Otis Singleton
El Paso Electric has been criticised for its rate hike proposal, which could see the average household bill increase by $22-$23 per month. The proposal has been met with resistance from El Paso's mayor and city council representatives, who are concerned about the potential burden on residents. The utility company justifies the increase by citing investments in infrastructure and rising costs due to inflation and elevated interest rates. The final decision on the rate hike lies with the Public Utility Commission of Texas, which regulates monopoly utilities in the state and determines their allowed profit margin.
| Characteristics | Values |
|---|---|
| Reason for price hike | El Paso Electric wants to raise rates to satisfy credit rating agencies and indicate to bondholders the likelihood of the company paying back debts |
| Amount of price hike | $22-$23 per month for average household bills |
| Affected areas | Texas, New Mexico |
| Date of price hike | Expected to take effect in a year or more |
| Opposition | City government, local business groups, consumer advocates, and City Council reps |
| Support | Kelly Tomblin, the utility's chief executive, and James Schichtl, a vice president with El Paso Electric |
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What You'll Learn
- El Paso Electric seeks a rate increase of $22-$23 per month
- The company attributes higher bills to increased energy use during hot summers
- El Paso Electric has invested $1.55 billion in capital investments since 2020
- The company needs to collect an additional $85 million from customers annually
- El Paso Electric's rate hike proposal has been criticised by City Council reps
El Paso Electric seeks a rate increase of $22-$23 per month
El Paso Electric has proposed a rate increase that would add $22-[$23] to the average household bill per month. This would translate to a 10% increase in bills for Texas customers, with residential customers—who make up 90% of EPE's Texas customer base—seeing a 19% increase. Small and large businesses would see bills increase by between 3% and 10.6%, while medium-sized businesses would see a 2% decrease.
The rate increase proposal is driven by El Paso Electric's need to collect an additional $85 million annually to pay off capital investments made since its last rate hike in 2021, as well as to secure a profit margin of 10.7%. The utility company has invested in significant infrastructure upgrades in recent years, including a new power plant, its first major solar farm, new transmission lines, distribution wires, smart meters, and export capabilities to Mexico and the Western United States.
The proposal has sparked concerns and criticism from El Paso's mayor and city council representatives, who anticipate the financial burden it would place on residents. The city's elected officials are expected to negotiate the rate hike with El Paso Electric, business groups, and consumer advocates in front of the Public Utility Commission of Texas. While the initial proposal may be substantial, it is likely to be negotiated down during the regulatory review process, which typically takes a year or longer.
El Paso Electric's request reflects a broader trend of rising electricity rates across the United States, driven by escalating costs due to inflation and elevated interest rates. Additionally, increasing demand for electricity, influenced by hotter summer temperatures and the growing use of power-intensive technologies, has contributed to the need for rate adjustments.
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The company attributes higher bills to increased energy use during hot summers
El Paso Electric has been seeking to raise its rates, which could add $22-$23 to the average household bill per month. This has been a cause of concern for El Paso residents, who are already facing rising costs of living. The company, however, attributes the higher bills to increased energy use during hot summers.
Robert Heimer, the director of customer care for El Paso Electric, explained that higher temperatures cause customers to use more energy to cool their homes and businesses. He advised customers to raise their thermostats slightly and allow their homes to warm up during peak hours of energy consumption, typically around 3 pm. Heimer's advice aims to help customers reduce their energy usage and, consequently, their bills.
The increased energy demand during hot summers has been a challenge for El Paso Electric. The company has invested in new generation resources, replaced wooden power poles with steel poles, and built new substations to meet this demand and ensure reliable service. These capital investments have amounted to $1.55 billion since 2020.
El Paso Electric's rate increase proposal is subject to approval by the Public Utility Commission of Texas (PUC), which regulates monopoly utilities in the state. The PUC determines the allowable profit margin for utilities like El Paso Electric and approves or rejects rate hike requests. The final decision on the rate increase lies with the PUC, even if the City Council rejects the proposal.
While the company cites increased energy use during hot summers as the primary reason for higher bills, other factors are at play. Rising natural gas prices, used to power El Paso Electric's plants, have also contributed to the increase in electric bills. The global supply of natural gas has tightened due to reduced flows from Russia to Europe, impacting prices.
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El Paso Electric has invested $1.55 billion in capital investments since 2020
El Paso Electric (EPE) has invested $1.55 billion in capital investments since 2020. This includes spending on new generation resources, replacing wooden power poles with steel poles, and building new substations to accommodate El Paso's growing sprawl. The company has also been facing increasing demand for electricity due to hotter summer temperatures, the growing number of power-hungry data centers, and more customers using refrigerated air.
