New Mexico regulators at a March 24 meeting approved special financing that will enable a small natural gas utility in the state to pay its $19-million fuel bill for the month of February, during which a week of extremely cold weather in the region and insufficient winterization of natural gas infrastructure contributed to record-high prices.
Zia Gas Co., which serves just under 40,000 customers in four separate service areas in the state, told the New Mexico Public Regulation Commission that it needs to finance a loan of $18 million over five years at an interest rate of 3.75 percent in order to pay the bill due March 25. Zia said its gas suppliers had refused the utility's requests for delayed payments, which put at risk its ability to continue to serve customers [21-00048-UT].
Leslie Graham, general manager of Zia's parent company, Natural Gas Processing Co., in written testimony explained that the company was able to supply gas to all of Zia's customers without interruption during the extreme weather event, but that gas prices from Feb. 14 to Feb. 18 were "astronomically high" and "rising higher and faster than Zia could have possibly anticipated."
The unprecedented spike, Graham said, will have a major direct financial impact on the utility and its customers. The company plans to soon file a plan to recover costs stemming from the event, and said that Zia is cooperating with the New Mexico attorney general's office in its investigation into the price spikes.
Several investigations and inquiries into the event and resultant pricing are underway, including one by the NMPRC [21-00045-UT]. The outcome of such investigations could lead to legal action that would affect the price impacts to Zia and other natural gas purchasers in the region. No such litigation is currently pending, thus obligating utilities to make the unusually large payments
Zia's average February fuel bills for the past five years are less than $1.5 million, Graham said, and gas supply costs for an entire year have been in the $10-million range. The utility up until now has paid its monthly bills from customer revenues and carries no debt, she said. The loan will shift Zia's capital structure from 100-percent equity to 27-percent debt and 73-percent equity, according to the combined testimony of NGP's controller and NMPRC Utilities Division Director John Reynolds.
The commission also denied Public Service Company of New Mexico's 10-year, $17.7-million demand-response plan, filed as ordered in the final resolution of its proceeding for the abandonment of and replacement resources for the San Juan Generating Station [20-00218-UT].
Anthony Medeiros, who is overseeing the current proceeding for the NMPRC, said he found PNM's plan to contract with a third party for up to 15 MW of demand response inconsistent with the previous order to procure 24 MW of DR resources as part of the replacement resource package for San Juan. With Medeiros' recommendation, the commission ordered PNM to issue a new request for proposals for DR resources to be implemented in 2024, after the utility's energy-efficiency and load-management program plan for 2021-2023 has concluded.