The Las Cruces Green Chamber of Commerce commissioned a report that evaluates the proposed gas rate increase from the City of Las Cruces Utilities Department. The report draws special attention to:
- The need for and appropriateness of proposed rate increases
- Any market analyses justifying new capital expenditures
- The impact of new or extended gas service on the City’s stated goals, including CO2 emissions
We believe that the Las Cruces Utilities Department needs to hold off on raising gas utilities rates for the following reasons:
1. The proposal to raise natural gas prices comes at a very bad time, especially for small businesses
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- Small businesses have been hit hard by Covid-19 closures, restrictions, and recession
- Large new recovery surcharge for Winter Storm Uri adds to burden on businesses
- Proposal increases small business energy charges much more than other customer classes
- The average monthly small business gas bill will increase by over 75%
2. Most of the $2.4M annual increase is due to inappropriate expenses:
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- Unrealistic assumption of filling all personnel vacancies raises O&M costs by $584K per year
- New Annualized Debt Service obligates customers to pay $935K more per year for 20 years
- New debt would fund surge in building new gas lines with no economic justification
3. Economic analysis strongly argues against new gas lines – expensive for both old and new customers
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- Talavera investigation demonstrates that other existing customers will pay over 66% of costs
- Current gas customers will also heavily subsidize line extensions for other planned projects
- For new construction, electric air-source heat pumps have lower total costs than gas
- High cost of converting existing homes to gas will discourage signups to new lines
4. New Annualized Debt Service is driven by enormous increase in gas development spending
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- Gas development annual spending averaged $91,919 from 2015 to 2018
- Annual average for 2021 to 2023 is $3,871,463, creating need for long term debt
5. The gas utility is financially healthy and can delay this increase
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- Operating Fund balance is 3.2 times recommended minimum
- Capital Fund balance is enough to fund 7 years of gas line rehabilitation
6. Gas system expansion is in conflict with City Resolution 21-153 and Climate Action Plan (CAP)
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- Resolution says retire natural gas debt and maintain reliability, safety and affordability
- New gas lines create new debt, decrease affordability, and don’t significantly aid reliability
- CAP Strategy says electrify 6% of buildings by 2030, 75% by 2050, not add new gas buildings
- Creating new gas-heated buildings creates need for later expensive conversions to electric
Recommendations
- Delay rate increase until gas utility completes transition plan and businesses recover
- Define personnel skills needed for new natural gas and energy resources line of business
- Pause new gas line extensions and scrutinize carefully to see if any are truly needed
- Maintain gas lines for safe and reliable service to existing customers without cost increase