Las Cruces, New Mexico Moves forward with Municipalization

The City of Las Cruces, New Mexico (pop. 70,000) is moving forward with its municipalization effort against its current investor-owned utility, El Paso Electric (EPE) after a neighboring competitor, Southwestern Public Service Company (SPS), won a 15 year (85MW) contract offering wholesale rates at 60% of what El Paso Electric currently charges its residents and businesses in competitive bidding between 11 investor owned utilities and Independent Power Producers. Residents in Las Cruces currently pay 10.83 cents/kwh.

The city, which estimates a loss to its ratepayers of $600,000 to $700,000 for every month they remain under El Paso's monopoly, is seeking a declaratory judgement for the right to condemn El Paso's distribution facilities and substations in federal court, a determination based on New Mexico right to condemn statutes but under federal jurisdiction because El Paso is based in Texas.

Once it has received declaratory judgement the city will file to sue for condemnation. Appraisers are making a determination of the facilities' value based on traditional cost minus depreciation. While the utility is attempting to inflate the vaue of these facilities, they are hampered by the fact that their own evaluation of assets for the Securities and Exchange Commission during its 1992 bankruptsy produced generally the same number: somewhere in the high $30 million range. The acquistion will be financed on gross receitps tax bonds that can be converted to utility revenue bonds once the condemnation is underway. All proceeds on the bonds will be paid directly through the rates.

Las Cruces, which already operates the city's gas, water, sewer, and solid waste system, will take over meters and billing, and a contract with Southwestern for operations and maintenance of the distribution system. Bill Lutz, one of the lead attorneys for the city, told ALPN that even with the costs of purchasing the distribution system they will be able to reduce average electricity rates in Las Curces by 20%-25%. "The bottom line for municipalities to look at is simple: with all factors considered, can you deliver power at a lower cost? For a number of factors that ability exists in Las Cruces."