Gas Utility Gets Burned on the Spot Market

Fortnightly Magazine - May 1 1997
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Motivated by numerous consumer complaints regarding substantial, unexpected increases in bills for natural gas service, the New Mexico Public Utility Commission has fined Public Service Company of New Mexico, finding that the utility knowingly understated gas cost data in prior adjustment clause filings to avoid commission review of an ongoing gas price crisis.

The commission suspended the $2.2-million fine, however, in light of its decision to prevent PSNM from collecting more than $1.5 million in purchased gas revenues associated with the understated gas cost projection. The commission found that the utility had relied much too heavily on spot market purchases in planning for its supply needs.

The PUC also: 1) opened a separate inquiry into the utility's gas procurement practices to see whether customers are due a refund for management imprudence; 2) directed the utility to develop plans to exit the merchant segment of the natural gas business; and 3) directed the utility to make a general rate case filing for both electric and gas services.

It said PSNM was "attempting to hide behind regulation" to escape responsibility for deciding to move 99 percent of its portfolio into the spot market. It also noted Public Service had eliminated an existing "meter fee" imposed on transportation customers to foster competition among gas suppliers in the residential market.

According to PSNM, the increase in its monthly gas cost charge of approximately 123 percent was due, in large part, to "dramatic increases in the index prices" applicable to system supply purchases. (The LDC had recently increased its customer gas cost factor from $0.1822 in December 1996 to $0.4064 in January 1997.)

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