Power Struggle: Wolberg predicted backlash against SEC in 2018

Ten days ago, the New Mexico Supreme Court rejected Socorro Electric Cooperative’s (SEC) proposed rate increase of $1.2 million proposed in 2018 for five years.

SEC challenged the Public Regulation Commission’s authority saying the PRC could only accept or deny the rates. It could not, according to SEC, exceed its authority by reallocating revenues among customer classes, redesigning rates and calculating the cooperative’s revenue requirements through a method different than what was used by SEC.

The Supreme Court concluded the PRC acted within its authority and its decision was reasonable.

Prediction came to fruition

Six years ago, the road to a rate increase began.

Socorro Electric Cooperative board members struggled on whether or not to approve a rate increase back in August 2018.

Although the board had not increased rates since 2011, there was a problem. The problem: How could the board vote on a rate increase of $1.2 million for five years without asking its membership?

Donald Wolberg, former SEC board member, warned his fellow board members during a meeting on Aug. 22 a rate increase would cause backlash. “My basic (issue) is this: We have an aging population in an economically blighted area,” said Wolberg. Imposing rate increases on a population that largely is still struggling wasn’t appropriate, he said, arguing the public’s input was needed.

Former SEC Board Chairman Anne Dorough, who has since retired from the board, said membership input wasn’t needed. It was up to the board to make the difficult decision to implement the increase.

CEO Joseph Herrera said informing the members would be part of the process after the decision was made by the board. “We’re going to have a campaign to help educate our membership on this.” That campaign included public outreach and open houses.

Wolberg still didn’t buy into the rate increase while asking how many members would it take to the PRC (Public Regulatory Commission) to intervene?

Herrera said one percent.

“And we can almost guarantee there will be sufficient number of people to complain to the PRC and we’ll have to justify the rate increase,” said Dorough.

While the board voted to proceed with a resolution with the intention of raising rates, it also approved at the same time a federal loan of $26.3 million to cover upgrading the systems – including steel poles between Socorro and Magdalena.

Despite Wolberg’s decision to abstain from the vote his prediction came to fruition. There was backlash.

Membership pushes back

Within days of the SEC Board’s decision, Mayor Ravi Bhasker discussed the process of filing a protest with the New Mexico Public Regulation Commission over the Socorro Electric Cooperative’s plan to raise rates.

Bhasker and Councilor Mary Ann Chavez-Lopez voiced their concerns about how the SEC would notify its members about the rate increase.

“According to the PRC, the Co-ops only have to tell the public about the increase it says: ‘the dates the rates are filed will be stated on a notice to customers that you have received from the Cooperative, either through the Enchantment or a special notice,’” Bhasker said. “I doubt very much we’re going to get a special notice, but everybody who gets the Enchantment (a state-wide electrical co-op magazine) should make sure they look at it and see how it is going to affect them.”

“Why didn’t they tell everyone about this at their annual meeting (conducted in April)?” Chavez-Lopez chimed in.

The city was not the only entity to file a protest. New Mexico Tech filed the initial protest with the PRC as did more than 50 individuals and businesses.

New Mexico Tech’s position was unique. Its protest was different than the city’s. Tech indicated they were not being reimbursed through the legislature for utilities. They only were receiving funds for educational purposes.

Accumulating fines

The Socorro Electric Co-op has been accumulating a $1,000 fine per day since April 2020 after refusing to restructure their rates as directed by the New Mexico Public Regulation Commission.

Because of the member objections, NMPRC reviewed the rate increase proposal and rejected it, recommending no revenue increase for the Co-op. Along with rejecting the proposal the Commission also required the Co-op to restructure their rates. The restructuring would not have increased the Co-op’s revenue.

It would have decreased the amount paid by large commercial services, like New Mexico Tech, increased residential services 2 percent and proposed a 3 percent increase in base revenue collected from irrigation service. The additional revenue from residential and irrigation service would have been used to reduce revenues collected from large commercial and load management service classes. The reasoning behind the changes was that residential rates are subsidized by commercial rates in the existing rate structure.

Among other changes, the redesign also rejected a proposed $5 monthly minimum use charge. The NMPRC also directed the Coop to investigate an economic development rate.

The Co-op didn’t follow the order from NMPRC. At the time, Co-op spokesperson Jimmy Capps said the reason they declined was that it is highly unusual for the NMPRC to restructure rates. General Manager Joseph Herrera said the Coop always tried to subsidize the rates of residential customers, who cannot easily increase their income, with rates from large commercial customers, who can potentially increase their income.

The NMPRC instituted a fine because the Co-op did not follow the order — a fine of $1,000 per day which the Co-op has not paid and does not intend to pay. To prevent the fine from impacting Co-op members, it was levied on the Co-op Board of Trustees specifically. The Trustees are elected Co-op members. Capps said it is unrealistic for them to pay such a significant fine.

In January 2022, the New Mexico Supreme Court temporarily stayed SEC’s appeal and remanded jurisdiction to NMPRC to consider modifying or withdrawing the compliance order–the fine.

SEC’s Response to the Commission’s Initial Order on Remand, stated that SEC opposed the order because it exceeded the Commission’s authority. According to the staff’s reply, the NMPRC Utility Division staff believes the Co-op should be charging the restructured rates, since no stay in the order has been granted.

