El Paso’s sweltering heat is both good and not-so-good news for El Paso Electric’s finances.
It means customers use more electricity, which brings in more revenue, but it also means the company has to spend more money to add more power and make other improvements to keep the grid reliable, which decreases profits, said Lisa Budtke, the company’s chief financial officer.
In 2023, the company’s sales increased 4.5% to just over $1 billion, when power plant fuel costs are subtracted, show the company's 2023 financial report filed with the Federal Energy Regulatory Commission, or FERC. That's better than an average year, Budtke said.
El Paso Electric officials no longer issue news releases for the company's financial reports after the company was acquired in July 2020 by the JP Morgan Chase-tied Infrastructure Investments Fund , or IIF. The financial reports filed with FERC are more difficult to read than the quarterly and annual reports filed with the U.S. Securities and Exchange Commission when EPE was a publicly traded company.
In summer 2023, a long streak of 100-plus temperature days pushed the utility's power consumption to a peak its forecasters didn't expect to hit until 2029. The heat streak has resumed in the early part of this summer.
The gradual increase in area homes switching to refrigerated air conditioning from water-based evaporative coolers, which use less electricity, has helped increase electric consumption, Budtke said. About 60% of homes in EPE's system use refrigerated air, she said.
EPE has about 460,000 customers in West Texas and Southern New Mexico.
Palo Verde fund distorts profits, officials say
The increased sales and other factors helped the company's profit remain strong.
Its 2023 profit increased 84% to $208.6 million. However, that number is misleading, said Budtke and Cynthia Prieto, EPE controller.
A big chunk of that profit, $45.5 million, is only a profit on paper from the value change in the utility’s investments in its Palo Verde Decommissioning Trust Fund, Prieto said.
That means the company’s true profit was $163.1 million, she said. That's 44% above 2022’s $113.3 million profit.
However, the company's 2022 profit was deflated by a $70.8 million paper loss in the Palo Verde fund , Prieto said. That accounting loss also distorts the company's profit in 2022, making it smaller than in reality, she said.
The investment fund, with $398.3 million at the end of 2023, is designed to help the company pay for its share of decommissioning costs, or costs for possible closure of the Arizona nuclear power plant in the distant future. EPE owns almost 16% of the plant, which supplies about half its electricity.
IIF shareholders help fund projects
IIF received just over $180 million in cash dividends, or profits, from EPE last year. However, IIF’s shareholders, which are large pension funds, returned $167 million of those profits to the company to be used to pay for construction projects.
That means IIF kept just over $13 million in profits in 2023, well below the $92.7 million it retained in 2022.
One reason IIF returns profits to the company is because Texas regulators allow EPE to provide only a certain rate of return to investors, Budtke noted. So, maintaining the required return rate requires some of the profits to go back to the company.
While the sale of 122-year-old EPE was fought by some in El Paso , Budtke said she welcomed it. That's because EPE is able to easier tap shareholders' equity to help fund construction projects than when the company's stock was publicly traded on the New York Stock Exchange, she said.
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EPE spends $1.7B in 5 years for projects
"Over the last five years, we’ve invested $1.7 billion for our (construction) projects. And the reason we’ve been doing that is to make sure we can have a reliable system for our customers," Budtke said.
"And over the next five years we’re going to be spending more than that, not only due to making our system reliable for customers, but also for growth.”
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IIF shareholders have helped pay for part of that by returning millions of dollars in shareholders' profits to EPE since IIF bought the company, Budtke said.
EPE also gets money to help fund projects through bond sales. For example, this year, it sold $180 million in bonds, for which the company got just under $179 million, after paying the bond-sale commission, legal fees and other expenses, show a FERC filing.
CEO's salary increases $54,772
About 700 of El Paso Electric's 1,100 workers, including executives, received pay raises averaging 4.4% in 2023, and 3.9% in 2024. About 400 workers covered by a union labor agreement received pay raises of 8% in 2023 and 5% in 2024 under a five-year union contract.
Kelly Tomblin, EPE chief executive officer, is the company's highest paid executive. She had a base salary of $824,675 in 2023, not including bonuses, which are not disclosed in the company's financial report. That's an increase of 7.1%, or an additional $54,772, compared to 2022.
The company's board of directors, which had 10 members in 2023 and is now at nine members, received $1.4 million in fees and expenses in 2023. The company does not disclose individual amounts paid to each board member.
Vic Kolenc may be reached at 915-546-6421; vkolenc@elpasotimes.com ; @vickolenc on Twitter , now known as X.
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El Paso Electric 2023 financial highlights
Electric sales : $1 billion, up 4.5%✱
Power plant fuel costs: $137 million, down 52%
Profit: $208.6 million, up 84.1%✱✱
Notes: ✱ Electric sales with power plant fuel costs subtracted.
✱✱ 2023 profit declines to $163.1 million, up 44% from 2022, if $45.5 million investments’ value, or paper loss, in El Paso Electric’s Palo Verde Nuclear Decommissioning Trust Fund is subtracted.
Source: El Paso Electric 2023 annual financial report filed with the Federal Energy Regulatory Commission
This article originally appeared on El Paso Times: Heat boosts El Paso Electric sales, but creates need for new energy projects
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