Associated Press via KRQE: Public Hearing Planned for PNM Rate Hike Request

May 2011

By Susan Montoya Bryan

New Mexico regulators have a tough decision to make, and no matter what they decide, not everyone is going to be happy.

The Public Regulation Commission has to decide whether to approve a proposal by the state’s largest electric utility — Public Service Company of New Mexico — that would mean higher rates for its 500,000 residential and business customers.

The utility is scheduled to present its case during a public hearing that starts Monday in Santa Fe.

The case has been months in the making, with negotiations between industry groups and others and the preparation of reams of expert testimony both for and against the proposal. And customers are paying attention to all of it as the economy continues with its fits and starts.

“We’re getting more calls and emails than I’ve ever gotten on a PNM case from folks who want us to say no,” said Commissioner Jason Marks.

Consumer advocacy groups and environmentalists say the utility hasn’t justified the need for a rate increase. They also argue that higher monthly electric bills would hurt customers who are barely getting by.

Mike Donnelly, the advocacy director for AARP New Mexico, said a few extra dollars in monthly expenses is a big deal for senior citizens who have not seen an increase in their Social Security benefits in two years.

“Even the state Legislature this last session understood that now is not the time to increase any sort of taxes or fees to the public,” he said. “It bothers us that PNM doesn’t have the same empathy for what’s going on.”

But flipping the switch and having the light bulb turn on comes at a cost.

PNM is asking regulators for the increase mainly to recoup investments made in infrastructure to ensure reliability of its hundreds of miles of transmission lines and power generating stations.

When PNM initially made the request last summer, the utility estimated that investments in its system would total more than $575 million through 2011. At the time, the utility was seeking a rate increase of about 21 percent.

Negotiations with the commission’s staff, the attorney general’s office and others helped cut the proposed rate increase in half.

Now, the rate hike would average nearly 11 percent for residential and business customers. That could mean another $6 to $7 a month for average residential customers next year when the phased-in increase would be complete.

Under the proposal, the increase would result in $85 million in annual additional revenues for the expansion of substations and power lines and upgrades at five power plants. An additional $20 million could be recouped for more infrastructure investments made through the end of 2012, if approved by regulators.

Pat Vincent-Collawn, PNM president and CEO, said the proposal is fair and balanced.

“It is in the long-term best interests of customers because it balances what we need to provide safe and reliable power, reduces the amount of the increase, provides more help for low-income customers and limits other charges customers could see on their bills,” she said in a statement issued Friday.

Utilities must borrow large sums to make investments to keep service reliable, and PNM has argued that having adequate cost recovery through a rate increase would be critical to the company’s ability to access capital at a reasonable cost. Narrowing the gap between revenue and expenses will help the system operate at a lower cost, Vincent-Collawn has said.

As part of the deal, PNM agreed that base electricity rates will not increase again before 2014.

The proposal also limits the amount PNM can recover for fuel costs and energy efficiency programs over the next three years and sets limits on the amount the utility can recover to meet state renewable energy mandates. The utility would also have the ability to recover actual costs to comply with state or federal requirements or mandates that became effective after June 30, 2010.

Marks said the key for the commission will be determining what the proposal’s total cost to consumers will be and whether that is just and reasonable.

“I can say we’ll look closely at this and make sure that PNM doesn’t get a dime more than the law requires,” he said. “But the law does require us to authorize them to recover their cost of providing service so we need to look at what those costs really are.”

Critics of the plan, including the group New Energy Economy, have argued that PNM failed to prepare for the future knowing that tougher environmental regulations could be imposed and it now wants consumers to pay for it through higher rates.

New Energy Economy executive director Mariel Nanasi contends the proposal violates the regulatory principles of being just and reasonable.

Critics have also complained about the pay of PNM’s top executives, several of whom have shared in millions of dollars in bonuses and incentive pay.

In just one day last month, Marks said his office received 70 phone calls about the rate case. He gets about 20 emails a week related to the case.

“These are people who care enough to call or compose a letter,” he said. “They’re telling me they’re concerned about what PNM is doing, the investments they’re making, the salaries they pay and some of them talk about how they won’t be able to afford a rate increase.”

Despite the stories of hardships, the commission has to consider the law and how much PNM has invested in its system.

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