Title
Consider and take action on a resolution by the City of League City, Texas (“City”) denying Texas-New Mexico Power Company’s proposed rate increase in connection with its statement of intent submitted on about on November 14, 2025; requiring the reimbursement of municipal rate case expenses; authorizing participation in the coalition of similarly situated cities; authorizing intervention and participation in related rate proceedings; authorizing the retention of special counsel; finding that the meeting complies with the open meetings act; making other findings and provisions related to the subject; and declaring an effective date (City Attorney)
Background:
On November 14, 2025, Texas-New Mexico Power Company (TNMP) filed an application to increase its annual revenues by approximately $34.0 million, which represents an increase in revenue of about 6.0% in retail rates. For a residential customer using 1,000 kWh per month, TNMP’s proposed rates would increase a customer’s bill by about $5.50 per month. This is TNMP’s first comprehensive base rate case since 2018.
TNMP proposed an effective date of December 23, 2025, for its increase in rates. As is explained below, the proposed resolution related to TNMP’s application to increase rates, if adopted, denies TNMP’s proposed increase.
CITY JURISDICTION TO SET TNMP’s RATES:
Municipalities that have not ceded their original jurisdiction to the Public Utility Commission of Texas (PUCT) have exclusive, original jurisdiction over an electric utility’s rates, services, and operations within a city’s boundaries. This means that for a utility like Texas-New Mexico Power Company (TNMP) to change its rates it must seek approval to do so from the city in which it provides its service. But even if a city has ceded its jurisdiction to the PUCT, a city nonetheless has the statutory right to participate in rate proceedings before the PUCT.
BASIS FOR TNMP’s REQUEST:
TNMP asserts as the main factors for its proposed increase in rates the following:
• Significant growth in its service areas;
• Additional investments in its distribution and transmission network;
• Increases in operations and maintenance (O&M) expenses;
• Recovery of O&M expenses related to Hurricane Beryl in its Gulf Coast Region;
• Expenses related to its ongoing vegetation-management program;
• Updated depreciation and amortization expenses
• A requested cost of capital consisting of a 10.4% return on equity (ROE) and an equity layer of 47.54% in its capital structure and 52.46% long-term debt producing an overall rate of return (ROR) of 7.88%.
ALLIANCE OF TNMP COMPANY MUNICIPALITIES (“ATM”)
In prior rate cases involving TNMP, the City participated in the proceedings as part of the Alliance of TNMP Company Municipalities (“ATM”), a coalition of similarly situated cities in which TNMP provides electric service. ATM was organized about 10 years ago by a number of municipalities served by TNMP. Through ATM the City has intervened in TNMP’s past rate proceedings at the Public Utility Commission (“PUCT”) and has been represented by the law firm of Herrera Law & Associates, PLLC and has been successful in moderating the increases TNMP has sought.
REPRESENTATION AND PARTICIPATION IN ATM:
The law firm of Herrera Law & Associates, PLLC has previously represented the City and its participation in the coalition of cities named the “Alliance of Texas-New Mexico Power Company Municipalities” (“ATM”) in rate matters involving ATM, including TNMP’s most recent rate case and the multiple “DCRF” rate proceedings TNMP filed since its last general rate case. The accompanying Resolution authorizes retention of Herrera Law & Associates as Special Counsel and the City’s continued participation in the ATM coalition.
INTERVENTION AT THE PUBLIC UTILITY COMMISSION OF TEXAS
TNMP filed its Statement of Intent to raise rates with the City and with the Public Utility Commission of Texas (“PIUCT”) on the same date, November 14, 2025. It is important to participate in the proceedings before the PUCT because its decisions will impact rates within the City. Thus, the accompanying Resolution authorizes intervention in proceedings at the PUCT as well as any appeals taken from the PUCT’s decision.
RATE CASE EXPENSES:
Cities by statute are entitled to recover their reasonable rate case expenses from the utility. Legal counsel and consultants approved by ATM will submit monthly invoices to the coalition-designated city that will be forwarded to TNMP for reimbursement. No individual city’s budget is negatively affected. The proposed resolution directs TNMP to reimburse the ATM cities’ expenses on a monthly basis.
NOTICE:
TNMP is required to provide notice of its rate increase application. The resolution that accompanies this agenda information sheet requires that TNMP provide proof that TNMP has published notice as required by state law.
RECOMMENDATION:
The City's options are:
1. To do nothing and TNMP’s proposed rates go into effect on December 23, 2025, TNMP’s proposed effective date for its increase in rates;
2. Deny TNMP’s proposed increase and TNMP will file an appeal of that denial to the PUCT; or
3. Suspend TNMP’s proposed effective date of December 23, 2025, for the statutorily established suspension period of 90 days.
Though in prior general rate cases filed by TNMP, the ATM cities have “suspended” TNMP’s proposed effective date for the statutorily allowed time of 90 days, because it is unlikely that the ATM’s expert consultants will complete their analysis within the suspension period and importantly, in time for timely final action by the cities, ATM’s Special Counsel recommends that the ATM cities deny TNMP’s proposed increase in rates and intervene in the proceeding at the PUCT. Thus, if adopted, the accompanying resolution:
1. Denies TNMP’s proposed increase in rates;
2. Authorizes intervention in TNMP’s rate case pending at the PUCT;
3. Authorizes retention of Herrera Law & Associates, PLLC, to continue as ATM’s Special Counsel with regard to proceedings related to TNMP’s rates;
4. Authorizes continued participation in the Alliance of Texas New Mexico Company Municipalities (ATM);
5. Directs TNMP to reimburse ATM’s rate case expenses related to TNMP’s application to increase rates; and
6. Directs TNMP to provide proof that TNMP has published notice as required by state law.
The City must take action no later than December 23, 2025. If the City does not take action by December 23, 2025, TNMP’s proposed rates will be deemed approved by operation of law, subject to the City’s right to hold a hearing to address TNMP’s rate application.
Attachments:
1. Proposed Resolution
2. Rate Tables
CONTRACT ORIGINATION:
FUNDING
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STRATEGIC PLANNING
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