PRC GRILLING
Encounter focuses on PNM’s Palo Verde power purchase
In a contentious encounter, New Mexico Public Regulation Commission hearing examiner Carolyn Glick presented her recommended decision to regulators in the Public Service Company of New Mexico’s rate case. Glick’s Aug. 4 recommendation cut PNM’s rate hike request by two-thirds, from an increase of $123.5 million in annual revenue to $41.3 million. PNM customers would on average see their bills increase by 14.4 percent under the utility’s proposal instead of 6.4 percent under Glick’s.
PNM declined a request for comment.
The commission’s questions focused on Glick’s decision to exclude certain PNM investments from the rate base calculation, particularly transactions involving the Palo Verde Nuclear Generating Station in Arizona. On the grounds that PNM had not conducted an appropriate analysis of alternatives before purchasing 64.1 megawatts of power from the station and extending several other Palo Verde leases, Glick argued that the utility’s customers should not be held accountable for PNM’s “imprudent” business decisions.
“Any reasonable business, in particular a utility, when it had the opportunity to look at whether it was going in a direction that was going to impact customers, should have conducted a more thorough cost-benefit analysis,” said Glick at the hearing. The Palo Verde transactions were made in part to replace power lost from a partial closure of the coal-powered San Juan Nuclear Generating Station. The closure was part of an agreement between PNM and the Environmental Protection Agency aimed at reducing air pollution in the Four Corners area.
PNM has said if the commission adopts Glick’s proposal unchanged, it will sell off its interests in Palo Verde, leading to more reliance on coal- and gas-powered energy sources. The company has also said it will immediately appeal the decision to the state Supreme Court, and likely lay off up to 300 employees if the decision remains unchanged.
Two of the commissioners in particular took issue with Glick’s exclusion of the Palo Verde purchase from the rate base calculation, which decreased her recommended rate increase by $24 million.
“You’ve decided this case based not on what is on record,
but what is not on the record,” said Commissioner Karen Montoya.
Glick responded that there was precedent for making such an exclusion based on existing case law, and cited several cases where public commissions in other states had made a similar decision because they had deemed the utility had not conducted sufficient cost-benefit analyses.
“I don’t think one hearing officer should have the ability to take something out of the energy portfolio,” said Commissioner Pat Lyons. “There are five commissioners here elected to make sure something like this doesn’t happen.”
Lyons also said he felt PNM’s suggested valuation for the nuclear power purchase was too high, and that he favored including a more moderate “net book value” — the value of the cost of an asset minus depreciation.
At one point in the back-andforth between Montoya, Lyons, and Glick, commission Chair Valerie Espinoza intervened and asked Lyons and Montoya to “be respectful” of Glick.
Glick summed up her position by saying the commission’s decision will come down to whether or not it concurs with her interpretation of the utility’s prudency in the Palo Verde transactions.
“If you agree with me that PNM was not prudent because it did not consider alternatives, then you cannot look at incorporating the 64.1 megawatts into the rate base,” said Glick. “If you disagree with me, then you have a lot of decisions to make about net book values, double-counting improvements, and many other things.”