Rate case FACE-OFF
All but one intervenor either support or don’t oppose PNM’s 9% hike agreement
Some sparks could fly at regulatory hearings on Public Service Co. of New Mexico’s latest request for a rate hike, which begin today in Santa Fe, but the flaming conflicts that consumed PNM’s last rate case in 2015 won’t be repeated this time around.
That’s because every intervenor in this case, with the exception of one, either directly supports or doesn’t oppose PNM’s request for a 9 percent hike in base rates. That includes more than a dozen intervening parties who signed a settlement agreement with PNM in May to resolve most conflicts in the case, which PNM filed with the New Mexico Public Regulation Commission last December.
The settlement agreement lowered PNM’s requested rate hike from 14 percent before to 9 percent now. And it paved the way for consumer advocates and environmental groups to begin negotiating other, more-contentious issues next year, such as PNM’s complete pullout from coalfired generation in coming years, and new rate-making proposals that could allow the utility to recover lost revenue from energy efficiency programs.
“We have all but one intervenor on board or not opposed,” said PNM Resources Chairman, President and CEO Pat Vincent-Collawn. “It’s a compromise that we think fairly balances the needs of shareholders and ratepayers.”
The one lone wolf, New Energy Economy of Santa Fe, could throw a wrench in the works. But even that group doesn’t oppose the whole
settlement outright. Rather, it objects to rate recovery for PNM investments in the coal-fired Four Corners Power Plant and some costs associated with the nearby San Juan Generating Station.
"We're not opposed to the entire stipulation." said NEE Executive
Director Mariel Nanasi. “We have very specific challenges against those investments. ...That's the main thing we’re fighting in this case.”
NEE could face a steep uphill battle to gain support at the PRC. The hearing examiners will make a recommended decision to PRC commissioners, who will rule on the case later this year.
Coal-related investments constitute the bulk of PNM’s rate request. It’s seeking $62.3 million in new annual revenue, down from $99.2 million before the settlement.
About $44 million of that is for expenses connected to shutting down two of the four generating units at San Juan next year, plus PNM’s share of costs for new pollution controls and other operation and maintenance costs at Four Corners, where it has a 13 percent ownership stake.
The rest is mostly for new investments in things like transmission and distribution, and to recover revenue for operating the grid that PNM lost when it lost wholesale distribution contracts with three electric cooperatives. There’s also a slight increase to the fixed charge on monthly bills for residential and commercial customers.
If approved, average rates for all customers would increase by 9 percent, phased in over two years, in 2018 and 2019, to mitigate the impact on ratepayers. Average monthly residential bills would actually only go up about 7 percent over those two years because the hike only applies to base rates on bills, not the costs for fuel that PNM buys to generate electricity.
NEE opposes any recovery of investments at Four Corners. It claims PNM never conducted a “prudent” financial analysis that might have shown pulling out of the
plant in 2013 — when it signed a new coal and co-ownership agreement to remain there until 2031 — would be less expensive than staying in the plant.
“We want to show that PNM’s investment in Four Corners was made recklessly, and ratepayers should not be burdened with its unsound business judgments,” Nanasi said.
But that’s an argument NEE and others lost in last year’s rate case, when PNM sought recovery for the new Four Corners coal contract. The PRC approved that coal contract as part of a 7.6 percent average rate increase that took effect last October.
Chuck Noble, attorney for the Coalition for Clean Affordable Energy, said losing that argument convinced his group not to pursue it again.
“We lost that at the PRC, so we’re focusing now on trying to make sure Four Corners is shut down in the future,” Noble said.
In fact, most environmental groups in the current case support the settlement agreement because it helps pave the way for PNM to pull out of Four Corners by 2031, if not sooner, while shutting down all of San Juan by 2022. PNM will review a full San Juan pullout next year, and then analyze the possibility of abandonment of Four Corners in 2020.
In addition, in the settlement, PNM agreed to only recover costs for installing new pollution controls at Four Corners, forgoing any profits on that investment.
NEE says that’s capitulation to PNM.
“(Other parties) didn’t challenge the prudence of the Four Corners investment, and they accepted crumbs through a slight reduction in pollution control costs,” Nanasi said.
But Noble and others say compromise is key to achieving long-term goals.
“In a lot of circumstances, we can achieve better outcomes by working with all parties, including PNM,” Noble said.
Steve Michel, chief counsel for Western Resource Advocates, said forgoing pollutioncontrol profits at Four Corners was an “important concession” by PNM.
“All consumer advocates in the case have concluded that’s a fair resolution,” Michel said.