PNM challenges hearing examiner’s rate conclusions

Utility defends its cost-benefit analysis

Public Service Company of New Mexico has filed a formal objection to a state hearing examiner’s recommendation in an increasingly contentious utility rate case.

PNM declined to comment for this story. But in a document filed with the New Mexico Public Regulation Commission Wednesday, PNM said hearing examiner Carolyn Glick ignored “facts, law, and commission precedent” in her decision to exclude several nuclear power transactions from PNM’s rate base, as well as an investment in air-pollution controls at the coal-powered San Juan Generating Station that some called excessive.

“Adopting these unsupported findings, along with the recommendation that PNM ‘try again’ in its next proceeding, would be unlawful, arbitrary, and financially destructive,” PNM said in the filing.

The exclusions accounted for the majority of the difference between Glick’s $41.3 million recommended annual revenue increase and PNM’s $123.5 requested increase. 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.

Glick has said it is not appropriate for her to comment in the middle of a rate caes. In her recommended decision, she said PNM had acted “imprudently” by purchasing 64.1 megawatts of nuclear power from the Palo Verde Nuclear Generating Station and extending several leases there without conducting an appropriate cost-benefit analysis. PNM maintains its analysis was sufficient.

The Palo Verde transactions were made in part to replace power lost from a partial closure of San Juan. The closure was part of an agreement between PNM and the Environmental Protection Agency aimed at reducing air pollution in the Four Corners area.

In its most recent filing, PNM complained aboiut what it perceived to be Glick’s “legally and factually unsupported conclusions” and “punitive tone.” PNM argued there is a legal precedent for the commission to allow for cost recovery in the absence of “serious doubt” about a transaction’s reasonableness, which PNM claims is the case for the costs Glick excluded from the rate base.

PNM took particular issue with Glick’s exclusion of the Palo Verde transactions, which it called “so obviously reasonable,” arguing at length that it was not required to consider alternatives to replacing the lost San Juan energy with nuclear power under current statute. The utility also said a PRC adoption of Glick’s recommendation would have serious repercussions for similar businesses throughout the state.

“If allowed to stand, the (recommended decision) sends a troubling message, not only to PNM, but to all of the utilities in New Mexico, that the Commission need not, and will not, consider whether its deci-

sions cause financial harm to the utility,” PNM wrote in the filing.

The Rio Grande Foundation, a free-market think tank, and the New Mexico Business Coalition, a pro-business advocacy organization, echoed PNM’s sentiment in a recent email warning of the potential impact of “radical environmentalists” on the PRC. The email asked recipients to sign a petition to the PRC in support of nuclear power.

Two of the nine intervening parties in the case that filed supplemental briefs on the Palo Verde transactions — New Energy Economy, an environmental advocacy organization, and the Albuquerque Bernalillo County Water Utility Authority — recommended complete exclusion of these events from the rate base. Both said PNM had not provided sufficient financial analysis to show the purchase was reasonable.

In a PRC meeting Wednesday, several individuals, including PRC Commissioner Pat Lyons, publicly accused Glick of being biased against nuclear power, an accusation Glick denied.

The encounter became heated enough that PRC Chairwoman Valerie Espinoza intervened several times on Glick’s behalf.

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 also has 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.

The PRC is expected to make their decision in the rate case by Aug. 31.