8-K 04-17-2012

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):

El Paso Electric Company

(Exact name of registrant as specified in its charter)



Texas	001-14206	74-0607870
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

Stanton Tower, 100 North Stanton, El Paso, Texas		79901
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

On April 17, 2012, the City Council (the “Council”) of El Paso, Texas approved the settlement of El Paso Electric Company's (the “Company”) 2012 Texas retail rate case and fuel reconciliation in PUCT Docket No. 40094. The settlement reflects discussions with the Public Utility Commission of Texas (the “PUCT”), the City of El Paso (the “City”) and other intervenors in Docket No. 40094. The approval by the City Council (i) resolves the local, City of El Paso rate proceeding that commenced with the October 4, 2011 show cause order of the Council, (ii) implements new rates within the city limits of El Paso commencing with bills rendered on and after May 1, 2012, and (iii) rescinds and withdraws the temporary rate order that the Council issued on November 15, 2011. For Texas service areas outside of the city limits of El Paso, the settlement is subject to (i) final signatures by the parties to the settlement, which are expected after the final intervention deadline in the case of April 18, 2012, and (ii) approval of the settlement by the PUCT. While we cannot definitively predict the outcome, we do not expect anyone to intervene to oppose the settlement. The Company can give no assurance whether or when the settlement will receive the required approvals.

Under the terms of the settlement, among other things, the Company has agreed to:

A reduction in its current non-fuel base rates of $15 million annually, with the decrease being allocated primarily to Texas retail commercial and industrial customer classes. The rate decrease will be effective as of May 1, 2012;

New tariffs that will include an Economic Development Rate Rider that provides discounts in the demand charge and is intended to spur new business development in the Company's Texas service area;

Revised depreciation rates for the Company's gas-fired generating units and for transmission and distribution plant that will lower depreciation expense by $4.1 million annually;

Continuation of the 10.125% return on equity for the purpose of calculating the allowance for funds used during construction;

A two-year amortization of rate case expenses, none of which will be included in future regulatory proceedings; and

Palo Verde decommissioning funding of $3.6 million annually on a Texas jurisdictional basis, which will be subject to review and adjustment on a going-forward basis in future proceedings.

As part of the settlement the Company has agreed to withdraw its request to reconcile fuel costs for the period from July 1, 2009 through September 30, 2011. The Company will file a fuel reconciliation request covering the period beginning July 1, 2009 and ending no later than June 30, 2013 by December 31, 2013 or as part of its next rate case, if earlier.

The effect of the settlement is expected to reduce both the low and high estimates of the Company's previously provided earnings guidance range of $2.15 to $2.55 per basic share by approximately $0.16 per basic share. The adjustment to earnings per share reflects only the impact of the settlement. The Company will provide updated earnings guidance, which may include additional adjustments, at the time earnings are released for the quarter ended March 31, 2012 and will discuss updated earnings guidance on the Company's first quarter 2012 earnings conference call currently scheduled for May 2, 2012.

The Company has scheduled a conference call to discuss the terms of the settlement for April 18, 2012 at 12:00 p.m. Eastern time. The dial-in number is 888-300-2347 with a conference ID of 4507337. The conference leader will be Steven P. Busser, Vice President - Treasurer of the Company. A replay will run through May 2, 2012 with a dial-in number of 888-203-1112 and a conference ID of 4507337. The conference call and presentation slides will be webcast live on EE's website found at http://www.epelectric.com. A replay of the webcast will be available shortly after the call.

On April 12, 2012, the Company filed with the PUCT a request to reduce its fixed fuel factor charged to Texas retail customers. The fixed fuel factor is based upon a formula that reflects current costs of fuel for changes in prices for natural gas and the revision reflects recent declines in prices for natural gas. The impact of the reduction in the fuel factor will be a reduction in annual fuel revenues of approximately $30 million. Under the PUCT rules for reviewing changes in formula based fixed fuel factors, the lower fuel factors are expected to be effective May 1, 2012.

9.01 Financial Statements and Exhibits

99.01 EPE Press Release, dated April 17, 2012

99.02 EPE 2012 Texas Rate Case Settlement Presentation, dated April 18, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



EL PASO ELECTRIC COMPANY (Registrant)

By:		/s/ DAVID G. CARPENTER
Name:		David G. Carpenter
Title:		Senior Vice President - Chief Financial Officer

Dated: April 17, 2012



Exhibit Number	Description of Exhibit
99.01	EPE Press Release, dated April 17, 2012
99.02	EPE 2012 Texas Rate Case Settlement Presentation, dated April 18, 2012

For Immediate Release Contact: Teresa Souza

Date: April 17, 2012 (915) 543-5823

El Paso Electric and City of El Paso Agree to Texas Rate Case Settlement

El Paso Electric Company (the “Company”) is pleased to announce that the City of El Paso approved a settlement of the Company's pending rate case on April 17, 2012. The settlement, which provides for a $15 million reduction in base rates, is designed to encourage economic growth, primarily through rate reductions for commercial and industrial customers in Texas.

“The Company has worked diligently with the City and intervenors to establish the cooperation and trust required to resolve the rate case for the benefit of our customers and our community,” said Tom Shockley, El Paso Electric Interim Chief Executive Officer.

In addition to the base rate reduction, the settlement includes the establishment of a new Economic Development Rate Rider (“EDR”). The EDR provides declining rate discounts over a four-year period for new and existing businesses that build new facilities and increase employment in the region. The EDR will assist local governments' economic development efforts to attract new businesses to the region, by mitigating relocation costs borne by those businesses. It is anticipated that the EDR will provide up to $2.2 million in economic development discounts per year.

