Faced with what it says is the growing demand for electricity and the need for cleaner energy sources, Public Service Company of New Mexico is asking for an 18 percent rate increase for residential, small-business and industrial users.

The rate proposal is to be considered by the state Public Regulation Commission at a hearing in early 2009.

PNM's first base rate increase in 20 years went into effect in June 2008, said PNM spokeswoman Susan Sponar. The average increase for all customer classes was 6.3 percent, she said. That amounted to a $5 increase for the average residential customer in June, July and August — the months when demand for electricity is the highest — and added an average of $1.58 to the customer's bill for the other nine months of the year, when demand lessens, Sponar said.

The planned rate increase would raise the monthly bill for a residential customer an average of about $12, Sponar said, a little more in the summer and a little less in the spring, fall and winter.

The $123.3 million rate increase is driven by several factors, PNM said, including devoting two existing, gas-fired plants in Southern New Mexico to meeting the increasing energy needs of PNM customers.

PNM is also looking at what it calls "a major environmental upgrade" at the coal-fired San Juan Generating Station that will reduce emissions by 24,000 tons annually and keep the plant working as a low-cost provider of electricity.

The company is also expecting to deal with increased interest, fuel costs and other expenses.

PNM said it expects to spend about $1.3 billion on power plants, power lines and other infrastructure during the next five years — that's 63 percent more than it has spent on similar projects in the last five years.

PNM said it recently proposed efficiency programs that would increase energy savings from existing programs by 110 percent and, over their lifetime, save enough electricity to power nearly 80,000 homes for a year.

In addition to the rate increase, PNM wants to continue use of a fuel and purchased power-cost adjustment clause, which was approved in May.

The clause allows the company to pass along to customers changes in fuel and purchased power costs paid to provide electricity to customers without adding a profit.

"Such a mechanism is prevalent throughout the country as well as in New Mexico, and helps keep rates lower than they otherwise would be," a statement from PNM said.

Information from The Associated Press was used in this report.

Contact Bob Quick at 986-3011 or bobquick@sfnewmexican.com.