover the costs incurred in replacing and updating old systems that are better and safer when replaced.

• Increasing the fixed portion of customer bills – the access fee – while the variable usage-based portion of bills would be lowered.

• Establishing an economic development rate that would give a discount to eligible businesses in order to help attract businesses to the state and to help existing New Mexico businesses expand.

Contact Steve Terrell at 505-986-3037 or sterrell@sfnewmexica­n.com. Read his blog at http://www.santafenewmexican.com/roundhouse_roundup.