Skyrocketing wholesale natural gas prices have had a mixed impact on New Mexico, said PNM Resources CEO Jeff Sterba. The positive side has been substantially higher revenues to the state for the higher-priced oil and gas production. The negative has been the cost impact on consumers.
Between $700 million and $1 billion is estimated to be the potential windfall to the state treasury for the year, Sterba told financial analysts Wednesday. However, he noted that a special session of the New Mexico state legislature was convened earlier in the month primarily driven by the steep increases in oil and natural gas costs to consumers. State lawmakers are concerned about the impact the high energy prices were having on consumers of gasoline and natural gas in the state, the PNM CEO noted.
As a result of this sudden influx of added cash to the state, the legislature decided on three steps:
During PNM's third-quarter earnings presentation, Sterba refused to completely answer questions about PNM's gas purchases. PNM is "about 90% hedged through the end of the first quarter" next year, he said, without providing details. "Now I know a lot of analysts would like to know at what price are we hedged so you can compare that price to what the 'price-to-beat' price is, or what the competitive rates are so you can determine margins," he said. "If I were an analyst or competitor, that is exactly what I would want, too. And that is why this is information we will not provide.
"I would hope that over time, analysts will see the results of [hedging] decisions we have made from our marketing strategies and about our power procurement strategies and how they develop profitability within First Choice Power." The latter is now a unit in which PNM is hoping to earn some solid profits in the years ahead, Sterba said.
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