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El Paso Electric Rates, Tossed by City, Go to PUCT and Appeals Court

The City of El Paso, Texas, filed with the Texas Public Utility Commission (PUCT) on December 11 (Docket No.44941) to contest El Paso Electric’s requested rate increase of $71.5 million.

The utility had asked for a $69.2 million base rate increase and a $2.3 million step-up in miscellaneous revenues – claiming that the increase in base rates was necessary in order to recover “certain operations and maintenance (O&M) expenses associated with the utility’s [7 percent] ownership share in [two] Four Corners coal-fired generating units,” according to the testimony of city consultant Scott Norwood; as well as capital investments in other plants and transmission lines.

Instead, the city is recommending a lesser overall increase in rates of $41.7 million – comprising a $39.4 million increase in base rates, and a $2.3 million increase in miscellaneous revenues. That amount would reduce the utility’s proposed revenues by $46.8 million or 67 percent.

In addition, the city has asked the commission to reject El Paso Electric’s proposal to introduce an extra rate class for new rooftop solar customers – effectively raising fixed charges for them by $12, which represents one-third more than the $8 paid by other classes of ratepayers.

Indeed, the El Paso Electric rate request was unanimously denied in its entirety, with no small degree of vehemence, by the El Paso City Council on December 8.

“Despite all the success you’ve had, you have the gall to ask this community for an additional revenue collection of $71.5 million each year? Why? So you can double your earnings? It’s nothing but pure greed,” Rep. Cortney Niland (R-District 8) said in an open City Council meeting on October 13, directing her comments to El Paso Electric, according to the local channel 7/ABC News affiliate.

Norman Gordon, an El Paso attorney representing the city in the rate case said the city’s experts had compiled a list of areas in which they contended that El Paso Electric was asking for too much money, according to the Las Cruces Sun-News – among them:

  • Asking for too high a rate of return (10.1 percent rather than the 9.1 percent recommended by city consultant Daniel Lawton) for the utility’s shareholders;
  • Shifting too much in power plant costs from New Mexico customers to Texas ratepayers;
  • Overcharging for the Four Corners coal-fired power plants (in which the utility will no longer have an ownership interest after July 2016); and
  • Overcharging for depreciation of power plants and other equipment.

“I think they reduced this way too much,” said El Paso Electric CEO Tom Shockley at the same session. “We feel like they are being very harsh on some of the variables we (company and rate case interveners) will be talking about as we go forward in this process.”

“A real low rate of return over time has a negative impact” on the company’s ability to raise money to build power plants and other facilities, Shockley added. “You need that number (rate of return) to be fair for investors to get an adequate return and invest money in El Paso Electric, so it can build facilities.”

Now the case will go the Court of Appeals in Austin, with a judgment likely by mid-2016.

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