“Economic development is critical to the continued growth of the El Paso region and is a common goal shared by the City and the Company,” said Shockley. “Over the past few years, regional growth, combined with operational efficiencies, has allowed the Company to make the investments needed to serve its customers and provide reasonable returns to its shareholders.

El Paso Electric • P.O. Box 982 • El Paso, Texas 79960

Today's settlement will allow us to continue to play an expanded role in promoting future growth for the benefit of our customers and our shareholders,” he said.

El Paso Electric is also pleased to announce that, because of the combination of the Company's reliance on natural gas for a significant portion of its generation and the recent decline in natural gas prices, the fixed fuel component of its Texas customers' bills will also be reduced. Based on current gas prices, this should reduce customer bills by approximately $30 million annually. The revised base and fuel rates are expected to be effective May 1, 2012.

Over the next five years, the Company anticipates spending approximately $1.4 billion in plant improvements to meet our customers' growing demands for electricity. As the Company invests in new infrastructure, El Paso Electric will continue to seek improvements in customer service, reliability, and operational efficiency, while seeking a fair return on its investment through the regulatory process.

For areas outside the City of El Paso, the settlement is subject to the agreement of the other parties and final approval by the Public Utility Commission of Texas (“PUCT”). While we cannot definitively predict the outcome, we do not expect anyone to intervene to oppose the settlement. We also anticipate a final order from the PUCT no later than June 2012.

El Paso Electric • P.O. Box 982 • El Paso, Texas 79960

El Paso Electric R El Paso Electric Company 2012 Texas Rate Case Settlement April 18, 2012 Exhibit 99.02

El Paso Electric R Safe Harbor Statement Certain matters discussed in this presentation other than statements of historical information are forward-looking statements. The Private Securities Litigation Reform Act of 1995 has established that these statements qualify for safe harbors from liability. These forward-looking statements involve known and unknown risks that may cause our actual results in future periods to differ materially from those expressed in any forward-looking statement. Factors that would cause or contribute to such differences include, but are not limited to, such things as: • the final approval and financial impact of a proposed settlement to our rate case filed on February 1, 2012, • rates, cost recovery mechanisms and other regulatory matters including the ability to recover fuel costs on a timely basis, • ability of our operating partners to manage costs at Palo Verde and Four Corners, • scheduled and unscheduled outages including outages at Palo Verde, • the size of our construction program and our ability to complete construction on budget and on a timely basis, • our ability to recover our costs and earn a reasonable rate of return on our invested capital through rates, • electric utility deregulation or re-regulation, • economic and capital market conditions, • changes in environmental laws and regulations, • political, legislative, judicial and regulatory developments, • changes in accounting requirements and other accounting matters, • other circumstances affecting anticipated operations, sales and costs. This list is not all-inclusive as it is not possible to predict all factors. Please refer to EE’s 2011 Form 10K and other 1934 Act Filings. April 18, 2012 2

El Paso Electric R Benefits of Settlement • The settlement demonstrates EE’s commitment to the growth and expansion of the El Paso region ‾ Allows the City and EE to move forward in a cooperative and collaborative effort to serve the local community ‾ Helps promote economic development through the implementation of an Economic Development Rate Rider that provides declining rate discounts for new and existing businesses ‾ Allows EE to continue making improvements in customer service, reliability, and operational efficiency while seeking a fair return on its investment April 18, 2012 3

El Paso Electric R Texas Rate Case Settlement • Settlement approved by the El Paso City Council on April 17, 2012 ‾ Resolves the City of El Paso’s show cause resolution of October 4, 2011, ‾ Implements new rates within the city limits of El Paso commencing with bills rendered on and after May 1, 2012, and ‾ Dissolves the temporary rate order issued by the El Paso City Council on November 15, 2011 • For Texas service areas outside the El Paso city limits, the settlement is subject to: ‾ Final signatures by the parties to the settlement, which are expected after the final intervention deadline in the case of April 18, 2012, ‾ Approval of temporary rates effective May 1, 2012 reflecting the settlement, and ‾ Final approval by the PUCT which is expected in May/June 2012 April 18, 2012 4

El Paso Electric R Terms of Settlement • Reduces non-fuel base rates for Texas customers by $15 million annually ‾ $1.5 million for residential customers through a credit factor until the next rate case ‾ $13.5 million in base rate reductions primarily to commercial and industrial customers • Lowers depreciation expense by $4.1 million annually for gas generating units and transmission and distribution plant • Continues 10.125% return on equity for AFUDC purposes • Amortizes rate case expenses over a two year period (will not be recovered in future regulatory proceedings) • Allows for recovery of $3.6 million annually for Palo Verde decommissioning funding April 18, 2012 5

El Paso Electric R Terms of Settlement (continued) • The Company’s request to reconcile fuel costs included as part of the rate case will be withdrawn ‾ The Company will be allowed to file its next fuel reconciliation request covering the period starting July 1, 2009 and ending no later than June 30, 2013 by December 31, 2013 or in a rate case filling, if earlier • On April 12, 2012 the Company filed with the PUCT a request to reduce its fixed fuel factor due to lower natural gas prices ‾ Will reduce annual fuel collections in the Texas jurisdiction by approximately 18% or $30 million annually April 18, 2012 6

El Paso Electric R Impact of Settlement • The effects of the rate settlement are expected to decrease both the low and high estimates of earnings guidance by approximately $0.16 per basic share ‾ Previous earnings guidance range of $2.15 to $2.55 per basic share ‾ Earnings guidance will be updated and the items affecting the range of estimates will be provided at the time earnings for the first quarter are released and will be discussed on the Company’s first quarter 2012 earnings conference call scheduled for May 2, 2012 April 18, 2012 7

El Paso Electric R Questions and Answers April 18, 2012 8 El Paso Electric Company 2012 Texas Rate Case Settlement