LAS CRUCES – The Las Cruces City Council approved a natural gas utility rate hike at its Monday meeting, increasing rates on small commercial customers substantially over the next three years.
The city-owned Las Cruces Utilities says it needs additional revenue to cover employee salaries and benefits, operation and maintenance expenses, regulatory expenses, system maintenance costs and the cost to replace aging vehicles and equipment. The utility needs to bring in an additional $1.46 million annually to meet the natural gas utility’s costs.
Under the rate increase, approved 7-0 at the April 18 council meeting, the rate per energy unit for small commercial gas customers — the majority of businesses in town — will more than double by the end of a three-year phase-in period . At the same time, those rates for residential customers won’t change.
Access charges for small commercial will go from $16.41 to $17.50 per month in three years, and volumetric rates will rise from $1.07 to $2.38 per dekatherm. For residential customers, access charges will rise from $13.75 to $14.50 per month over three years, and the volumetric charge will remain at $1.34 per dekatherm.
The rates will go into effect some time in the next fiscal year, which begins July 1, following the full recovery of a surcharge imposed to cover the cost of gas during a 2021 winter storm.
Las Cruces Utilities last raised the gas base rate in 2011. LCU Director Delilah Walsh has said the new rate distribution is meant to more accurately reflect the actual cost to provide natural gas service across ratepaying classes. Currently, Walsh said commercial customers are being subsidized by other classes such as residential customers, since it costs more to provide service to businesses.
The resolution also calls for utilities to review rates on a more frequent basis.
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“In order to mitigate future impacts to customers, LCU staff will conduct and recommend more periodic rate reviews as required,” the resolution states.
The council also agreed to direct the Las Cruces Utilities Board to immediately implement a 15-cent-per-dekathem decarbonization rider on all customers, instead of phasing it in over three years as proposed.
The 15-cent rider, a surcharge on gas usage imposed evenly across ratepaying classes, would be used to evaluate and implement energy efficiency measures in homes, Walsh said.
The rate hike will not cover any cost of Las Cruces Utilities’ mandated transition off natural gas. The city committed to a transition to renewable energy in its 2020 Climate Action Plan and in a separate resolution passed by the council last year, which calls for a plan to transition off natural gas.
Concessions, such as the three-year phase-in, had already been made in response to public input about the proposed rate increase. Along with recommending the three-year phase-in, the utilities board recommended in December the utility eliminate the funding of new debt service for gas line extensions, bringing down the amount of new revenue needed, and wait until LCU concludes its emergency winter storm recovery surcharge this summer to implement the new rates.
Walsh said that if the commodity cost of gas doesn’t change — something LCU has no control over — customers’ bills won’t change much from what they are currently paying under the imposed emergency storm surcharge.
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“The risk of not fully funding the gas utility feels significant, feels very risky,” said District 4 Councilor Johana Bencomo, who also serves on the utilities board. “I think there’s definitely been a lot of compromise already from the utility.”
Bencomo also said she didn’t support residential customers subsidizing businesses, something that would likely need to continue to happen to fully fund the utility, according to City Manager Ifo Pili, if the rate increase was not approved.
District 3 Councilor Becki Graham said it was a difficult decision, but she supported the increase to support the ability for LCU to maintain system safety and to support increasing and retaining personnel.
Michael McDevitt is a city and county government reporter for the Sun News. He can be reached at 575-202-3205, [email protected] or @MikeMcDTweets on Twitter.