The City of Socorro and New Mexico Tech both agreed. The same staff replied stated the fine should not be withdrawn unless the Co-op follows the order. Instead, Capps said the Coop will follow any Supreme Court decision on the rate restructuring.

Herrera said part of the reason the Co-op was having financial issues, including trouble replacing equipment like old trucks and leaving staff positions vacant, is because they were not allowed to increase rates in 2018.

Again, Socorro Mayor Ravi Bhasker sent a public letter to the Trustees offering to acquire the Co-op, and points to the financial challenges as one reason the Co-op should consider selling to the city.

Then Co-op Board President Paul Bustamante said he believed the board members would be against the offer, but ultimately it would be up to the Co-op members to decide on an offer. If the city gives a specific offer, it would be put to a vote and the Co-op members would decide whether to accept it. Two thirds of the members would have to accept the offer for it to go through.

Restructured rates ordered

An El Defensor Chieftain story from April 7, 2022, noted more than $800,000 in fines had been leveled directly at the Socorro Electric Co-op, instead of the individual Board of Trustees members, for refusing to follow a New Mexico Public Regulation Commission order.

The NMPRC was again ordering the Co-op to make changes it required in 2019, including restructuring its rates. The Co-op would continue to be fined $1,000 per day until the changes were made. As of June 14, 2024, fines total $866,000.

“The Commission further finds that its statutory mission is to ensure that all utilities and intervenors should not be allowed to completely ignore and violate Commission orders and pretend that they were granted an automatic stay of all cases pending appeal which is expressly not the law,” the decision reads.

The fine was originally leveled at the individual Board of Trustees members. In a decision last week, the NMPRC required the Co-op once again to implement the changes. The NMPRC also shifted the fine to the Co-op overall instead of directing it at the individual board members.

The Co-op tried to raise rates in 2018, but Coop members objected. Due to those objections, NMPRC reviewed the proposed rate changes. The NMPRC rejected a revenue increase but did approve some of the Co-op’s changes, like canceling Rate No. 15 and replacing it with two new rates. NMPRC also required the Co-op to redesign its rates. This includes creating an economic development rate and reallocating residential and commercial rates so that residential rates are no longer subsidized by commercial rates.

SEC is being required to account for all the increases or decreases that customers would have had if the new rates the NMPRC told them to adopt had been implemented back in 2019 and to stop billing customers in violation of the commission order.

Socorro Electric Cooperative also had been ordered to mail customers a notice about the case created by the commission by April 7.

Changes required by the NMPRC included:

• Re-allocating rates among residential, energy thermal storage, and irrigation for a “just and reasonable outcome.” This includes a 2 percent increase in base revenue from residential service, including energy thermal storage, a 3 percent increase in the base revenue collected from irrigation service. Those two reallocations will reduce revenue collected from large commercial and load management service classes.

• The 2 percent increase in revenue from residential services would come through a $1.50 or 10 percent increase in the customer charge.

• The change to irrigation service rate would be adding a new $5 customer charge and increasing variable energy charge by 4.21 percent.

• Disapproval of a $5 monthly minimum use charge.

The NMPRC also approved canceling Rate No. 15 and replacing it with two new rates: an economic development rate; as well as implementing and collecting a renewable energy and conservation fee. Finally, the PRC requested SEC invest in renewable energies.

A decision with big implications

Last week’s decision by the New Mexico Supreme Court was meet with cheers and jeers.

In an interview with New Mexico Public Radio (KUNM), SEC General Manager Joseph Herrera called the Supreme Court’s decision “dangerous” and said he wants the state legislature to change the rules, so the PRC does not oversee the 15 rural cooperatives in New Mexico.

The Supreme Court’s decision noted the legislature had not distinguished rural electric coops from other utilities when comes to the PRC to set rates.

As a result, Herrera told KUNM the cooperative will again be looking at increasing its rates next year after it completes a cost-of-service study. Once it’s completed, he estimates rates could be three to four times the original ask of $1.2 million in 2018.

What’s next?

Socorro Mayor Ravi Bhasker told El Defensor Chieftain last week, it will continue to pursue the development forming its own municipal electrical utility. The council recently met with Ed Reyes of Enchantment Energy Consulting who provided updated numbers on a feasibility study conducted in 2017.

Some of the modifications include: the competition of a preliminary substation and system design; the target load data would include New Mexico Tech, Socorro schools and the rest of the industrial corridor; a operational and functional budget was developed; as well as whole power costs updated including adding city-owned solar facility to the project.

Financing option also were updated and included three options: municipal bonds at federal funds rate; private/bank financing then convert to public financing with the New Mexico Finance Authority; and finally, private/bank financing then converting to public financing with the New Mexico Finance Authority along with only partial grant funding for a solar facility.

As Bhasker noted, any final movement toward development of its municipal electrical utility will depend on grants and financing options. If the city can secure a lower price from a wholesale supplier for electricity than what the Coop receives from Tri-State, it will continue to move forward for the betterment of Socorro.

Publisher’s Note: This piece is an analysis of information compiled from the archives of El Defensor Chieftain for the past seven years.