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Criticism of examiner not justified

I feel compelled to respond to some of the inaccurate statements made by Suedeen Kelly, a former PRC commissioner, regarding PNM’s pending rate case in her letter published on Sept. 11.

Kelly, whom I thoroughly respect, is wrong when she asserts that Carolyn Glick, the commission’s hearing examiner, didn’t consider the import of orders that Kelly approved along with other commissioners.

Kelly authorized PNM in 1985 and 1986 to sell its Palo Verde capacity and to then lease that capacity back from the new owners. Glick recognized that Kelly’s orders authorized PNM to reacquire its capacity in Palo Verde at fair market value or extend those initial leases when those initial leases expired. Pursuant to that authority, PNM recently acquired capacity and extended some leases in Palo Verde at a requested annual cost of about $103 million.

According to the Albuquerque Bernalillo County Water Utility Authority, ratepayers have already paid $2.083 billion under the initial leases for a plant that cost $644.3 million.

Kelly is wrong when she says that Glick forbids PNM from recovering any costs associated with its recent Palo lease extensions and capacity acquisitions. Glick’s recommended decision, although recommending disallowance of PNM’s $103 million request because it wasn’t shown to be reasonable, clearly states that PNM can attempt to recover those costs in PNM’s next rate case, which may be filed as soon as the end of this year.

Kelly further opines that the commission should open a separate proceeding to examine the reasonableness of the Palo Verde costs that PNM wants to pass through to ratepayers.

Had she read the recommended decision correctly, she would have recognized that PNM has the opportunity to do just that in its next rate case. Her suggestion also ignores the fact that the commission on Aug. 24 issued an order offering to reopen PNM’s rate case and allow PNM another opportunity to justify the recovery of its Palo Verde costs, provided that PNM agreed to extend the suspension period in its rate case. PNM refused to agree to that condition and to reopening the record.

I find it interesting and somewhat ironic that by suggesting that the commission open yet another proceeding to examine the reasonableness of PNM’s Palo Verde costs, Kelly appears to agree with Glick’s finding that PNM failed to justify those costs in its pending rate case.

The importance of ensuring that the costs being paid for Palo Verde are reasonable can’t be overstated. Like all other utilities, PNM earns a profit from its capital investments, and thus has a financial incentive to make as large a capital investment in utility facilities as it can.

Because PNM is a statutorily created monopoly, the normal forces of competition don’t act to restrain that incentive as much as it does for non-utilities. Ensuring that PNM’s proposed investments in facilities are reasonable and prudent is one of the more important functions performed by the commission.

Although not addressed by Kelly, I would like to respond to the recent, and in my mind, unfortunate, announcement by PNM that it will lay off about 300 employees if the commission adopts Glick’s recommendations. I question whether laying off that many employees shortly after giving its senior management a 6 percent or 7 percent raise is the wisest course of action to take or even necessary, especially if it affects PNM’s ability to provide reliable and safe service to its customers.

In closing, I would like to state that while I do not necessarily agree with all of Glick’s recommendations in the PNM rate case, I am confident that her recommendations are based on an objective, professional and dispassionate review of the facts and issues in that case. We New Mexicans are fortunate to have a public servant of the caliber and competence of Glick.

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