A measure introduced in the New Mexico senate last week was a”good first step” towards opening up the state’s electricityindustry to competition, says the state’s largest utility, althoughit cited certain concerns.

The Public Service Co. of New Mexico (PNM) supports thelegislation in that it’s the “first major comprehensive” effort bythe Legislature to restructure the state’s electricity market, butit also has some “serious reservations” because while the billwould allow for recovery of stranded costs, it fails to giveutilities credit for the costs they’ve already written off, saidLarry Smith, a spokesman for the utility that serves 1.3 millionelectric and natural gas customers.

Specifically, “there is no recognition [in the bill] that PNMshareholders have already absorbed substantial losses in order toprovide more than $30 million in rate reductions since 1994,” notedPNM CEO Benjamin Montoya. Moreover, he expressed concern that thefour years allotted under the legislation for utilities to collectbetween 50% and 100% of their stranded costs might not be enoughtime.

The bill, which was sponsored by Sen. Michael Sanchez (D-Belen),calls for customer choice to be offered to schools, residentialcustomers and small businesses in New Mexico beginning Jan. 1,2001, and to industrial customers and municipalities on Jan. 1,2002. A companion bill in the state House has not been proposedyet.

The New Mexico Legislature has a very narrow window (until theend of March) in which to pass a customer-choice bill and get it toGov. Gary Johnson for his signature. If it should fail this year,the Legislature would have to wait until its next session-two yearsaway-to again address customer choice, which would put New Mexicobehind other states in the Southwest.

If enacted, the Sanchez bill would require all public utilitiesoperating in New Mexico to submit transition plans to the statePublic Regulation Commission (PRC) no later than March 1, 2000, forapproval by Dec. 1, 2000. Such plans would include proposed tariffsfor transmission and distribution services, together with proposedstandard offer service tariffs for residential and small businesscustomers that don’t select a power supplier. Additionally,utilities would have to submit proposals for separating theirregulated and non-regulated business activities.

Significantly, the legislation would give utilities a”reasonable opportunity to recover an appropriate amount” ofshareholder investments that would be stranded in a competitivepower market. For PNM, most of its stranded costs will stem fromits 10% ownership in the Palo Verde, NM, nuclear generating plants,Smith said. The bill would permit utilities to collect between 50%and 100% of their stranded costs through a nonbypassable charge onall customer bills for four years after the implementation ofcustomer choice in New Mexico. In addition to stranded costs, stateutilities would be able to recover in full any costs associatedwith implementing open access on their systems. The transitioncosts would be recoverable through 2007.

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