New Mexico delays retail competition to 2007

By the OGJ Online Staff

HOUSTON, Mar. 9�New Mexico Gov. Gary Johnson Thursday signed legislation delaying electric retail choice to 2007 and permitting Public Service Co. of New Mexico to build 1,500 Mw of generating capacity in the next 5 years.

Under the 1999 law, small businesses and consumers were scheduled to begin choosing an electricity supplier this year. The new law also delays a requirement Public Service Co. of New Mexico's (PNM) separate its distribution assets from the generating and power marketing businesses.

While the governor was not in favor of the delay, "no one came to him with a good reason to veto it," said Diane Kinderwater, a spokeswoman. By delaying choice and permitting the utility to own and build more generating capacity, Johnson "thinks we will be in the same situation in 2007," she said.

However, PNN Chairman Jeff Sterba said postponing retail competition New Mexico is a sign of "continued progress toward assuring New Mexico's energy future. Investing in new generation will benefit not only our company, but also customers and the entire state. Based on our success over the last 5 years, producing and selling wholesale power is clearly one of our core competencies.''

PNN said it will spend up to $800 million on owned or contracted generation, which will support continued expansion of the company's wholesale power marketing business. PNM revenues from wholesale trading more than doubled in 2000, climbing to $748.2 million for the year.

``With our planned increase in generation supply, New Mexico will be in a better position when competition begins here,'' Sterba said.

Under the law, PNM will be allowed proceed with plans to form a new holding company, requiring state regulatory approvals by July 1. The bill also allows PNM to recover, without an increase in rates, $114 million in coal-mine decommissioning costs incurred from closing the San Juan generating station's surface mine.

The Public Regulation Commission retains the authority to review this accounting treatment in a future rate case. Without this provision, PNM would have been required to write off the costs under generally accepted accounting principles.