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House OKs electric rate cut to draw big businesses

By February 16, 2014April 26th, 2022Public Lands, Water & Wildlife, Democracy, Climate & Energy

By Staci Matlock, the Santa Fe New Mexican
The House approved a bill Friday that lawmakers say will attract jobs to New Mexico by giving larger businesses a discounted electricity rate but lets utility companies recoup the money by charging more to families and small businesses.
House Bill 296 would help New Mexico attract manufacturing jobs, increase the tax base and put the state on par with 29 others that offer a reduced electricity rate to manufacturers and other businesses, according to the bill’s sponsor, Rep. Antonio “Moe” Maestas, D-Albuquerque. “We just want to attract businesses that we think are best for our economy, that hire in state and sell out of state,” Maestas said.

Some lawmakers, regulators and advocates say the bill is unfair by making families and small-business customers pay more for electricity.
“We’re obviously not against economic development, but the way the bill is structured doesn’t protect other ratepayers,” said Liliana Castillo, communications manager for Conservation Voters New Mexico. “We think the intentions of the bill are good. We’re not OK with the execution.”
Only Public Service Company of New Mexico, the largest power utility in the state, and El Paso Electric would be able to offer the discounted rate to commercial customers. The bill allows the utilities to negotiate private contracts with companies without limiting the size of the rate discount. There’s also no limit on how much residential and small-businesses customers will have to pay to subsidize the discounted rate for larger businesses.
The bill does cap the amount of power the utilities can offer at a discounted rate to 5 percent of the total retail power sold.
Maestas said the discounted rate for large businesses would cost other ratepayers an estimated 0.2 cents more for every 600 kilowatt-hours used, or about $3.24 a month, based on estimates.
But bill opponents say at this point, it is impossible to know exactly how much more PNM and El Paso Electric customers will have to pay to subsidize a discounted rate for large businesses.
The bill passed on a 47-17 vote. Rep. Jim Trujillo, D-Santa Fe, voted for the bill, calling it “a wonderful tool” for attracting businesses.
Rep. Brian Egolf, D-Santa Fe, said it seemed like utilities could offer incentives the way cable companies do — without charging their other customers: Hook new customers with a deep discount, and then charge them more when the contract is renewed.
“Why is rate recovery necessary?” he asked during the floor debate. “Shouldn’t the utility bear the risk, instead of passing it to other customers?”
Public Regulation Commissioner Valerie Espinoza, who represents District 3, including Santa Fe, said she is completely opposed to the bill because it limits the commission’s authority to protect customers in rate cases. The bill requires the PRC to grant the discounted rate for a company without a public hearing and within 30 days after a contract has been signed with a utility company.
“This is not a good bill for District 3 residential consumers and small businesses who will be picking up the tab,” Espinoza said. “Who in their right minds would be against economic development? Certainly not me, but not if it is at the expense of others.”
Under the bill, a company will apply for a certificate from the state Economic Development Department to get the reduced rate.
A company would qualify for the reduced electricity rate if it:
  • Hires at least 20 people at salaries of $40,000 or higher.
  • Commits to staying in the state for at least a decade. The company could only get the reduced electricity rate for seven years.
  • Uses at least 2 megawatts of electricity
  • Has invested or will invest at least $5 million in fixed assets in New Mexico, including machinery.
  • Plans to sell at least 50 percent of its product out of state.
  • Agrees to pay back all of its discount to the utility if it does not meet obligations.
PNM’s industrial electricity rates already are fairly low, ranking fifth out of 20 regional cities. “The issue isn’t the rates, but rather the fact that we cannot at this time offer an incentive as more than 44 utilities in 29 states can,” spokeswoman Valerie Smith said.
HB 296 only had to win approval in one House committee before reaching the House floor. A similar Senate bill, SB 283, has been approved in two Senate committees and moves next to Senate Judiciary.
Contact Staci Matlock at 986-3055 or Follow her on Twitter @stacimatlock.