Board hears detailed briefing on NMMEAA prepaid gas arrangement; members ask for comparative analysis

The Board of Public Utilities heard a technical briefing on the county’s participation in the New Mexico Municipal Energy Acquisition Authority (NMMEAA) prepaid natural gas arrangement and asked staff for a deeper, comparative financial analysis before any ordinance or final commitment is approved.

Ben Ulbrich, deputy utilities manager for power supply, described the agreement’s structure: NMMEAA issues tax‑exempt bonds and a financial intermediary (Royal Bank of Canada in prior packages) leverages the tax advantage to generate a fixed per‑unit discount that is passed back to participating municipalities. Ulbrich said the county is proposing a roughly 15% reduction in monthly daily quantities to better reflect the county’s recent five‑year consumption trend, which has fallen compared with the historical baseline used when the program began.

Ulbrich provided historical context for the county’s participation from 2019–2024: the county’s net spending on gas under the agreement for that period was about $17.7 million compared with roughly $18.85 million on the same volumes at index prices, yielding a net savings on the order of $1.14 million over five years. He cautioned that that headline number is influenced by the extreme price spike in winter 2022–23; excluding that period, the effective discount in the remainder of months was larger (Ulbrich cited a roughly 9.5% implied discount for non‑spike months).

Ulbrich and board members discussed the discount mechanics: the arrangement is not a fixed price for the commodity. Instead, the county pays the monthly settlement price at the San Juan index and the prepaid structure supplies a fixed dollar discount (Ulbrich said roughly 25–30¢ per MMBtu was expected in preliminary numbers). Ulbrich said extending the agreement term from the current scheduled end in 2039 to 2054 could materially increase the discount (the presentation suggested a potential doubling in the headline per‑unit discount under a longer term, though Ulbrich flagged that the final number would depend on market and interest rate conditions at execution).

Board members repeatedly asked for more transparent comparative information before the county signs a new five‑year package or considers extending the term. Members requested:

- A net‑of‑fees comparison showing total cost and savings versus a monthly index strategy and versus other available hedging or fixed‑price approaches for representative winter months; - Clarification of the intermediary/purchaser fees and how much of the tax‑exempt yield is retained by the financial intermediary versus returned to participants; - A clearer estimate of the discount range expected when the deal is executed (Ulbrich said the board should expect a final number in late February/early March when bond pricing firms produce final offers).

Public commenter Paul Parker said he was skeptical of the scale of savings, noting that even modest aggregate savings on the county’s portion of the package appear small relative to the hundreds of millions in bonds issued by the authority, and asked whether bond deal economics primarily benefit the bank intermediaries. Ulbrich and utility manager Philo said they would seek additional documentation and independent review from the NMMEAA consultant and return to the board with comparative scenarios.

No ordinance vote occurred at the meeting; Ulbrich said he expects a supplemental ordinance and final discount numbers during the next NMMEAA cycle in late February/early March and will bring a recommendation to the board and county council for formal approval.