Fight over El Paso Electric’s proposed rate increase plows on
by June 30, 2025
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The El Paso City Council recently rejected a proposed rate increase by El Paso Electric that would spike household electricity bills by more than $22 per month — and likely generate millions of dollars of additional profit for the J.P. Morgan-backed investment fund that owns the utility.
But the unanimous vote by the council on Tuesday was largely symbolic and doesn’t mean rates won’t increase to some extent by next year.
Over the next few months, the city and dozens of other parties – such as local school districts and industrial companies – will try to lower the amount of the requested rate increase by negotiating with El Paso Electric in front of the state’s utility regulators. It’s those regulators who will ultimately decide whether to approve a rate hike – and by how much.
El Paso Electric’s power generation and delivery system has transformed significantly in recent years, and the utility plans to spend billions more on construction projects in the years ahead.
El Paso Electric said it has since late 2020 spent $1.55 billion on capital investments such as new power generation resources – primarily the utility’s $217 million Newman 6 natural gas power plant in far Northeast El Paso. It’s also replacing wooden power poles with steel poles and is building new substations to deliver electricity as El Paso sprawls out further.
El Paso Electric is asking the Public Utility Commission of Texas to let it raise rates and recover that money it has spent in recent years. The power company says it needs to collect an additional $85 million from customers annually to pay off the capital investments it’s made since its last rate hike in 2021, plus an increased profit margin of 10.7%.
If its rate request is approved as is, El Paso Electric said the average residential customers’ bill will increase from about $106 per month today to around $128 monthly.
“It’s pretty common knowledge that border towns and rural communities have higher rates of poverty and a greater amount of households that have lower income,” said Rafael Carrasco, a resident of the Square Dance community in east El Paso County.
“Out there in the communities where I live, it’s a rural community. Households that are of lower income, seniors on fixed income and vulnerable groups that live out in the county,” said Carrasco, who joined other activists at Pavo Real Park earlier this summer to protest the proposed rate hike. “A higher rate would only add a further burden to their financial sustainability.”
Future of El Paso’s economy
El Paso Electric’s ongoing build-out of its electricity system has major stakes for the future of El Paso.
Mayor Renard Johnson has said attracting new businesses to El Paso will help lower residential property taxes as businesses as a whole would pay a larger share of taxes needed to operate the city than they do now.
“This is tough,” Johnson told El Paso Electric executives during the council meeting. The mayor can only vote to break ties, so he didn’t cast a vote on the proposed rate increase. But he has supported the city attorneys fighting the rate increase.
“We’re getting the calls where people are concerned with inflation, the high rising food costs, gasoline costs and now utility costs,” Johnson said. “Our constituents want to know: Why are the rates going from one amount to an average (increase of) $22.39 per bill?”
But as new companies such as manufacturing plants or data centers come to El Paso, the utility’s executives have said it must add new sources of electricity and new distribution infrastructure to meet growing demand for power and replace outdated electricity generation units at its power stations in Sunland Park, New Mexico and elsewhere.
“If we can’t build power, (employers) can’t build jobs,” Kelly Tomblin, El Paso Electric’s chief executive, said during a discussion held by the Federal Reserve Bank of Dallas earlier this month.
Tomblin referenced the new $152 million facility that Taiwanese firm Wiwynn recently committed to build in Socorro, which she said will create 515 jobs that pay well over $30 an hour. But the facility will require 150 megawatts of power to operate – a significant amount of new demand for El Paso Electric to supply.
And that’s just one example of a new enterprise entering El Paso.
“We are a 2.3-gigawatt system,” Tomblin said, referring to the utility’s total power generation capacity. “We need another 2.3 gigawatts to grow the economy, to provide the jobs that I think will be high-paying and high-tech.”
And new demand for electricity isn’t just coming from new businesses.
Like other electric utilities throughout the U.S., El Paso Electric has seen demand for power in its service territory – which spans from Hatch, New Mexico, to Van Horn, Texas – grow rapidly in recent years. That’s been driven by factors such as hotter weather, which leads to more air-conditioning usage, as well as customers switching to more power hungry-refrigerated AC and new customer growth.
“EPE continues to experience above-average growth in its customer base and load demand,” analysts with the credit rating agency Fitch wrote in an April note.
The analysts study El Paso Electric to signal to investors who buy the utility’s bonds how likely El Paso Electric is to pay back its debts. The Fitch analysts said demand for electricity in El Paso could grow by 1,700 megawatts by 2030, which they attributed to hotter weather here, electrified vehicles and appliances, and new industrial customers setting up shop in El Paso.
“To address the growing demand, EPE plans substantial capital investment to add new generation resources and improve its existing infrastructure,” the analysts wrote, adding that the utility has plans to spend $3.5 billion on capital investments through 2029, a big increase compared with the utility’s prior multi-year spending plans.
The increase in capital spending is mainly driven by new solar farms, battery storage projects and the expansion of its distribution system, the poles and wires that deliver power to homes and businesses.
El Paso Electric’s current rate hike request is retrospective; it’s meant to recover investments the utility has made in the past few years.
