Recommendation downsizes rate hike

By Jean Verlich: CNJ news editor

A state Public Regulation Commission hearing examiner recommended a smaller water rate increase for the city’s water provider, according to a PRC document.

Hearing examiner Elizabeth Hurst recommended in her Feb. 12 report a 12.6-percent hike, which would generate about $1 million annually in additional revenue for New Mexico American Water.

New Mexico American Water asked for a 20-percent increase in May from its adjusted water service revenues for 2005, which would generate revenue of $1.6 million annually from its Clovis service district, according to Kathy Wright, the utility’s vice president and general manager.

The matter still faces a vote by the PRC.

The increase was requested, according to the report, in order for the utility “to recover its full costs of providing water utility service, including a fair return on its investment” in doing so.

“One of the biggest driving forces in asking for a rate increase is the amount of money we are spending to improve the infrastructure to supply water to the city of Clovis,” Wright said after the plan was filed May 30, 2006.

The recommendation must be approved by the PRC by March 30, although the state can request an extension, according to city and water officials.

If the recommendation is approved, the monthly bill of a customer using 6,000 gallons of water would increase from $26.20 to $28.51, or a little less than 8 cents more a day, according to Wright.

However, if the state regulatory agency does not take formal action by March 30, the original rate request would be approved by default, according to Clovis city attorney David Richards.

Richards and Wright said they were not aware of PRC setting a meeting date.

Wright said the lower increase was recommended because “some expenses were disallowed, our authorized rate base, which includes items such as the Industrial Park job, was reduced, and our requested return on equity was reduced.”

The PRC also recommended a 10 percent increase in rates for Southwest Cheese, which uses approximately 325,000 to 335,000 gallons of New Mexico American Water per day, according to testimony.

Wright said in an e-mail while the percentage increase is less than that for Clovis, “Southwest Cheese is subject to other contract conditions, including minimum purchase obligations and surcharges for exceeding maximum daily deliveries, that do not apply to other customers.”

She added New Mexico American Water considers the PRC’s recommendation for Southwest Cheese “reasonable in light of these conditions and it is a very substantial contribution to the costs shared by all customers on our system.”

Richards said the case was considered in six days of testimony from more than 20 witnesses. The city and Clovis Municipal Schools filed an intervention against the proposed rate increase.

Richards didn’t want to speak directly for the city, but agreed city officials are happier with a lower rate increase than previously offered, adding, “You fight any increase.”

City Manager Joe Thomas declined comment, preferring instead to wait until an official decision has been rendered.

“While not all issues were resolved as NMA would have liked,” Wright said, “we believe that the hearing examiner has issued a fair and balanced recommendation.”

According to the commission’s Web site, a meeting had not been scheduled as of Wednesday.