PRC examiner recommends one-third of rate hike PNM was seeking

By Steve Terrell
The New Mexican | Posted: Thursday, August 4, 2016 10:45 pm

In a move blasted by the president of Public Service Company of New Mexico and cheered by the director of a local clean energy advocacy group, a hearing examiner for the state Public Regulation Commission on Thursday recommended a drastically lower revenue increase for PNM compared with the amount the utility requested.

Hearing examiner Carolyn Glick recommended a $41.3 million increase to PNM’s revenues. That’s about a third of the $123.5 million the utility requested. PNM’s request would have resulted in a rate increase of about 15.8 percent for residential customers. 

Pat Vincent-Collawn, president and chief operating officer of PNM, called the recommendation unreasonable and said in a news release that PNM plans to “file strong exceptions with the [Public Regulation] Commission that emphasize the importance of recovering our investments.”

The commission will vote on the hearing examiner’s recommendation later this year.

Mariel Nanasi, executive director of the advocacy group New Energy Economy, said if the recommendation is adopted by the regulatory commission, it would save PNM customers about $300 million.

In the 280-page recommendation, Glick recommended:

• Increasing the residential customer charge from $5 to $7 a month. PNM had asked to increase the charge to $13.14 — which Glick, in her recommendation, called “astonishing.”

• PNM not be allowed to include in its rate base $152.8 million spent on purchasing 64.1 megawatts of power in two units at the Palo Verde Nuclear Generating Station in Arizona, saying PNM failed to show that this was the most cost-effective choice.

“The prudent investment theory provides that ratepayers are not to be charged for negligent, wasteful or improvident expenditures, or for the cost of management decisions which are not made in good faith,” Glick wrote.

• PNM not be allowed to include in its rate base $52 million for installing balanced draft pollution controls at the San Juan Generating Station near Farmington. Glick wrote that PNM submitted no evidence that the pollution controls resulted in environmental benefits or workplace safety.

Nanasi called the balanced draft pollution controls “gold plating.” Vincent-Collawn said the equipment was required by law.

• PNM should be allowed a 9.575 percent return on equity — not the 10.5 percent the company requested.

“We are deeply disappointed with the hearing examiner’s recommendation, as it does not represent a fair balance between the interests of customers and shareholders,” Vincent-Collawn said. “The rate case represents a request to recover the $655 million PNM has invested in its system since 2011 to provide safe, reliable, affordable and environmentally responsible electricity to customers.”

Vincent-Collawn said the decision to exclude the Palo Verde costs “could ultimately force PNM to eliminate nuclear energy from its PNM resource portfolio, even though it has been reliably and cost-effectively serving customers for more than three decades. The loss of this zero-emission resource would make it more difficult and costly to reduce emissions and for New Mexico to meet federal carbon regulations.”

She said if the recommendation is adopted, the utility’s credit rating could be downgraded.

“Customer bills would potentially be impacted because PNM would have to pay more to access capital for improving and maintaining the energy grid. In addition, PNM will be forced to re-evaluate its spending for New Mexico infrastructure, operations and in other areas.”

Nanasi said experts testifying for her group “discovered and highlighted that PNM did not provide any analysis to demonstrate cost-effectiveness or prudence in the nuclear purchase. We challenged PNM’s credibility and the hearing examiner agreed with New Energy Economy’s analysis,” she said.

However, Nanasi was critical of one part of the recommendation, in which the hearing examiner did not agree with her group.

Glick, she said, “wrongfully accepted the costs for the 15-year $580 million coal contract [for the Four Corners power plant] because PNM did no contemporaneous analysis to prove that this coal contract was cost effective or prudent.”

In her recommendation, Glick wrote that New Energy Economy provided no evidence that the cost of the coal contract was unreasonable.

If the Public Regulation Commission accepts Glick’s recommendation, it would be the second year in a row that a PNM rate increase failed. In May 2015, the commission upheld a hearing examiner’s recommendation to reject a rate increase from PNM because its application was incomplete. The company filed the current rate case a few months later.

Contact Steve Terrell at 505-986-3037 or sterrell@sfnewmexican.com

 

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