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PNM files ‘decoupling’ case at PRC

 PNM is seeking a new rate rider to recover fixed costs independently from how much electricity ratepayers consume. (Adolphe Pierre-Louis)

Copyright © 2020 Albuquerque Journal

With electric consumption plummeting in the pandemic lockdown, Public Service Company of New Mexico is seeking regulatory approval to recover all its fixed service costs independently of how much electricity customers actually consume.

The utility filed its request Thursday with the Public Regulation Commission. If approved, PNM would start tallying next year how much residential and commercial customers actually paid for electricity throughout 2021 and then compare that with the total annual revenue that the PRC has authorized the utility to collect during the year to cover its fixed costs.

If the amount collected from ratepayers is less than the total allowed by the PRC, PNM would apply a rate rider on customers’ bills starting in 2022 to make up the difference. If customers over-pay during 2021, PNM would credit the difference back to ratepayers.

That proposed rate mechanism, known as “decoupling,” would ensure that PNM always recovers its fixed costs for providing electric service, effectively separating, or “decoupling,” customer payments from consumption levels.

That could correct an endemic deficit PNM has incurred as customers reduce their use through energy efficiency programs and rooftop solar installations. Since PNM’s last rate case in 2015, residential consumption has fallen about 4% to 5%, representing a revenue loss of about $2 or $3 per month for every residential customer, according to the utility. Yet PNM’s fixed costs have remained the same.

“Decoupling is designed to collect fixed costs – no more, no less,” PNM Director of Pricing Stella Chan told the Journal. “If we over collect, we’ll credit that back to customers, and if we under-collect, we’ll charge customers the difference to recover the costs we incurred.”

The state Legislature authorized the PRC last year to approve decoupling as part of a new law that requires the state’s public utilities to increase spending on energy efficiency programs. By cutting total energy use, utilities can reduce the amount of new generation needed in the future, potentially easing the state’s goal of achieving carbon-free generation by 2045.

PNM says the coronavirus makes decoupling more urgent, because electric consumption by small businesses has plummeted during the shutdown, and recovery will be slow given the economic downturn.

Still, to ease the potential impact of reversing fixed-cost deficits, the utility proposes to limit recovery for under-payments to a maximum of 3% of its annual revenue requirements in any given year, Chan said. The remaining under-collected balance would instead be carried forward for collection in the following year.

If customers overpay, however, PNM would immediately pay back the full amount.

“Say there’s a hot summer and customers use a lot more energy and we over collect beyond our fixed costs, we would credit it all back without any limits,” Chan said.

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