EPE's significant investments have been made to maintain safe and reliable service for its customers and to support new and existing loads during a period of increasing customer growth. The company has also been working to ensure the long-term reliability of electricity in El Paso. However, these investments have contributed to EPE's request for a rate increase, which could add $22-$23 to the average household bill.
The rate hike proposal has faced criticism and pushback from El Paso's mayor and city council representatives, who are concerned about the potential burden on residents. The proposal will likely undergo a lengthy negotiation process involving the city, business groups, consumer advocates, and the Public Utility Commission of Texas (PUC), which has ultimate authority over rate increases.
It is worth noting that EPE reported a profit of $146.2 million in 2021, its first full year under new ownership by the JP Morgan Chase-tied Infrastructure Investments Fund (IIF). The sale, valued at $4.3 billion, was completed in 2020, and EPE's 2020 profit was reported at $78 million.
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The company needs to collect an additional $85 million from customers annually
El Paso Electric has proposed a rate hike that would see the company collect an additional $85 million from customers annually. This is because the company has made significant capital investments since its last rate hike in 2021, and it needs to pay off these investments while maintaining a profit margin of 10.7%. The proposed rate increase has been met with criticism from City Council representatives, who are concerned about the financial burden it will place on residents, especially those who are low-income.
El Paso Electric has defended its proposal by arguing that the rate hike is necessary to ensure the long-term reliability of electricity in the city. The company has invested in new infrastructure, such as a new power plant, a solar farm, new transmission lines, and distribution wires. These improvements have allowed El Paso Electric to export power to Mexico and the Western United States. Additionally, the company has replaced wooden power poles with steel poles, reducing fire hazards.
The rate increase proposal would see the average residential customer's bill rise from about $106 per month to around $129 per month, an increase of $22 to $23. This is a significant jump and has caused concern among stakeholders, who expect El Paso Electric to negotiate the rate hike and settle at a lower increase. The proposal will be decided by the Public Utility Commission of Texas, which has the ultimate authority over rate hikes.
The rate hike proposal comes at a time when El Paso Electric is facing increased demand for electricity due to hotter summer temperatures, the proliferation of power-hungry data centers, and more customers using refrigerated air. The company has also stated that it wants to charge all customers the actual cost of serving them, instead of having industrial and commercial customers subsidize rates for residential customers.
While the proposal is likely to face negotiations and interventions, the final decision will have a significant impact on El Paso residents and the company's ability to continue investing in its electric system.
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El Paso Electric's rate hike proposal has been criticised by City Council reps
El Paso Electric has proposed a rate hike that could add $22-$23 to the average household bill each month. The proposal has been criticised by El Paso's mayor, Renard Johnson, and half of the City Council, who are concerned about the burden this could place on El Paso residents.
The rate hike is intended to help El Paso Electric recover money spent on capital investments, such as new generation resources, and replacing wooden power poles with steel poles. The utility company has spent $1.55 billion on these investments since the end of 2020.
However, critics of the proposal argue that El Paso Electric should not raise its rates. Mayor Johnson has stated that he will take "every necessary step" to protect the interests of El Paso residents. The City Council can vote to approve or reject the proposal, but the final decision lies with the Public Utility Commission of Texas (PUC).
The PUC has ultimate authority over whether El Paso Electric can raise its rates and is led by five commissioners appointed by Governor Greg Abbott. The PUC determines the profit margin allowed for monopoly utilities like El Paso Electric. Currently, the utility is allowed to make a 7.5% after-tax rate of return on invested capital.
The rate hike proposal is expected to initiate a lengthy negotiation process between El Paso Electric, the city, business groups, and consumer advocates. It is likely that El Paso Electric will eventually settle for a smaller rate increase than initially proposed.
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Frequently asked questions
El Paso Electric has proposed a rate hike that would increase the average household bill by $22-$23 per month. However, this proposal has not yet been approved and is currently in the negotiation stage.
El Paso Electric wants to raise prices to recover the money it has invested in recent years. Since the end of 2020, the company has spent $1.55 billion on capital investments such as new generation resources and replacing wooden power poles with steel poles.
El Paso Electric justifies the price increase by citing the need to maintain reliable service for customers and support new and existing loads. The company has also experienced increasing costs due to inflation and elevated interest rates.
The price increase is expected to have a substantial impact on El Paso residents, with some customers struggling to pay their bills. The company offers programs to help customers reduce their energy use and provides financial assistance through various projects and plans.
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