NM Gas Co., advocacy groups reach agreement in rate case

New Mexico Gas Co. has reached a potential agreement with various consumer and environmental advocacy groups to gain their support for a rate increase that is pending before the New Mexico Public Regulation Commission. While an agreement has been reached, it still requires the PRC’s approval. “We appreciate the spirit of collaboration that all parties […]

NM Gas Co., advocacy groups reach agreement in rate case

New Mexico Gas Co. has reached a potential agreement with various consumer and environmental advocacy groups to gain their support for a rate increase that is pending before the New Mexico Public Regulation Commission.

While an agreement has been reached, it still requires the PRC’s approval.

“We appreciate the spirit of collaboration that all parties brought to the table in reaching the settlement,” Tim Korte, a spokesman for NM Gas Co., said in an emailed statement. “The company is committed to implementing the terms of the settlement as agreed to when it is approved by the PRC.”

The state’s largest gas utility filed the request for a rate increase in September. In that request, the company asked to increase its revenues by nearly $49 million. That increase in revenues would come through higher rates.

Korte said the original request for an additional $48.97 million annually from customers was to pay for upgrades and improvements to gas delivery infrastructure. Many of those investments are required “to keep pace with federal and state reliability and safety regulations,” he said. Additionally, NM Gas Co. is replacing its customer billing and account information system and faces increasing operating expenses.

NM Gas Co. agreed to reduce the amount that it is requesting in additional revenues to $30 million annually. The rate increase would still go into effect in October.

The company also asked for a higher return on equity, which determines how much investors recoup. Nationally, the return on equity typically ranges from 9 percent to 11 percent. New Mexico Gas Co. requested a 10.5 percent return on equity.

Under the agreement reached last week with the intervening parties, the gas company has agreed to just under 9.4 percent return on equity and a reduction in the rate increase.

One of the things that reduces the size of the rate increase is that New Mexico Gas Co. is no longer asking for a regulatory asset for expenses related to fees charged by third-parties to process credit card payments, nor is it asking for a regulatory asset to cover expenses related to its application to build, own and operate a liquified natural gas storage facility in Rio Rancho.

Regulatory assets are essentially a cost that utility regulators allow companies to pay off expenses over a period of time through rates.

According to New Energy Economy, which is one of the advocacy groups that has agreed to the settlement, the regulatory asset for the LNG facility application would have cost ratepayers around $10 million.

NEE Executive Director Mariel Nanasi said the gas company has also agreed to change its notice, which the advocacy group argued was misleading because the usage it showed as an example of what a rate increase might look like was lower than most customers consume during winter months. 

In its notice, NM Gas Co. assumed the average customer uses 53 therms of gas. Under that scenario, the original proposal would have resulted in a $6.70 per month increase for average customers, which is about 11.2 percent.

However, Korte explained, customers who are not on budget billing—which allows them to pay the same amount every month based on their annual average usage—would see higher dollar impacts in the winter when usage increases and lower impacts in the summer.

Still looking at a 53 therm per month average use, the new agreement would result in a 7.1 percent increase in customer bills rather than 11.2 percent. The summer impact would be a 6.3 percent increase while the winter bill impact would be 7.3 percent.

Korte said a customer on budget billing using an average of 53 therms per month would see a bill increase of $4.21 monthly.

The agreement outlines what future notices must state, including breaking it down to summer month impacts for customers using 10 therms and winter month impacts for customers using 100 therms as well as those using 150 therms in the winter. The notice must include percentage increase as well as current rate and future rate.

Nanasi said the gas company has also agreed to keep the access fee that all customers must pay at $12.40 rather than raising it to $15.50 per month. An increase in the access fee would have disproportionate impacts to low-income ratepayers, Nanasi said.

The rate increase comes amid a push to decarbonize, including incentives for electrification and for heat pumps.

But, Korte said, NM Gas Co. continues to see “modest customer growth and continuing demand for natural gas across our service territory.”

Nanasi said that if humanity is going to survive, gas should be phased out and only used in extreme circumstances. This is because gas contributes to climate change.

Should that phase out of natural gas occur, she said, “maybe the gas company will exist, or maybe it won’t. Maybe it’ll transform itself into another kind of company.”

Nanasi said she hopes that as the transition occurs, it happens in a way that doesn’t leave low-income communities behind or result in bills so high that customers struggle to pay them. 

Korte said NM Gas Co. has an obligation to provide natural gas to customers when they need it. 

“We see an ongoing role for natural gas, especially for space heating, as part of our state’s long-term energy strategy, including decarbonization,” he said.

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