Commission OKs smaller rate hike for PNM

Utility requested 14 percent rate increase; PRC approves 7.6 percent average increase

SANTA FE — In a 3-2 vote, the New Mexico Public Regulation Commission on Wednesday approved an increase in annual revenue for the state’s largest utility of $65.7 million, about $58 million less than Public Service Company of New Mexico requested.

PRC staff told the commission the estimated increase would equate to a bill hike of 10.24 percent for the average customer, but PRC spokesman Carlos Padilla later told the Journal the average customer rate increase would be 7.6 percent, with residential customers seeing an average bill increase of around 9 percent.

PNM said it plans to file an appeal with the New Mexico Supreme Court.

The approved rate hike was a little more than half of PNM’s requested increase of $123.5 million in annual revenue, but higher than the $41.3 million recommended by a PRC hearing officer. PNM’s request would have on average had customers see their bills increase by more than 14.4 percent, versus about a 6 percent increase under the hearing officer’s recommendation.

Voting for the increase were Commissioners Pat Lyons, Lynda Lovejoy and Karen Montoya; voting against were Valerie Espinoza and Sandy Jones.

The increase will affect more than 500,000 New Mexican homes and businesses.

“This is a sad day for ratepayers,” Espinoza said.

The decision marks the conclusion of one of the most contentious rate cases in recent memory. It lasted nearly two years and was marked by public protests, person-

al attacks from the parties involved in the case, as well as solidarity between entities that have historically found little to agree on.

Much of the controversy stemmed from hearing examiner Carolyn Glick’s decision to exclude several transactions from the calculation that determines how much PNM can charge customers. In particular, Glick said PNM acted “imprudently” by failing to sufficiently weigh other options when it purchased 64.1 megawatts of nuclear power from the Palo Verde Nuclear Generating Station for $163.5 million, extended several leases at Palo Verde for $19.5 million per year and installed $52.3 million worth of air pollution controls at San Juan Generating Station that some parties called excessive.

PNM maintains that the investments Glick excluded from the rate calculation were prudent and appropriately analyzed.

The commission showed consensus early in the day that PNM was entitled to only $300,000 per year in recovery of the $52.3 million it spent on balanced draft air pollution technology at San Juan. PNM argued that the commission was obligated to allow full recovery of the costs because the balanced draft had been required by a permit issued by the state’s Environment Department. Evidence presented in the case showed that the balanced draft was included in the permit at PNM’s request.

The commission called the arguments PNM used in its request for full recovery of the costs “spurious and misleading.”

“This highlights the desperate nature of PNM’s arguments and undermines the integrity of this commission,” wrote the commission in its proposed order. “PNM may be subject to sanction if it continues this type of practice in the future.”

The commission allowed PNM $300,000 in cost recovery to account for operating and maintenance costs of the technology.

Regulators were divided when it came to evaluating the Palo Verde transactions. Espinoza moved to accept Glick’s proposal that the Palo Verde costs be excluded from the rate base, but she was the only one who voted in favor of doing so. A second proposal offered by Jones would have offered PNM the option of selling its nuclear power purchase on the open market, but no other commissioners voted in favor of the measure. The third proposal, brought forth by Lyons and supported by Montoya, accepted the full value of the Palo Verde leases and included the purchased nuclear power at “net book value” — the value of the cost of the asset minus depreciation.

The deciding vote came down to Lovejoy, who called it the most difficult decision she’s had to make in years.

“I’m not proud of it, and I’m not happy with it,” she said. “But I just couldn’t go along with the (hearing examiner’s) recommended decision.”

Lyons’ proposal also included in the rate base PNM’s nuclear power purchase at about $44.6 million instead of the $163.5 million PNM had requested.

“We appreciate that the commission’s order corrects some aspects of the Hearing Examiner’s recommendation related to the Palo Verde Nuclear Generating Station,” said Pat Vincent-Collawn in a statement. “We are, however, disappointed that the commission discounted the value of these long-term, carbon-free assets and did not approve recovery of the required balanced draft technology for the San Juan Generating Station.”

New Energy Economy, one of the intervening parties in the case, also expressed displeasure in the decision, albeit for a different reason.

“This PNM-friendly body voted for profits and further rate hikes over the rule of law and against the people,” said executive director Mariel Nanasi. “There is no factual legal or moral basis for the PRC to grant approval of more coal and nuclear. We will appeal.”

Another intervening party, Western Resource Advocates, took a different view.

“The commission reached a reasonable outcome for valuing Palo Verde,” said attorney Steve Michel. “The PRC recognized that Palo Verde is a zero-emission, useful resource for PNM’s customers, but also recognized that PNM’s claimed value was way too high.”

PNM has said it plans to file a new rate case by the end of the year.