Preference for Flat Rates Drives Gas Charge Restructuring

Fortnightly Magazine - May 15 1997
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While directing PNM Gas Services ( a division of Public Service Company of New Mexico) to reduce rates for gas service, the New Mexico Public Utility Commission has redesigned residential rates to reinstate the once-discredited notion of recovering fixed costs in the commodity charge.

In the same case, the commission also rejected recovery of discount costs and other fees the utility paid and a proposal by the utility to "rebundle" sales and transportation rates by end-use class.

The PUC ordered PNM to reduce gas service rates $6.958 million. The commission also denied recovery of transportation rate discounts granted by the LDC to avoid loss of customers; certain costs associated with reformation of take-or-pay liabilities contained in gas supply agreements; "reservation fees" paid to suppliers during the prior two heating seasons; and losses on reacquired debt financing. It adopted a weather normalization adjustment based on 30 years of data rather than a 10-year adjustment proposed by the utility.

Residential Rate Design. The PUC redesigned rates by moving away from a reliance on volumetric charges for recovery of a major portion of fixed costs. Citing input from residential customers in support of the policy shift away from volumetric charges, the commission allocated 80 percent of the cost of service to a residential "access fee" that will be charged to every residential customer on a monthly basis, regardless of consumption. Using current cost-of-service data would result in an access fee of $14.56 per month.

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