New Mexico is the latest state to be labeled unfit forresidential energy marketing by Enron Corp., North America’slargest wholesale energy marketing firm. As in other states, suchas California, where Enron came to a similar conclusion, thecompany plans to continue participating in commercial andindustrial energy marketing. But the regulatory structure will makeit difficult, if not impossible, to compete profitably against theincumbent gas supplier, Public Service Company of New Mexico (PNM),Enron said.

Consequently, until the regulatory environment improves, Enronwill drop residential marketing efforts and opt out of the 229 NewMexico residential customer contracts it currently holds. Thosecontracts expire Aug. 31. Enron will not renew them, officialssaid.

“When we started down the road to residential choice [in NewMexico] we had several assumptions,” an Enron executive said. Thecompany anticipated PNM would unbundle rates, the state’selectricity market would be restructured and there would be accessto billing and metering, among other services. “But that didn’thappen.” PNM won’t even file to unbundle tariffs for another18-months. The state legislature is moving slowly on electricsector competition. And Enron will not have access to billing andmetering services until 2000.

Electric sector competition was key because it would allow Enronto bundle gas and electricity supply services, much as PNMcurrently does. That would have increased Enron’s profit margins,with the possible profits in one service offsetting lower profitsin another.

Currently, there is no date specific for New Mexico electricsector competition. Also, access to billing and metering would havetaken PNM out of the Enron business picture and bolstered profitsas well.

Currently, PNM is a formidable competitor because of thatcompany’s ability to recover lost revenues in the gas market fromone year with a rate surcharge the next year, a luxury not allowedEnron or other competitors. PNM can set gas rates at one level,Enron said, and if that level proves to be unprofitable, it can adda surcharge to customer bills a year later. Enron didn’t say so,but such a system would allow PNM to set rates lower thancompetitors to win business and drive away those competitors, thenmake up the difference the following year.

For now, New Mexico’s Gas Choice program does offer competitorssome advantage. The program lowered the PNM service charge from $50per customer down to $6 per customer.

Currently, Enron is the only outside company in the Gas Choicemarket in New Mexico. Enron noted Texas-Ohio Energy Inc. has filedrequired applications to participate in the market.

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