Public Service Co. of New Mexico reported $45.5 million in net income in the second quarter of 2020, a sharp turn around from the $86.9 million loss it reported in the same period last year.
The income reversal largely reflects a $104 million write-off the utility was forced to take in second-quarter 2019, when the state Supreme Court upheld a ruling by regulators that prohibited PNM from charging ratepayers for having repurchased some capacity and renewed some leases at the Palo Verde Nuclear Generating Station in Arizona.
But warm weather this spring, debt refinancing at lower interest rates, and lower plant outage costs at the coal-fired San Juan Generating Station all significantly boosted utility income as well.
Ongoing earnings – which exclude one-time gains and losses such as the Palo Verde write-off – jumped 39% in the April-June period, from $19 million in second-quarter 2019 to $31.4 million this year.
“Warmer temperatures during the second quarter outweighed the reduced load impacts related to COVID-19 and has strengthened our ability to manage within our ongoing earnings guidance range,” said PNM chairman, president and CEO Pat Vincent-Collawn in a statement.
The company reaffirmed its 2020 earnings guidance of $2.16 to $2.26 per share.
Higher than normal temperatures particularly drove revenue as customers ramped up their cooling systems. Residential load increased by 5% in the second quarter – driven both by the weather and more customers staying home in the COVID-19 lockdown. That offset a 10% decline in commercial electric consumption as businesses either shut down or operated at partial capacity in the pandemic.
PNM’s positive performance, combined with a modest increase in revenue at Texas New Mexico Power, drove substantial gains for both utilities’ parent firm, PNM Resources. The parent company reported $57.5 million in net income, up from a $75.9 million loss in second-quarter 2019.
Ongoing earnings increased by 32% for PNM Resources, from $30.2 million in second-quarter 2019 to $44.1 million this year.
Going forward, PNM plans a lot more investment in grid modernization as the utility transitions away from fossil fuels, company executives said in a conference call with investors Wednesday morning. That includes about $450 million in upgrades and additions to transmission and distribution systems over the next three years, said Chief Financial Officer Don Tarry.
This week, state regulators approved a plan for PNM to add 950 megawatts of solar and battery capacity to its system to replace lost electricity from San Juan after the utility abandons the coal plant in 2022.
The company announced a new “Wired for the Future” program on July 22 to make sure the grid remains reliable, secure and resilient as PNM adds intermittent solar generation and new battery storage technology to the system.
“We need new investments (in transmission and distribution) to support the transition to a clean energy grid,” Tarry said.