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Deregulation under review

Laws have already been passed to deregulate New Mexico’s electricity industry in 2007. But the mixed fortunes of those states that have already undergone the deregulation process – notably the Californian experience – is causing players in the industry to think again. PNM, New Mexico’s largest utility, has come to an agreement with large users and state officials that could result in a halt being called to deregulation.

This agreement requires signatories to encourage the state legislature to repeal the law regarding deregulation. In return PNM has promised to cut rates for its 380,000 customers by 4% in September next year, with a further cut of 2.5% two years later, and then to hold this lower rate until 2008. These rate cuts will reduce the average residential bill by close to $3 a month – and will allow PNM to avoid a long and costly rate case before the public regulation commission. However, the agreement still has to be approved by state regulators.

And deregulation in Ontario, Canada, which came into force on May 1 this year, has been halted by the proposed introduction of price caps. The proposal will freeze generation costs at 2.7 cents US per kWh for all residential and small business customers – including those who have already entered into more expensive fixed price contracts. 

The provincial government has said it will reimburse small business and residential consumers for the difference between 2.7 cents and the amount they actually paid for electricity from 1 May 2002. Large C&I customers will be able to choose between their existing arrangements and the fixed 2.7 cent cost.

Electricity bills have increased by 25% since the introduction of deregulation, and this latest move comes as a result of significant political pressure.