Take A Hike: Utility Reps And Public Advocates Trade Blows On Rate Increase

Utility Reps And Public Advocates Trade Blows On Rate Increase

\ Apr 07, 2011

5 min read

PNM said it needed more cash—now. In the middle of a battle to raise prices overall, the electric company asked for part of that increase as soon as last week. But opponents stopped the measure in its tracks.

Still, permanent hikes may go into effect in July.

Billpayers were already hit with increases that happened from ’07 through ’09, which totaled 24 percent. But PNM feels your pain, says spokesperson Valerie Smith. "We recognize in this economy that it it is a horrible time to make a rate increase," she says, but that’s the only way the company can cover costs—such as $575 million in infrastructure.

The electric company started pushing for a 21 percent rate hike in the summer. After a private meeting in February that included the attorney general and Public Regulation Commission lawyers, PNM instead requested 10.8 percent in two parts. Then the utility started calling for the first increase to happen early.

But those fighting the hike had a small victory last week. The commission decided the electric company couldn’t do that at a hearing on Thursday, March 31. If it had gone the other way, prices could have gone up immediately by about 5.7 percent.

District 1 Commissioner Jason Marks says the utility was unable to show "irreparable harm and extreme circumstances." If the hike had passed, he says, it would have opened the floodgates for other corporations to seek temporary increases.

Opponents will tell you that PNM’s executives aren’t exactly suffering. Eyebrows have been raised over the big salaries and bonuses bestowed even while stock was downgraded to junk bond status.

From 2007 to 2008, the electric company saw a 64 percent market decline. During that time, the top five execs were taking in plenty of extras on top of their salaries. Incentives, in many cases, seemed to outweigh their pay. Jeffry Sterba, PNM’s chairman and CEO, made a $830,000 salary in 2007. But add in the perks, and that number looks more like $2.4 million.

But part of Sterba’s extras was $863,000 in stock awards. Another PNM spokesperson, Susan Sponar, says that’s not a cash payout. Instead, the CEO wouldn’t make money until those stock values increased.

"This is the kind of disingenuous PR they do," says Carmela Starace, an attorney for nonprofit Prosperity Works, an advocacy group for low-income New Mexicans. She adds that "salary is one small component of what they get paid."

Spokesperson Sponar also wants to make it clear that the pay doesn’t just come from New Mexico’s pockets. The company is connected to other utilities in the Southwest, and the pay burden is shouldered by them all.

As for the price increase numbers, hike opponent Starace says that 10.8 percent is misleading because it doesn’t include a one-time cost of up to $20 million in 2013. After looking at the totals, she says it’s going to be more like 14 or 15 percent that year, with additional costs coming from riders (those extra charges at the end of your utility bill). PNM promised in a news release that "base electricity rates will not increase again before 2014."

Overall, the extra cash flow from customers would go toward a $40 million switching station at Rio Puerco that, among other functions, helps redirect power to areas that suffer outages, says spokesperson Smith. She also points out that Rio Rancho is using 25 percent more power than it did four years ago, and the jump requires new tech. Plus, the Reeves power plant at Jefferson and Paseo del Norte is being renovated, which she estimates will cost $23.5 million.

Those projects are either in the works or already completed. And Starace says the infrastructure improvements should have been in PNM’s budget all along, noting that the facilities they are renovating have been in obvious need for years. Citing this, the high executive salaries and big shareholder payouts in 2009, Starace says PNM is "passing on the shareholder’s responsibilities to the citizens of New Mexico."

With New Mexico being one of the poorest states in the nation, she wants to know why the electric company doesn’t have better programs to assist low-income users. "Utilities that charge higher rates have discount programs based on income level," she says, and what PNM offers is not up to par.

PNM is on the low-end of utility billing nationwide, spokesperson Sponar counters, and the system is tiered so the biggest users would see the biggest hikes. Reps also point to the Good Neighbor Fund, which they say provided more than $800,000 to about 6,500 families last year. But as Starace puts it, that program is a hard-to-access, one-time fix, not something low-income households can count on.

The utility has promised a donation of $1.25 million to the Good Neighbor Fund if the rate request goes through, but Starace remains unimpressed: PNM could reap $105 million in one year from the hike, after all. "Thanks a lot for the penny on my dollar," she says.

Despite the March 31 ruling, PNM still has reason to hope the increase will pass. The PRC did not consider whether the proposed price increase was just and reasonable, only whether the electric company could survive without an immediate hike.

Marks expects the issue to be finalized no later than mid-July.