PNM Files for 14.4% Rate Hike, But Says Customers Won’t Foot Entire Bill

The Public Service Company of New Mexico (PNM) filed a request with the New Mexico Public Regulation Commission (NMPRC) on August 27 for an increase in electric rates of $123.5 million – or 14.4 percent.

Originally submitted in December 2014 as an application for a 12 percent increase, the rate case had been rejected by the NMPRC at that time as “incomplete.” Going forward, the commission directed PNM to provide more justification for the increase, and to supply the information electronically as well as in hard copy.

As the state’s largest electricity provider, PNM serves more than half a million New Mexico residential and business customers. The utility has not been granted a general rate increase since 2011 – and claims that the substantial hike would not be forked out fully by ratepayers. According to the company, “the net customer bill increase would average 5.4 percent when other changes” are considered – including savings from a new coal supply contract with the San Juan Generating Station near Farmington , if it is approved by the NMPRC.

“Since our last general rate increase in 2011, PNM has continued to make significant investments in the electric system to maintain the company’s …reliability and to protect the environment – benefits our customers are receiving but not yet paying for,” said PNM Resources’ CEO Pat Vincent-Collawn. “We’re also proposing the first significant change to rate structure in more than two decades so that bills may be calculated more accurately to reflect how our customers actually use energy today.”

According to the filing, the rate request reflects $2.5 billion in rate base, which is a $655 million increase since the 2010 rate case. The additional $655 million of investments are not currently recovered in PNM rates, and account for the majority of the company’s request, including depreciation.

Key capital additions to rate base include:

  • Four new solar centers online by 2016 (40 MW, $65 million) capable of powering 16,200 homes;
  • La Luz Natural Gas Plant online by 2016 (40 MW, $50 million) to serve customers when demand is highest, to support renewable energy growth, and to ensure reliable power under a variety of grid conditions;
  • Emission control equipment at San Juan Generating Station to comply with federal haze regulations ($58 million);
  • Critical resources for the future: Purchasing Rio Bravo Generating Station (formerly Delta Person) natural gas plant ($32 million) and purchasing leases for Palo Verde Nuclear Generating Station Unit 2 ($144 million); and
  • Investments to keep the utility’s electric system reliable, including a $61 million investment at PNM’s Rio Puerco Switching Station, $8 million to improve substation security, and modernizing the company’s distribution system operations center.

Another driver, the company said, is declining energy usage resulting from the still-recovering New Mexico economy and energy efficiency.

In the rate filing, PNM also proposes changes to rate design to better align electric rates with the actual costs to serve customers, while encouraging energy efficiency. Specific regulatory improvements, if approved, would include a Revenue Balancing Account four-year pilot program for residential and small commercial customers – also known as “revenue decoupling” that would, the company said, “Account) to remove the regulatory disincentives for energy efficiency programs.”

In addition, PNM has proposed implementation of a new distributed generation (DG) interconnection fee, “to ensure that DG customers pay the fixed costs associated with existing utility infrastructure that is available to them to provide needed service rather than transferring the payment responsibility to non-DG customers. The proposed fee is a monthly charge based upon the capacity of the DG system that will apply only to new customers who do not have an installed system or a completed application by December 31, 2015.”

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