New Mexico Senate Delays Deregulation of Electricity Until 2007 Knight Ridder/Tribune (February 17, 2001)

Feb. 15--SANTA FE, N.M.--Consumers, businesses and utilities will have until 2007 to see how other states, notably power-starved California, solve their electricity problems, under a bill unanimously passed by the Senate on Wednesday.

The measure will delay the start of electric competition -- which was slated to begin here next year -- if the House approves it with no further changes and Gov. Gary Johnson signs on.

"We take care of the people of New Mexico," said state Sen. Michael Sanchez and the bill's sponsor.

The bill was amended after intense negotiations the past week to overcome objections from Public Service Company of New Mexico, the state's largest utility.

PNM said the delay without allowing it to pursue new power plants would create financial uncertainty for the company.

The bill will allow PNM to form a holding company by July 1 as part of a transition to separating into different business units for transmission and generation.

Sanchez initially balked at such a step fearing that if power generation was not controlled by the Public Regulation Commission, New Mexico customers may have to pay higher prices.

But after consulting with PRC staff, Sanchez said he was assured that PNM could be allowed to form holding companies, as other utilities like Texas New Mexico Power Co. have, but keep the electricity generated from existing plants under state regulation.

"It doesn't change rates, it just shoves everything back," said PRC Chairman Bill Pope.

The bill also will allow PNM to build unregulated power plants to sell electricity on the open market.

The company has committed about $45 million to buy gas turbines and is considering a new power plant site near Las Cruces, said Pat Ortiz, general counsel for PNM.

Such plants built within the next five years will be financed either with stockholder money or debt and not affect the rates paid by New Mexico customers, Ortiz said.

A third provision in the amended bill will allow PNM to write off about $135 million in costs for decommissioning a coal mine near the San Juan Generating Station over five years.

During Senate debate on the bill Sen. Leonard Tsosie, D-Crownpoint asked whether this would affect rates. Sanchez said the write-off wouldn't affect ratepayers because it was an accounting procedure.

The governor, who has said he favored deregulation next year, met with Sanchez and now says he may approve the delay, according to Sanchez.

Johnson "found (the changes to the bill) to be helpful amendments and assuage some of this concerns about a pure delay," said Dave Miller, the governor's legislative liaison.

Johnson "has moved from the hard philosophical opposition to any delay to a better understanding that the amended delay bill does have merit," Miller said.

Two years ago Sanchez spearheaded legislation that would allow customers to choose their electricity suppliers starting in 2002.

Businesses had pushed for open competition in electricity in hopes of benefiting from lower prices.

But sky-high prices and a shortage of power in California provoked calls for a delay to avoid a similar situation in New Mexico.

On Tuesday, state Sen. Carroll Leavell, R-Jal, offered an amendment to shorten the delay from five to three years.

"I'm not in favor of a three-year delay, the market is too complicated," Sanchez said.

A utility that serves southern New Mexico, ExcelEnergy-Southwestern Public Service, had pushed for the three-year delay. However, Leavell's proposal was rejected by the Senate 29-11.

"I think we're doing the right thing waiting five years and hopefully we can start talking about getting better rates for the people of New Mexico," said Sen. Mary Jane Garcia, D-Dona Ana.

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-- Martin Thompson (mthom1927@aol.com), February 20, 2001