Dive Brief:

• State lawmakers in New Mexico are considering putting an end to automatic charges the state's utilities may levy on customers for increased fuel costs, the Albuquerque Journal reports. 
• Bipartisan Senate Bill 498 would eliminate the an automatic "pass-through" provision for the state's utilities that allows them to levy increased charges on customers for increases in the cost of fuel and electric market purchases.
• Public Service of New Mexico (PNMM) , Southwestern Public Service, and El Paso Electric are all subject to the provision. The utilities oppose the bill, claiming the provision allows them to protect other customers from the burden of price spikes. Supporters say the pass through rule allows utilities to manipulate revenues.

Dive Insight:

The Albuquerque Bernalillo County Water Utility Authority reduced its electricity consumption by 4% in 2014. But the Albuquerque Journal reports it paid $428,000 — almost 5% — more for electricity because Public Service Company of New Mexico (PNM) charged over twice the 2013 price for fuel and its electricity market purchases.

The Water Authority’s increased rates were applied automatically under New Mexico’s “pass through” provision that allows electric utilities to levy charges for fuel and market purchases without regulatory approval. Now state lawmakers are debating putting an end to that provision.

The utilities say they make no profit on the pass-through charges and the provision benefits customers by keeping capital costs and interest costs lower. All over-charges are adjusted.

Advocates of eliminating the pass-through provision say PNM has used it to manipulate its budget for shareholder gain. PNM has denied that accusation and argued there is regulatory accountability in the provision.

PNM’s last approved rate increase was $0.10 per kwh in 2011, but its fuel charge on residential bills is up $0.016 per kwh since then. Critics say that's tantamount to an unauthorized 10%-plus rate increase which amounts to approximately $100 million in annual revenue.

The Water Authority paid $582,000 in fuel charges in 2013, about 5.3% of its $10.87 million electric bill. In 2014, fuel charges were $1.01 million, over 9% of its $10.92 million electric bill. With the fuel charge now $0.0116 per kwh, it expects to pay $1.6 million or more in fuel charges in 2015.