Copyright © 2022 Albuquerque Journal
Public Service Company of New Mexico’s residential customers would pay just 75 cents extra per month if state regulators approve a proposed rate increase that PNM unveiled Monday afternoon.
The company presented its plans to reporters in a virtual press conference Monday after filing its first new rate case since 2016 with the state Public Regulation Commission. The filing ushers in a lengthy process of public hearings, likely culminating in a PRC decision next fall to potentially allow new rates to take effect in January 2024.
The company is seeking $336 million in additional annual rate recovery to recoup $2.6 billion in new investments it’s either made in the grid since 2019, or will make over the next year. If approved, that would represent nearly a 9% overall average rate hike for all customers combined, including residential, commercial and industrial consumers.
But residential ratepayers would only pay $63.8 million, or just one-fifth of the total, reducing the impact on average residential bills to just 0.9%, said PNM Senior Vice President for Public Policy Ron Darnell.
“The monthly increase for the average residential customer will be 75 cents,” Darnell told reporters. “That’s less than a 1% increase.”
The minimal impact on bills reflects substantial savings from shutting down the coal-fired San Juan Generating Station this summer, which will lower PNM’s new annual rate recovery requirements by about $260 million, according to the company. In addition, replacing San Juan with cheaper renewable energy will reduce utility operation and fuel costs even more.
“The energy transition to carbon free is keeping rates affordable,” Darnell told reporters. “The savings from exiting San Juan is significantly offsetting the investments we’ve made to ensure customers have power when they need it.”
Other savings are also helping, such as increased earnings from sales of New Mexico-produced solar and wind energy that’s delivered to other states through PNM transmission lines, refinancing utility debt at lower interest rates, and replacing some Palo Verde Nuclear Generating Station electricity with cheaper renewables.
Taken together, all the savings and additional utility income amount to about $339 million, according to PNM. Without that, the company’s total new investment-recovery that it would need starting in 2024 would be about $675 million, rather than the $336 million PNM is requesting through increased base rates.
In fact, if everything is factored in together – including the company’s savings and requested rate hike – residential base rates will actually rise by 9.7% if the PRC approves PNM’s plan. But all the savings – combined with higher rate hikes on commercial and industrial customers – will reduce the real impact on residential bills to below 1%.
“It is a bit like checking out at the grocery store and getting a total before you enter your frequent shopper number and apply your discounts and coupons,” Darnell said. “That final total, or what you actually pay, is much lower, just as the final total for the average residential customer is much lower than the 9.7%.”
Despite the potential benefits, some organizations will likely object to many things in PNM’s plan, beginning with commercial and industrial customers, whose rates will actually increase by 7.9%.
That represents a large subsidy by those customer classes that helps offset the impact on residential consumers, said PNM spokesman Ray Sandoval.
“We want to work on reducing that, but not in this rate case, because we would see a much bigger impact on residential customers,” Sandoval told the Journal. “It’s the wrong time to do it with inflation today. We need to right that ship, but not now.”
Environmental and consumer advocacy groups will also likely question PNM’s decision to fold San Juan savings into its rate case, rather than immediately lower customer bills after the coal plant closed. The PRC ordered PNM in June to return those savings to ratepayers upon closure. But PNM appealed to the state Supreme Court to withhold the savings and instead use them to lower the impact of its requested rate hike, leading to a court-ordered stay on the rebate in September.
And that, in turn, complicates the rate case, because PNM continues to charge customers for San Juan even though the plant is closed, said Cydney Beadles of Western Resource Advocates. Those charges won’t end until San Juan is removed from PNM’s base rates after the PRC approves new rates for the utility. And as a result, opposition groups will carefully scrutinize all San Juan savings in the rate case to ensure everything is fully returned to ratepayers.
“(That) has made the rate case a lot more complicated and adversarial than it might otherwise be,” Beadles told the Journal.
Opposition groups will also want to fully vet all of PNM’s new investments to ensure their prudence, which, in past rate cases, has led to substantial reductions in new rates approved by the PRC.
PNM says its investments reflect today’s revolutionary energy transformation, replacing fossil fuels with renewable generation and modernizing the grid with new technology, transmission and distribution infrastructure.
As a result, PNM now boasts 55% carbon-free generation, said PNM Resources Chairman and CEO Pat Vincent-Collawn.
“This rate change request reflects hundreds of millions of dollars on investment in the electric grid, our communities and environment since our last rate change request, ensuring reliability and resilience for the future,” Vincent-Collawn said in a statement. “At the same time, our departure from coal and transition to renewable energy is allowing us to keep our requested increase to a minimum and our rates for residential customers low in comparison to others in the region and nation.”