The Socorro Electric Cooperative (SEC) is currently petitioning the Public Regulation Commission (PRC) for a rate increase across all customer rate classes. New Mexico Tech [NMT] opposes all of these rate increases.
The SEC already enjoys a healthy rate of return that is consistent with US laws for Rural Utility Service, electric rate increases have a negative impact on the long-term well-being of the university and potentially other large commercial user rate class, and rate increases stifle economic diversification of our community.
To the last point, the National Rural Electric Cooperative Association states that “affordable electricity is essential to economic growth in rural America. Public policies, programs and other factors that increase the price of electricity even a small amount impair economic growth and job creation” [National Rural Electric Cooperative Association, July 27, 2015].
The SEC currently boasts a strong Rate of Return (ROR), and, thus, does not need the proposed rate increase to operate in a fiscally sound manner. In direct testimony to the PRC, SEC CEO Joseph Herrera states that the rate increase is unnecessary. In addition, Mr. Herrera agrees that the financial integrity of the SEC and the ability to serve its customers would be unaffected if the rate increase is denied.
The SEC also acknowledges that interclass subsidies exist in the current rate design, whereby large corporate customers subsidize the rates for other classes. Their justification for these subsidies is that large commercial accounts have ways of raising revenues to cover increased expenses. For New Mexico Tech, that is simply not true.
The budgets provided by the State of New Mexico have not provided enough funds to fully cover our rising utility costs since 2006. As a non-profit organization, NMT is not permitted to write off these costs as tax deductions.
The only means available to NMT to meet an unnecessary increase from the SEC, as well as to pay for other unfunded mandates, is to raise tuition on students and their families. A large part of NMT’s stellar academic reputation is its national rankings for the value it brings to our students, both for NMT’s level of education and low tuition.
Raising tuition to address unnecessary electric rate increases on NMT poses a serious threat to the value/cost of college education we provide our students as well as negatively impacts NMT’s reputation and rankings related to return on investment.
NMT’s long term goal of building and supporting a local innovation-based economy in the Socorro community involves attracting and retaining creative faculty and students who conduct cutting-edge research, building the infrastructure that will monetize our university’s intellectual property and support the spinning out of new companies, and attracting high-tech companies to locate in the community.
NMT has the capability and infrastructure to make these goals a reality, and our community will be a more attractive option for these new companies if the proposed rate increase is denied.
The cost for NMT’s electric utility service in fiscal year 2005 was $1,526,634. Thirteen years later that cost has ballooned to $3,141,885, meaning that NMT’s total cost for electrical services has risen by nearly 106 percent since 2005.
In contrast, our other energy source, natural gas, has increased by only 16 percent over that same time period. The SEC’s proposed rate increase only contributes more to the current rate structure which has been a burden on the long term financial health of NMT. And even more dramatically, the addition of 360,967 gross square feet of new building on the campus over the same time period only accounts for 18.3 percent of the total increase in electricity costs.
We hope you understand the challenges that New Mexico Tech faces as the key employer in the community, and we further hope that this editorial explains why we are protesting the SEC’s proposed rate increase.
Dr. Stephen G. Wells
New Mexico Tech President