Title
Approval and Recommendation of Incorporated County of Los Alamos Code Ordinance No. 02-359; An Ordinance Amending Chapter 40, Article III, Sections 40-151 and 40-152 of the Code of the Incorporated County of Los Alamos Relating to Gas Rate Schedules
Recommended Action
I move that the Board recommends Incorporated County of Los Alamos Code Ordinance No. 02-359; An Ordinance Amending Chapter 40, Article III, Sections 40-151 and 40-152 of the Code of the Incorporated County of Los Alamos Relating to Gas Rate Schedules and forward to Council for introduction and adoption.
Utility Manager's Recommendation
The Utility Manager recommends that the Board recommend Incorporated County of Los Alamos Code Ordinance No. 02-359 and forward to Council for introduction and adoption.
Body
The FY2025 adopted budget and FY2026 projection each included a 5.5% blended rate increase for gas. The Board and Council previously approved a 3% increase for FY2025 (effective Sept 2024) and a 2% increase for FY2026 (effective Sept 2025). In determining projected rate increases, the ten-year projection takes into consideration expenditures and fulfilling the reserve target requirements within the required ten-year horizon. Since DPU's budget preparation, New Mexico Gas Company (NMGC) and Conoco Phillips have notified the County of increases in their transportation rates on both a per meter and variable basis. Additionally, The New Mexico Public Regulation Commission, Pipeline Safety Bureau performed the Operation and Maintenance Procedures & Emergency Plan audit in 2023. The audit included review of records and procedures for the period from 2018 to 2022 and field inspection of the gas system. The audit resulted in a list of notice of probable violations (NOPVs) that required a timely response to avoid these findings elevating to violations. DPU has responded to each of the NOPVs which addressed updating procedures, new procedures, addressing items noted during field inspection and action plans to mitigate deficient records.
NMGC has also applied for a rate increase for their retail customers that would take effect in October if approved by the Public Regulation Commission (PRC). According to NMGC’s website “for customers who are not signed up for budget billing, the summer bill average impact would be an increase of 6.3% while the winter bill average impact would be an increase of 7.3%.”
The current DPU gas rate is made up of the following components:
Current Fixed Service Charge:
Small meter (<=250 CFH) = $11.08/month
Large meter (>250 CFH) = $33.24/month
Current Commodity Rate:
Varies monthly. Minimum allowable variable cost-of-gas rate = $0.11/therm
Fixed consumption charge = $0.27/therm
The rate analysis contained attached excludes the variable cost of gas rate because it is a pass-through rate that is calculated each month based on the projected cost of gas for the billing month plus an adjustment for any prior over or under collection for gas purchases and or gas transportation costs, provided, however, the variable cost of gas rate shall not be lower than the compensatory rate of $0.11 per therm.
Proposed Code Ordinance Schedule:
Council Introduction: July 9, 2024
Council Public Hearing: July 30, 2024
Alternatives
If the rate increase is not approved, the previously authorized rate increases for 2024 and 2025 will go into effect. DPU will have to curtail maintenance and replacements. This curtailment will impact system reliability and eventually create a need for a rate increase that is potentially urgent and more substantial.
Fiscal and Staff Impact/Planned Item
Fiscal changes are included in Attachment B - Gas Rate Calculation.
Attachments
A - Code Ordinance 02-359_Gas Rates
B - Gas Rate Calculation
C - Notice of Publication
D - Frequently Asked Questions