The state Supreme Court on Thursday issued a long-awaited ruling that said most of the Public Regulation Commission’s decisions limiting what PNM can charge ratepayers in a 2016 rate case were “reasonable and lawful.”
But the court overturned the state regulator’s order because it rejected one PRC decision that blocked Public Service Company of New Mexico from charging customers for possible future costs of decommissioning the Palo Verde Nuclear Generating Station, used as a source of electricity for customers.
In 2015, PNM had sought $123 million in rate increases to cover numerous expenses, some tied to the nuclear plant and the San Juan Generating Station. The PRC in 2016 approved only $61 million in rate increases, a decision appealed by PNM and cross appealed by other parties.
The PRC had determined that PNM acted imprudently in deciding to repurchase part of Palo Verde Nuclear Generating Station and renew leases for power from the plant in Arizona. As a result, the PRC limited how much of PNM’s spending for Palo Verde power could be passed along to ratepayers.
On Thursday, the Supreme Court, in a unanimous ruling, ordered the PRC to reconsider the $61 million electric rate increase, finding that the utility was not allowed to present its case for costs for recovery of the future decommissioning costs at the station. It determined the PRC failed to give PNM any notice at the rate hearing before deciding to exclude future decommissioning costs from rates.
However, the PRC does not have to go back to square one. The court said that the commission can include in a new decision those provisions of the vacated order that were found to be reasonable and lawful by the justices.
Instead, the PRC will need only to reconsider PNM’s request to recover “future decommissioning costs.”
“Because the issue of a permanent disallowance of recovery for contributions to the nuclear decommission trusts appears to have been first raised by the Commission in its final order, PNM was not afforded an opportunity to be heard on the issue,” the court said in an opinion written by Justice Barbara J. Vigil. “Accordingly, we conclude that the Commission’s decision to disallow recovery of any future decommissioning costs as a remedy for PNM’s imprudence deprived PNM of its right to due process of law.”
PRC Commissioner Stephen Fischmann said he was “really pleased” with the court’s decision because “they are affirming the need for a utility to prove that it is pursuing the least cost alternative for consumers by actually going out and comparing the alternatives.” He called that “a win for consumers and a win for what the PRC hopes to accomplish in protecting consumers.”
On the narrow issue of future costs for nuclear cleanup recovery after decommissioning, Fischmann said the court apparently felt that “more evidence was needed, and if that’s the case we just have to reopen it up and collect the additional evidence and reset.”
He noted that the vacated order allows for the PRC to “come back and do everything exactly the way it was done, and just make that one adjustment” to address future decommissioning costs.
PNM spokesman Ray Sandoval said, “we are pleased with the ruling in favor of PNM on one of the four key issues we appealed to the Court. We are disappointed with the outcome of the appeal of the other three issues.”
PNM is currently reviewing the court’s opinion “and assessing options on how to proceed,” Sandoval said. “At the conclusion of the 2015 rate case, the disallowed revenue items were never in customers’ rates and were never collected. Today, customers’ rates are being collected in accordance with the subsequent 2016 rate order that was never part of this appeal.”
Asked if PNM planned to present evidence to the PRC in support of an additional rate hike to compensate for future decommissioning at Palo Verde, Sandoval acknowledged that “at some point in the future we could come back and ask the PRC to do that, but I don’t want to speculate on a future rate case; we haven’t made a decision on what’s going to happen now.”