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Bloomfield, Farmington debate electric utility

Farmington officials question Bloomfield's ability to run an electric utility

Hannah Grover
hgrover@daily-times.com
The north side of U.S. Highway 64 in Bloomfield is lined with utility poles and power lines. City officials in Bloomfield are trying to acquire local electrical assets as part of an attempt to start their own electric utility.

FARMINGTON – Farmington officials warn that Bloomfield residents could see electricity rate increases if Bloomfield is successful in its efforts to acquire the electrical infrastructure located within its city limits — an assertion a Bloomfield consultant disputes.

Bloomfield has been attempting to acquire those assets from Farmington and filed a lawsuit earlier this year as part of its effort to set up and operate its own utility. A district judge will decide early next year whether to dismiss the lawsuit.

Bloomfield states online and in brochures that it has four main goals in acquiring the assets: stabilizing and maintaining electric rates, providing job opportunities for Bloomfield residents, generating revenues to improve the quality of life in Bloomfield and providing reliable electric service.

Farmington acquired the electric utility in San Juan County in 1959 from the Basin, Light & Power Company. That company had been created for the purpose of acquiring infrastructure more than 5 miles outside the Farmington city limits when laws prevented Farmington from owning the entire system. After the laws changed, the company was dissolved. Shortly afterward, Aztec bought the electric infrastructure inside its city limits from Farmington, but Bloomfield was not in a financial position to do the same.

Farmington City Manager Rob Mayes warned that if Bloomfield acquires the infrastructure and begins to operate its own utility, it will not be able to generate revenue while maintaining the same low rates customers currently enjoy. He said the Farmington Electric Utility System has only in the last eight years become a contributor to the city’s general fund, and 60 percent of the revenue it generates is reinvested in infrastructure.

“It’s hard to run a utility,” Mayes said in a phone interview last week. “It’s hard to make money by running a utility.”

Bloomfield's feasibility report, which was used to determine whether the city could make the utility a profitable enterprise, was conducted using the current Farmington rates as the basis for the analysis.

"Right now, all the conditions point to, yes it can be an economically viable enterprise," said Edwin Reyes, a consultant for Bloomfield, when reached by phone on Friday.

Reyes said Bloomfield would not change the rates customers pay if it were to take ownership of the assets within its city limits.The Farmington rates, which Bloomfield used in the feasibility report, are the lowest rates in the area — less than 10 cents per kilowatt hour. In contrast, Aztec charges a little less than 15 cents per kilowatt hour. Aztec signed a contract locking it into a set rate while power costs were high, and the price of electricity has since decreased.

If Bloomfield owned the utility system, it would acquire power through a contract process. Reyes said the current low energy costs make it an ideal time to acquire a utility. The contract would provide Bloomfield with approximately 25 megawatts of power. Most of that power would serve two large industrial customers. Bloomfield officials said in a written statement that contracts would allow them to purchase power based on usage, which would keep rates consistent if one of those customers left the system.

Power lines are pictured Friday adjacent to U.S. Highway 64 in Bloomfield.

Mayes said Farmington’s low rates are also partially due to the size of the utility system, which serves approximately 44,300 customers, according to numbers provided to The Daily Times by the Farmington Electric Utility System in March. About 3,400 of Farmington’s customers live within Bloomfield’s city limits. If Bloomfield left the system, rates for other customers also could increase, he said.

“The entire county we serve will lose some economies of scale, thereby likely increasing everyone’s rates to some degree,” Mayes said. “We are stronger together.”

Each year, the Farmington Electric Utility System receives between a $960,000 and $1.2 million surplus from the portion of the system within the Bloomfield city limits. Mayes said 60 percent of that profit is invested back into the infrastructure for upgrades, and the other 40 percent goes to Farmington's general fund.

That means that if the utility makes $1 million from Bloomfield customers, about $600,000 of it would go to the infrastructure while $400,000 would go back into Farmington’s general fund, Mayes said.

However, that $400,000 comes before the franchise fees are paid to Bloomfield. Twice a year, Farmington pays Bloomfield “rent” for rights of way needed to operate the utility. The most recent payment received in franchise fees was $107,007, which covered the time between January and July, according to numbers provided by Brad Ellsworth, the Bloomfield finance director. Annually, Bloomfield receives a little more than $300,000 in franchise fees, Reyes said.

Mayes said the fees were determined prior to Bloomfield's recent annexation of territory, and Farmington is willing to increase its payments to account for the new boundaries. He said this could potentially increase franchise fees to $400,000 or more.

If Bloomfield were to acquire the assets, the revenues the city currently receives in franchise fees would be worked into the utility rates, Reyes said. The fees to pay for the utility system also would be incorporated into the rates, Reyes said, but he noted there are attractive financing options that will enable the rates to remain low.

Bloomfield residents will have an opportunity to vote on the approval of the bond that the city would use to pay for the system, Reyes said. Such an election will occur if the court rules in favor of Bloomfield's right to acquire the assets from Farmington.

Bloomfield Mayor Scott Eckstein said during a meeting with The Daily Times last week that the utility would benefit the city by allowing it to “grow the way we want to.” That includes the ability to offer incentives to businesses to locate to Bloomfield, he said.

Eckstein said Bloomfield is currently losing money to Farmington because its residents buy power from Farmington instead of Bloomfield.

“I’m a big believer in shopping in Bloomfield, spending my money in Bloomfield,” he said.

Hannah Grover covers Aztec and Bloomfield, as well as general news, for The Daily Times. She can be reached at 505-564-4652.