DENVER - Smith Barney Inc. has been named bookrunning senior manager on a key power deal in New Mexico that would be part of a national trend toward power "wheeling."

But the $60 million to $90 million municipal bond issue, which would enable the city of Las Cruces, N.M., to buy transmission facilities from an El Paso utility, is by no means a sure thing.

Las Cruces voters will decide whether to approve the debt in an August election. Meanwhile, regulatory and business matters remain unsettled for the Texas utility - the bankrupt El Paso Electric Co.

Smith Barney bankers were nonetheless pleased to grab the senior position on the account from Dean Witter Reynolds Inc. Dean Witter was retained by Las Cruces a year ago and remains on the underwriting team, but the firm will not lead the proposed underwriting, sources said.

Las Cruces officials could not be reached for comment.

"As a firm with a strong commitment in New Mexico, we're pleased to have the opportunity to serve Las Cruces. It is a new opportunity for Smith Barney," said Chris Romer, Smith Barney's New Mexico specialist and vice president based in Denver.

An investment banking source with Dean Witter said he believes that Las Cruces switched because former Dean Witter banker Jorge Garza left the firm to join Smith Barney's regional office. Garza took the business with him, the source said.

Romer agreed with that assessment. He also credited David Brownstein's recent hiring to Smith Barney from A.G. Edwards & Co. as part of the reason Smith Barney got the job. Brownstein has worked in New Mexico for the past 10 years, Romer said.

Still, "Dean Witter is happy to be part of any municipal underwriting," said Stephen Young, senior vice president in Dean Witter's Dallas office.

The last Cruces situation is considered important by bankers because it is part of the so-called "wholesale wheeling" trend that has been predicted but has not widely materialized.

The trend's beginning stem from the Federal Energy Regulatory Commission's 1992 ruling that started deregulation of the electric utility business. As a result of the ruling, power companies must provide access to competitors who want to use their transmission lines. The result would be to create a situation similar to the oil and gas industry's, where pipeline companies transport oil and gas, but don't buy and sell oil.

Goldmann, Sachs & Co. was interested enough in the Las Cruces issue that the firm reportedly sent a five-person team there to head the deal, a source said.

"If the number one power underwriter does that, it tells you where they think the future of power underwriting is going," the source said.

Las Cruces, a city of 65,000 located about 40 miles from both El Paso and the Mexican border, has received offers of power 20% lower in cost than the power provided by El Paso Electric Co. Owning transmission facilities would allow the city to buy power from sources other than El Paso Electric.

El Paso Electric owns part of the Arizona nuclear plant, Palo Verde. High costs and oversupply ran El Paso Electric into bankruptcy court in 1993. Central & South West Corp. of Dallas successfully bid $2.2 billion for El Paso Electric in bankruptcy court, but is awaiting regulatory approval for the merger.

Las Cruces represents 8% of El Paso Electric's revenue base, without which the company would have difficulty living up to its Palo Verde commitments, the company has testified in regulatory hearings and said to local newspapers.

Texa's Public Utilities Commission might have a problem with granting the merger if Las Cruces pulls the plug. Las Cruces has two other choices, local sources said. It could proceed with condemnation hearings to buy the transmission assets such as power lines and transformers, or it could build its own.

Regardless of what Las Cruces does, it needs money to go on its own. Smith Barney's Romer, son of Colorado Gov. Roy Romer, was unsure of prospects for the underwriting.

"It's Thursday and we were hired on Monday," Romer said. "We have yet to weigh in on our analysis. Utilities acquisitions are always difficult, but we're very optimistic that ultimately there will be a transaction that makes sense for the city of Las Cruces."

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