In addition to building the Newman power plant for $217 million, other recent investments include a $41 million project to replace 300 wooden poles with steel poles in the Gila Wilderness, where transmission lines ferry power generated at the Palo Verde Nuclear Plant in Arizona.
New sources of electricity for El Paso
The utility has also spent hundreds of millions of dollars building substations throughout El Paso County, which enable El Paso Electric to bring in power from solar farms outside the city and then distribute it to customers.
And the $3.5 billion that credit analysts expect El Paso Electric to spend from now through 2029 indicates additional rate increases are likely in the years ahead for the utility’s customers.
One example: El Paso Electric said it has 1,180 megawatts of solar capacity plus 965 megawatts of battery storage arrays under construction. Those are massive figures relative to El Paso Electric’s size.
El Paso Electric currently operates about 2,300 megawatts of electricity generation capacity across its system of four local natural gas-fired power plants, a couple of solar farms and the Palo Verde nuclear plant that it partially owns. So, the new solar farms the utility is developing represent more than 50% of its current system that it has built out for decades.
And the battery storage arrays would store much of that solar energy generated during the day and disburse it onto the grid at night when it’s most needed.
“As our customer demand continues to increase at unprecedented levels, we continue to pursue renewable generation along with other options to keep up with that demand,” Teresa Sosa, director of environmental and safety for El Paso Electric, told El Paso Matters in a statement.
Potential windfall for El Paso Electric’s owner
Yet, the construction of new capital projects such as the solar farms and related distribution infrastructure doesn’t just benefit the region’s electricity system. It also translates into additional profit for the utility’s owner, Infrastructure Investments Fund, which is owned by J.P. Morgan.
As part of the rate increase request, El Paso Electric is also asking regulators to fatten its authorized rate of return – called “return on equity” – up to 10.7% from 9.35%, currently.
Regulators allow El Paso Electric and other utilities to earn a set rate of return to give to their investors. That way, investors – in this case, IIF – have an incentive to put up money to fund the utility’s construction projects instead of piling cash into the stock market or other investment options.
Because El Paso Electric funds capital projects with both equity – essentially, cash sent from IIF – plus debt in the form of bonds, the utility’s actual rate of return on its capital investments is 7.5%, currently. That would rise to about 8.3% if the rate hike is approved as is.
An increase of less than 1% in the utility’s overall rate of return on capital spending could still have a significant effect considering that the utility plans to invest billions more on capital projects that produce a return over the coming years.
If approved as is, El Paso Electric’s rate hike proposal would mean its owners on Wall Street would likely see millions of dollars of additional profits in the coming years in the form of dividends from the utility funded by higher customer bills. It’s also possible, though, that IIF may choose to re-invest some amount of future profits into El Paso Electric’s infrastructure instead of taking dividends from the utility.
From 2022 through 2024, El Paso Electric paid $491.8 million in total dividends to its owner, IIF, or an average of $164 million annually, according to regulatory filings submitted to the PUC.
“The return on equity is the profit that the utility is allowed to earn,” Jennifer Borden, director of regulatory accounting for El Paso Electric, told City Council. “This ensures that the company can attract future funding to continue to invest in the necessary infrastructure to provide reliable service to its customers.”
Taken together, a two-sided picture emerges: El Paso’s economy and the growth of well-paying jobs here depends on an updated, reliable and affordable electricity system. And El Paso Electric’s renovation of the regional power grid also translates to higher profits for the J.P. Morgan-owned utility.
Rate increase negotiations
It’s likely the final rate hike customers see will be less than the nearly $23-per-month increase that El Paso Electric initially proposed. In recent months, El Paso Electric, the city and other entities involved in the case have filed thousands of pages of information and expert witness testimony to the PUC to make their case about why the rate increase is or isn’t justified.
There are many points of contention. One example – among many buried within the voluminous documents related to the rate case – is the cost El Paso Electric paid to build the Newman 6 power plant.
Evan D. Evans, a former El Paso Electric executive and consultant for the Office of Public Utility Counsel, a consumer advocate, said in filings that El Paso Electric overspent its budget by tens of millions of dollars and finished construction of the plant over six months behind schedule. The PUC, he said, should consider that when the commissioners decide whether to approve a higher rate of return for the utility.
El Paso Electric has said it was struck by unavoidable inflation and cost escalations that utilities across the U.S. experienced.
“EPE has not proven that it adequately managed the construction of Newman Unit 6 or the costs of that construction,” Evans told regulators.
Still, the utility’s customers will see a rate increase of some amount that likely will take effect early next year. Despite City Council representatives’ vote Tuesday, the question now is not if, but rather how much household power bills will increase in El Paso.
“It’s safe to say … to ratepayers ‘You will see some increase.’ There won’t be a scenario, essentially, where there’s zero increase, because that’s just not realistic,” said District 8 City Council Rep. Chris Canales.
“Just like anybody else,” he said, “El Paso Electric is dealing with inflation and increased costs, and also legitimately taking steps and making efforts to make sure your service is more reliable.”
