An analysis of Texas-New Mexico Power Company and their community choice program.

• Author: Vaughn, Johnny
• Position: Includes appendix

INTRODUCTION

Texas -- New Mexico Power (TNMP) company is an operating company of TNP Enterprises, a Fort Worth, Texas based holding company whose subsidiaries provide energy and energy services in Texas and New Mexico. TNMP is the primary investor -- owned competitor for Otero County Electric Cooperative and other cooperatives located in Central and Southwestern New Mexico, as well as parts of Texas. See appendix #1 for a map of TNMP's territory.

TNMP owns and operates electrically separate transmission and distribution systems in Texas and New Mexico. Although TNMP owns transmission facilities in both of these states, it is a transmission dependent utility because it relies on transmission owning utilities in Texas through the Electric Reliability Council of Texas and in New Mexico through the Western Systems Coordinating Council. In Texas, TNMP obtains bulk electric energy to serve its Texas customers from generating facilities owned and operated by TNMP and by purchasing bulk electric energy from wholesale suppliers. In New Mexico, TNMP purchases bulk electric energy from wholesale customers to provide all of its electric TNMP purchases wholesale power for its New Mexico territories from El Paso Electric, Southwestern Public Service, Public Service of New Mexico and Tucson Electric Power Company. In total, TNMP generates about one -- third of all of its KWH requirements.

FINANCIAL INFORMATION

TNMP serves approximately 214,000 customers with total GWH sales of 6,641 in 1995. Total revenues were $485 million. On October 1, 1996, Moody's Investor Service raised the long term debt ratings of TNMP by one rating level: first mortgage bonds to Ba2, secured indentures to Ba3 and the company's counterparty rating to Ba3. According to the October I news release, "the upgrade is prompted by the company's improving financial profile, as well as management's strategy to reduce the potential for "stranded" or unrecoverable assets associated with the TNP One power plant ( a 300 MW lignite -- fired generating plant) and the time the slow pace of deregulation in Texas has afforded the company to do so. However, the new ratings continue to reflect weak debt protection measurements, costly generation, expensive purchased power and high rates." TNMP's average revenue per KWH sold in 1995 was 7.32 cents.

DOWNSIZING

TNMP has downsized their organization in the past 5 years. Employment levels in 1991 were at 1,104. This number has been reduced to 858 as of the...