PNM rate hike comes with caveat

Spokesman says utility ‘disappointed’ over no fees for coal plant upgrades

State regulators on Wednesday agreed to allow Public Service Company of New Mexico to raise rates for electricity over the next two years, but they said the utility cannot ask consumers to foot the bill for tens of millions of dollars the company is spending to upgrade a coal power plant in northwestern New Mexico.

The Public Regulation Commission voted 4-1 on the rate increase, which would amount to about 8 percent for the average consumer by 2019, but with a potentially deal-breaking caveat.

The commission barred PNM from using higher rates to recoup the cost of nearly $150 million in improvements at the Four Corners Power Plant, deeming that spending “imprudent.”

PNM, a group of several major energy consumers and environmental advocates will have to agree in just the next few days on the commission’s provisions. If they do, the new rates could take effect Jan. 1. But if anyone rejects the plan, the rate case will head back to regulators for more hearings.

The company’s next steps remained unclear in the hours after the commission’s vote in Santa Fe, but a spokesman said PNM was “disappointed.”

PNM last year filed an application

to hike rates by about 14 percent for the average consumer over 2018 and 2019. The rate increase would yield about $99.2 million annually, part of which would cover investments in the Four Corners Power Plant.

PNM has said it will divest from the generating station in 2031 when its contract for coal expires. In the meantime, the plant is undergoing upgrades, including the installation of equipment to limit air pollution.

Environmental groups have argued the company should stop putting money into the plant altogether and move more quickly to cleaner sources of energy.

In May, PNM struck a deal with a range of groups that were likely to object to the rate increase — from conservation groups like the Sierra Club to major businesses such as Kroger.

Under that agreement, the company would raise rates on the average retail customer by about 4.9 percent in 2018 and another 4.4 percent in 2019.

But one environmental organization, New Energy Economy, objected. It argued that the agreement would still leave consumers to pay for PNM’s investment in the Four Corners Power Plant.

New Energy Economy argued the spending was imprudent, which would mean that regulators could bar the company from asking consumers to pay higher rates on the basis of those costs.

State officials agreed and recommended that the company not be allowed to use a rate increase to recoup expenses at the Four Corners Power Plant.

Commissioner Valerie Espinoza, a Democrat whose district includes Santa Fe, argued PNM was throwing good money after bad with its investments in the plant and then asking consumers to pay.

And she suggested that discounts PNM provided several groups earlier this year as part of the agreement effectively were a means of buying off critics.

“Ratepayers would lose again,” Espinoza said.

As part of its decision Wednesday, the commission called for another hearing to decide how much spending on the Four Corners Power Plant the company will be barred from factoring into its request for higher rates.

Only Commissioner Lynda Lovejoy, a Democrat from Western New Mexico whose district includes the Four Corners Power Plant, voted against the move.

But Dan Ware, a spokesman for PNM, emphasized that the agreement reached on rates earlier this year was supported by a diverse coalition of groups and that only one organization opposed it.

“The parties to the settlement agreement have worked together to strike a fair and balanced outcome, with only one party opposing the settlement,” Ware said. “Making significant changes to a settlement that has overwhelming support adds to the uncertain regulatory environment in New Mexico.”

Ware said after the vote that the company is reviewing the commission’s decision and mulling what to do next.

New Energy Economy touted the decision as saving ratepayers at least $150 million.

“Coal doesn’t make financial sense and New Energy Economy has prevailed at the Commission level in proving our case,” the group’s executive director, Mariel Nanasi, said in a statement.

Contact Andrew Oxford at 505-986-3093 or aoxford@sfnewmexican.com. Follow him on Twitter @andrewboxford.