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NM Gas seeks 1.4 percent rate hike

ALBUQUERQUE, N.M. — The New Mexico Gas Co. is seeking a 1.4 percent rate hike, marking its first new rate request with the state Public Regulation Commission in six years.If approved by the PRC, the increase would generate about $8 million more in annual revenue for the company, helping to recover about $250 million in investments it’s made in the natural gas transmission and distribution system since the last time the utility raised rates in 2012.

The amount requested is much lower than it would otherwise have been thanks to the federal tax reform approved last fall, which lowered the corporate income tax rate from 35 percent to 21 percent. That allowed the company to cut the amount it needs in new annual revenue by more than half, from $17.6 million to $8 million, said NM Gas President Ryan Shell.

“The investments to maintain and improve the company’s natural gas system and business are the primary reasons for the revenue request,” Shell said in a statement. “Since 2012, New Mexico Gas Company has invested more than $250 million in upgrading and maintaining its gas system and business operations. Over the same period, the company has been successful at containing its operations and maintenance costs, which are actually lower now than they were in 2012.”

The complete rate request, which the company filed Monday morning at the PRC, proposes a variety of changes to the utility’s rate design to smooth out the volatility in company revenue caused by erratic weather patterns and a warming climate, said Tom Domme, vice president of regulatory affairs.

To do that, the company wants to raise the fixed charge on customers’ bills by $3, from $11.50 per month to $14.50. At the same time, the variable monthly rates that customers pay, which is based on total usage in a given month, would be reduced.

The company is also proposing a new “weather normalization adjustment” mechanism, whereby sharp changes in temperature during any given winter would be compensated for by adjusting the variable rate on customers’ bills either up or down in the following year.

“The weather has become much more variable and warmer and our revenue recovery is tied to it and dramatically affected,” Domme said. “The adjustment mechanism would help even things out and reduce that variability from year to year.”

Those changes, combined with savings from the federal tax reform, would raise the average residential monthly bill by about 1.4 percent, starting in January 2019, Domme said.

Separately, however, the company is also seeking a new surcharge on customers’ bills to recover about $10 million it spends annually to replace aging pipelines to assure system integrity and safety. That could cost about 50 cents more for average residential bills during winter months, Domme said. That would be in addition to the 1.4 percent increase in the utility’s rates.

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