Note: An earlier version contained an incorrect figure for the overall impact on ratepayer bills. The increase will be about 1.4 percent over two years.
The Public Regulation Commission voted 3-2 Wednesday to add $4.7 million more to the new annual revenue Public Service Co. of New Mexico can start earning this year, bringing a likely close to the year-old rate case.
The decision modifies the PRC’s order last week to lower PNM’s request for $62.3 million in new annual revenue by $9.1 million to $53.2 million. With the modification, commissioners have now approved $57.9 million in new revenue, or $4.4 million less than PNM requested.
PNM has agreed to immediately pass on to consumers $48.5 million in annual savings it expects from federal tax reform, meaning the overall impact on bills will be about 1.4 percent over two years, an increase of about .7 percent each year.
PNM asked the commission to add back the $4.7 million to its revenue because, apart from that revenue reduction, it is already having to write off $4.7 million by forgoing any profit on $148 million it invested in the Four Corners Power Plant near Farmington.
Commissioners said that write-off was supposed to be in addition to the $9.1 million reduction in new annual revenue it ordered last week. But given the rate case’s lengthy, contentious process, they opted to concede to PNM and end the case.
“There is some sense of urgency to take action here,” said Commissioner Sandy Jones. “We can’t kick this down the road.”
Without the modification, the case could have moved back to square one, said Commissioner Pat Lyons.
“In the spirit of negotiation, we’re only talking about $4.4 million here,” Lyons said.
However, commissioners Valerie Espinoza and Cynthia Hall objected, reprimanding PNM for making a new request rather than just accepting or rejecting the PRC order from last week.
“A commission order is non-negotiable,” Espinoza said. “It’s not like buying a house. We can’t just accept a counter offer from the utility.”
About a dozen parties had signed a settlement agreement last May with PNM to support its requested rate hike. That agreement reduced PNM’s original proposal for a 14 percent increase to 9 percent. Those parties are expected to accept the latest modification.
Still, PNM could face difficulties in future rate requests as a result of this case. In December, the commission said PNM’s $148 million in new investments at Four Corners were “imprudent.” That meant a total write off, casting a shadow on PNM’s ability to recover any more investments there going forward.
The PRC reversed that decision last week, agreeing instead to defer discussion of “imprudence” to PNM’s next rate case. But investors remain concerned.
Standard and Poor’s moved the credit outlook for parent company PNM Resources’ and its local utility to negative on Tuesday, citing “potential regulatory headwinds for the company” given the PRC’s treatment on Four Corners.
The move could impact PNM and customers’ bills through higher interest rates on future debt if the utility’s credit ratings are downgraded, said PNM executive Vice President and Chief Financial Officer Chuck Eldred.