Public Service Company of New Mexico customers may receive an increase in their electric rates of just 1.5 percent over the next two years – rather than a 9 percent hike – thanks to federal tax overhaul and a new ruling by the Public Regulation Commission.
PNM had been seeking the 9 percent rate increase, or $62.3 million more in annual revenue. But this year’s reduction in corporate tax rates, from 35 percent to 21 percent, is expected to generate about $48.5 million in savings that PNM proposes to pass on immediately to ratepayers as part of a settlement agreement in the rate case that the PRC reviewed Wednesday.
Using the tax savings, PNM managed to lower its request to $13.8 million in new annual revenue, which would lead to about a 2 percent increase in electric rates, PNM attorney Richard Alvidrez told the PRC in the hearing.
But the PRC decided on Wednesday to slash an additional $9 million from PNM’s annual revenue request, meaning the company would actually get less than $5 million more in new money if it accepted the PRC’s decision. That would amount to a 1.5 percent rate increase on customer bills, to be phased in over two years.
It’s not yet clear whether PNM will accept the additional $9 million cut.
“We have to wait until today’s order by commissioners is officially delivered so we can analyze it in detail before making a decision,” PNM spokesman Dan Ware said.
PNM may well support the PRC ruling, because the PRC also reversed some decisions adverse to the company that commissioners had made in December. Those decisions were in connection with a settlement agreement that PNM and nearly all other parties in the case filed in May, and which lowered PNM’s original request for a 14 percent rate hike to the 9 percent hike.
But the PRC voted 4-1 on Dec. 20 to reject parts of the agreement, including allowing PNM to recover $148 million in investments it made in the coal-fired Four Corners Power Plant near Farmington, although the utility agreed in the settlement to forgo any profit on those investments. One party, the Santa Fe-based environmental group New Energy Economy, opposed that stipulation, arguing that PNM’s decision to continue investing in Four Corners instead of cheaper alternative sources of generation was “imprudent.”
Two hearing examiners in the case agreed, encouraging the commissioners to rule in December that PNM was not entitled to recover that money. At the December hearing, the commissioners agreed and also rejected the settlement’s approval of special, discounted rate hikes for some large industrial and institutional electric customers who had signed onto the agreement.
PNM and other settlement supporters rejected those PRC decisions and requested a rehearing, culminating in Wednesday’s follow-up review.
On Wednesday, commissioners voted 3-2 to reverse both of those December decisions, allowing PNM to now recover its $148 million Four Corners investment. The PRC will instead re-examine the alleged “imprudence” of PNM’s continued commitment to the coal plant in a future rate case.
“The tax-related decrease will zero out so much of it, plus the $9 million,” said Commissioner Pat Lyons, who proposed the reversals to the December order. “I believe it’s in the best interests of finding a balance between ratepayers and shareholders to accept these changes than it is to go back to a full-blown hearing where we don’t know what will happen.”
Commissioner Sandy Jones, who also voted to reverse the December ruling, said he had “a change of heart” given the benefits of the tax overhaul being immediately passed on to ratepayers.
“This will make us one of the first commissions in the country to get the federal tax breaks in place for ratepayers,” Jones said. “I believe there’s value in bringing this to a resolution. We might get a better deal in new hearings, but we may not.”
New Energy Economy Executive Director Mariel Nanasi argued passionately against reversing the December ruling.
“They (commissioners) abdicated their responsibilities by not deciding on the ‘prudence’ of PNM’s investment in Four Corners, which was the main issue in the case,” Nanasi said after the vote. “They took back their own finding of imprudence, and reversed the findings of the hearing examiners in this case.”
PNM and other settlement agreement supporters have until next Tuesday to accept or reject the PRC’s new ruling.