FOR MORE INFORMATION, CONTACT: Mr. Lance R. Adkins, Farmers' Electric Cooperative Inc.
FOR IMMEDIATE RELEASE
Clovis, NM, January 19, 2001 --
Vowing to protect the economic interests of its members from potential increases in wholesale power costs, the Board of Farmers' Electric Cooperative has challenged the transition plan of Southwestern Public Service (SPS), a wholly-owned subsidiary of Xcel Energy of Minneapolis, Minnesota. The transition plan -- presently being considered before the New Mexico Public Regulation Commission (NMPRC) and the Public Utility Commission of Texas (PUCT) - would allow SPS to move regulated power generation assets (power plants) into unregulated affiliates, and then sell the bulk of its generation plants to independent operators. The transition plan is the blueprint for how SPS would enter into a deregulated marketplace in both states.
SPS merged with Public Service Company of Colorado to form New Century Energy (NCE) in 1997. This latest move to sell off generation assets is part of an overall business plan of Xcel Energy which first came to light in the stipulation entered into with the PUCT which, in turn, gave its approval to the merger between NCE and Northern States Power in Minneapolis, MN. The new company formed from the merger between NCE and Northern States Power - Xcel Energy -- would reap the windfall profits of the sale of generation assets, estimated to be between $500M and $1billion. Under the current regulated utility structure, SPS would need approval by the NMPRC before selling generation assets, and if a sale of generation assets produced a net gain, the NMPRC could require SPS to share the gain with consumers. If the generation assets are sold following the transition into an unregulated affiliate, state regulators cannot require SPS to share any gains with consumers.
By SPS's own accounting, the sale is likely to result in increases in retail electric rates from 7% - 8%, though many believe the increases will be much greater. According to Lance Adkins, General Manager of Farmers' Electric, "We have a long-term contract with SPS to provide our wholesale power needs through 2015. While the terms of that contract state that it cannot be transferred to another party, it seems that SPS intends to disregard that provision of our agreement, forcing us to purchase power from whatever entity buys their generation facilities."
Adkins believes that SPS could minimize or eliminate this negative impact on the Cooperative by exercising a "buy-back" provision contained in a stipulation agreement with the PUCT that secured approval of the merger between NCE and Northern States Power. "The buy-back provision allows SPS to purchase power from generators sold to a third party; it was included in the stipulation agreement to ensure that the wholesale rate we originally agreed to would be the same whether SPS owned the generators or they sold them to another party. By ignoring this provision, SPS can attract much higher prices for its generation assets because potential buyers will be able to charge higher, California-like market prices for the wholesale energy. Due to the limitations on transmission and generation facilities in eastern New Mexico, our members become a captive market for whomever buys the SPS plants. As a result, our members will likely be forced to pay significantly higher prices for energy -- energy produced from generators which they have already partially paid for as part of the current SPS wholesale rate structure," said Adkins.
Adkins further stated, "We understand the complexities of purchasing wholesale power, and recognize the dangers of moving too quickly into a deregulated environment. Take a good look at the disaster that's unfolding in California, and you've got a good picture of what eastern New Mexico and the Texas panhandle could look like if SPS is successful in getting its transition plan approved."
According to Adkins, the impact of SPS's transition plan could likely affect their own retail prices as well. "After divesting themselves of their generation assets, they would simply buy power from those to whom they sold their generators. Their own retail customers could be hit hard by increases in energy prices."
The Cooperative believes that a remedy for its members exists in the restructuring legislation in New Mexico and Texas. "Lawmakers in both states inserted language in the legislation that said - in effect - that nothing in the law would affect the contracts of wholesale power customers. SPS has the option to comply with this through the buy-back provision in their stipulation agreement with the PUCT. We simply want the commissions of New Mexico and Texas to require that SPS comply with the intent of the deregulation legislation that has been passed in both states," said Adkins.
The Cooperative is also intervening in an SPS filing with the Federal Energy Regulatory Commission (FERC) in which SPS is seeking to amend its wholesale agreements with Farmers' Electric, Lea County Electric, and Roosevelt County Electric Cooperative in eastern New Mexico. Recognizing the potential negative impact on the Cooperative's members, the New Mexico Attorney General's office has also indicated their intent to intervene in this proceeding.
Legislatively, Farmers' Electric is actively participating in discussions with Senator Michael Sanchez, author of New Mexico's restructuring law, who plans to introduce changes to the law in this legislative session, delaying restructuring by five years. At this time the vast majority of individuals and organizations involved in the discussions support delay, and some, a complete repeal of the New Mexico Electric Utility Restructuring Act. A few, Public Service Company of New Mexico (PNM), Southwestern Public Service Company (SPS), and the New Mexico Shareholders Alliance propose that any delay not include the separation of generation assets into unregulated affiliates. "One thing that is crystal clear in California, is that the loss of regulatory oversight of generation assets is directly contributing to the extreme prices in California" says Adkins. Adkins further stated, "We will be contacting legislators and asking them to support Senator Sanchez's delay and/or repeal if proposed, and that any delay must include a delay in generation asset separation into unregulated affiliates".
"The Board and management of Farmers' Electric are committed to placing our members' economic interest as the top priority -- our first obligation is to our members", says Adkins. "We'll continue to fight for an equitable resolution before the NMPRC and all other appropriate forums; we simply aren't willing to have our members subjected to the same kind of wild market fluctuations as are occurring in California." Adkins said that if changes are not made in this legislative session, New Mexico restructuring will pass a critical point of no return, and that consumers could take an active part in the legislative process by directly contacting the Governor's Office and local legislators and let them know of their concerns.