NM Gas Co. seeks 4.2% rate increase
Hike to generate $13.2M yearly, mostly for capital investments
The New Mexico Gas Co. is asking state regulators for $13.2 million in additional annual revenue, mostly to pay for about $400 million in capital investments in the utility’s 12,200 miles of pipelines and related infrastructure.
The company filed Monday with the Public Regulation Commission for the rate hike, which would raise the average residential bill by about $1.71 per month, from about $40.61 now to $42.32 in January 2021. The utility anticipates a PRC decision by next fall, allowing for new rates to take effect the following year.
Most of the 4.2% increase would come from a hike in the customer access fee, or fixed charge, on monthly bills, from $11.65 to $12.70. That would generally pay for investments the company has either already made, or will make, over the period from September 2017 to year-end 2021. It would also pay for an increase in the utility’s allowed return on equity, from 9.1% now to 10.2%.
In addition, the company wants PRC approval for a new “integrity management cost recovery mechanism,” or rate rider, to provide more timely recovery when replacing or upgrading aging infrastructure to improve system safety and reliability.
“Even with the proposed increase, NMGC residential bills will remain among the lowest in the region and have increased on average only 1.95% annually since 2009,” said utility President Ryan Shell in a prepared statement.
Still, the rate request will likely generate robust debate from intervenors at the PRC. Last year, the company requested PRC approval for a 1.4% rate hike to generate $8 million in new annual revenue, but that was cut to just $2.5 million under a settlement with parties in the case. In the end, the company was allowed to raise customers’ fixed monthly charge by a total of 15 cents, phased in over two years.
The PRC also approved a “weather normalization adjustment mechanism” last year to smooth out the erratic ups and downs in the company’s annual revenue caused by wide fluctuations in heating patterns from one winter to the next. The mechanism authorizes a rate rider that will rise and fall each year depending on weather patterns, but it won’t kick in until next year.
Last year’s case was the first rate hike requested by the company since 2012. In 2015, the utility changed ownership when Canadian firm Emera Inc. bought it from Florida-based TECO Energy.
The utility supplies natural gas to about 530,000 residential and commercial customers with 26 offices throughout New Mexico.
The utility invested about $250 million in its system from 2012-2016. The $400 million it expects to have invested by year-end 2021 is mostly in pipelines, including new projects and maintenance and repair to existing ones, said Tom Domme, vice president for regulatory affairs.
The biggest project is a new, 35-mile line to run from Bernalillo to Santa Fe, costing about $50 million. That would be a supplemental, or “looping,” line to complement the existing Santa Fe mainline.
“We’ll run a parallel, 20-inch line alongside the existing 12-inch line for redundancy of supply and enhanced reliability in northern New Mexico,” Domme told the Journal.
The company also wants to build a new 13-mile, $15 million pipeline in the Permian Basin in southeastern New Mexico to transport more natural gas from processing plants there to existing utility lines near Loving.
“That would give us another access point for gas produced in the basin,” Domme said.
In addition, the company wants to:
Upgrade information and telecommunications technology to improve computer system reliability for cybersecurity and business functionality;
Acquire the 68,000-square-foot headquarters it currently leases in Albuquerque for $11.2 million to lower long-term costs;
Invest in more compressed natural gas stations to help government and private businesses switch to natural gas-based transportation fleets; and
Install solar systems on utility-owned facilities throughout the state.
The CNG stations and solar installations reflect a company commitment to help reduce greenhouse gas emissions, as does the planned Permian pipeline, which helps natural gas producers avoid venting and flaring of gas when pipeline bottlenecks make it difficult to transport product to market, Domme said.
All rate modifications only cover service costs for providing delivery of natural gas to customers. All retail customers pay the actual cost of gas, with those charges rising and falling based on customer use.
This year, customers are paying record-low prices on gas, which have fallen from 88 cents a therm in 2008 to 24 cents today, thanks to the country’s shale-gas revolution that has flooded the market with low-cost fuel.