May 29--LAS CRUCES -- City officials got some unexpected good news Friday when El Paso Electric Co. executives told them the utility has asked the New Mexico Public Regulation Commission to lower monthly electric bills.

Lawyers for El Paso Electric filed a new rate case Friday with the New Mexico Public Regulation Commission (PRC) seeking a projected $8.6 million reduction in rates for the utility's approximate 80,000 customer in New Mexico. David Stevens, El Paso Electric's chief executive officer, said the proposed reduction would save typical residential customers in New Mexico -- who use an average of 593 kilowatt hours a month -- about $1.26 a month on their bill.

"Even though the cost of serving our growing southern New Mexico communities has increased, that increase was more than offset by the projected decrease in the cost of fuel and purchased power to generate electricity," Stevens said.

City officials were briefed by El Paso Electric on the proposed rate reduction Friday afternoon at City Hall. On Thursday, some said they believed rates could increase.

"It's tremendous news," City Manager Terrence Moore said. "The proposed rate reduction is consistent with the comments El Paso Electric officials have been making to us in the past two years that they contemplated making adjustments in the rates because of the cost of fuel."

City officials, other municipal governments, Dona Ana County government, and other entities served in the state by

El Paso Electric can legally challenge, or intervene, in the rate case. However, Moore said city officials don't plan on doing that.

"Given the outcome of today, no, that doesn't appear to be necessary," Moore said.

The reduction is comprised of two factors, a $21.3 million projected decrease in fuel and purchased power costs, and a $12.7 million increase in non-fuel and purchased power base rates.

El Paso Electric does not earn any profit on fuel or purchased power costs charged to customers. According to a company news release, the expected savings are based upon projections of fuel and purchased power from July 2010 through June 2011.

"Customers are credited or charged for the difference between actual fuel costs and fuel collected through base rates through the fuel factor," said a portion of El Paso Electric's news release.