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URL: http://www.abqjournal.com/biz/245009biz02-08-01.htm

Thursday, February 8, 2001

California's Winter Misery Spreads to N.M.

By Rosalie Rayburn Journal Staff Writer While California's energy crisis has only zapped one major company in New Mexico, some smaller players are beginning to feel an electric pinch. Thousands of residents and small-business owners outside the major metro areas have seen higher electric rates thanks in part to the Golden State's problems. "We are living proof of the spillover from California," said Robert Castillo, New Mexico vice president for Texas-New Mexico Power Co. The Fort Worth-based company supplies about 46,000 customers in nine New Mexico cities, including Alamogordo, Ruidoso, Silver City, Lordsburg and Tularosa. TNMP has about 180,000 customers in Texas. Unlike other New Mexico utilities that own power plants, TNMP produces no electricity of its own. In anticipation of the lower prices touted by deregulation supporters, TNMP also allowed some of its long-term contracts to run out.

But instead of lower prices, the high prices power wholesalers could command in California upped the ante for buyers and sellers throughout the West, Castillo said.

In 1999, TNMP paid market prices of 3.3 cents per kilowatt-hour. In early 2000, market rates rose to between 3.5 cents and 6 cents per kwh. But in the second half of 2000, when prices soared in California, TNMP received quotes in the range of 10 to 15 cents per kwh. Even the quotes TNMP received from New Mexico utilities were like California's market prices, Castillo said. TNMP's charges to residential customers have risen from 8.6 cents per kwh in January last year to 10.5 cents per kwh this January. At the same time, PNM residential electric rates have remained unchanged the past two years. The rates are 7.23 cents per kwh for the first 200 kwh and 8.6 cents above that. PNM estimates its average residential customer uses 526 kwh per month, said PNM spokeswoman Julie Grey.

TNMP has passed along some of the higher wholesale costs to customers; Castillo estimates bills have risen by 12 percent to 15 percent over the past year. TNMP is not able to pass prices along in real time because there are regulatory caps on the level of increases, said Valerie Smith, TNMP spokeswoman in Fort Worth, but "we're not going to become a PG&E by any stretch." Pacific Gas & Electric, a leading California utility, racked up billions in debt buying power at higher rates than it was allowed to charge customers. TNMP views the present wholesale-retail price gap as a temporary situation. The utility plans to recoup costs over time, which means customers won't see an immediate drop in bills when wholesale prices come down.

One of TNMP's largest customers, Phelps Dodge, warned last month it may have to lay off up to 2,300 workers because of the high energy prices. The company even sold both its own internally generated and contracted power back to the market when it was financially attractive to do so, said Rodney Prokop, director of investor relations for Phelps Dodge. The higher costs have been painful for small businesses in Silver City, too. "I don't know how the government can say we don't have inflation," said Mark Dovner, owner of Dovner Enterprises Machine Shop there. The equipment in Dovner's shop, large lathes and milling machines, are heavy power consumers. Dovner estimates his electricity usage is up some but his bill has jumped by 40 percent to 60 percent over the past year.

Phelps Dodge is one of Dovner's biggest clients, and he is worried that big layoffs at the mines could further hurt his business. Some of the people impacted are those least able to accommodate change.

The monthly electricity bill for the Sunset Vista Adult Residential Care home in Silver City climbed steadily from $293 last March to $518 in August and $636 in October. December's cost, without the power-hungry air-conditioning factor, was down to $279. Copyright 2001 Albuquerque Journal

-- Martin Thompson (mthom1927@aol.com), February 09, 2001