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PRC rejects PNM’s request to increase rates by about 7 percent

May 13, 2017 GMT

New Mexico regulators have rejected an agreement between the Public Service Company of New Mexico and a number of other parties, including the state attorney general, that would have allowed the electric utility to increase customers’ bills an average of about 7 percent by 2019.

Last week, the company announced it had reached a deal with several stakeholders, most of them business and environmental groups, in a rate case it has pending before the state Public Regulation Commission. Under the agreement, PNM sought to incrementally raise customers’ bills by about 3.9 percent in January 2018 and an additional 3.4 percent beginning in January 2019 — down from the 14 percent it initially requested when it filed the case in December 2016.

PNM said the new deal would help streamline the case — its second request in two years to raise customers’ rates. But on Friday, PRC hearing officers cited several problems with the agreement, saying it “imposed unnecessary complexity” and violated regulatory standards.

Hearing examiners Ashley Schannauer and Anthony Medeiros said in a statement that the two-part rollout would create an extensive hearing process that would strain the commission’s resources and draw out the case, leaving too little time for commissioners to deliberate before the rates are set to go into effect.

Schannauer and Medeiros also questioned the fairness of the rate increase.

Most residential customers would actually see an increase closer to a 4.9 percent in 2018 and 4.4 percent in 2019, or 9.2 percent total, while others — like street lighting customers in Albuquerque and Bernalillo County — wouldn’t see any rate increases, the statement said. This disparity, it said, called into question “the reasonableness of the overall level of revenue increase under the stipulation.”

Pahl Shipley, a spokesman for PNM, said in an email Friday that the electric utility “strongly disagrees with the order rejecting the agreement prior to any public hearings. We will be asking the Commission to review the Hearing Examiner’s order.”

Under the agreement, the rate increase would bring in $62.3 million in new revenue for the company to compensate for expenses from the partial shutdown of the San Juan Generating Station near Farmington and losses related to energy-efficiency technology used by customers. In its original request, the company sought $99.2 million.

The case was filed just two months after the PRC approved a $65.7 million rate increase for PNM.

New Mexico Attorney General Hector Balderas and several business and environmental groups, including Wal-Mart Stores East, Sam’s East Inc., The Kroger Co., the Sierra Club, Western Resource Advocates, the Renewable Energy Industries Association and the Coalition for Clean Affordable Energy, all signed on to the deal.

Shipley said the agreement saw broad support “following a fair and vigorous negotiation,” and “we believe each party should be given the opportunity to present their position on the value of the settlement” to the commission.

Travis Ritchie, an attorney for the Sierra Club, said the organization would not comment on the PRC’s order Friday because the group is still reviewing it.

Steve Michel, an attorney with Western Resource Advocates, called the order a “a discouraging development.”

“The stipulation was developed after weeks of discussions,” he said in an email, “and supported by many very experienced consumer and environmental advocates. I expect the parties to the agreement will try to find a path forward that addresses the PRC’s concerns, and preserves what I believe to be a very good outcome.”

Mariel Nanasi, director of the nonprofit clean-energy advocacy group New Energy Economy, the only group involved in the rate case that did not sign on to the agreement, said Friday the group had been correct in decrying “the unjustified rate increase as a ‘heavy and unjustified burden on New Mexican families.’ And this is exactly what the Hearing Examiners found,” she said in a statement.

“New Energy Economy opposed the stipulation because it was not in the best interest for ratepayers,” Nanasi said.

PNM will have an opportunity to revise the agreement, according to the hearing examiners’ order, which called the revised rate request “premature, hasty and unwise.”

The order doesn’t dismiss the case, Schannauer and Medeiros said in the statement, but they won’t hold a hearing on the agreement.

Earlier this spring, PNM said it might extract itself from all of its coal assets at the San Juan Generating Station and the Four Corners Power Plant by 2031 as part of its Integrated Resource Plan, but that won’t be heard by the commission until sometime this summer. Still, the hearing examiners said, the utility included assumptions about how it would seek and assess depreciation returns related to retiring coal assets.

Further, the order said, “proposals relating to the San Juan and Four Corners units raise concerns over depriving due process to interested parties who might have objected if PNM had provided sufficient notice” of its plans when it filed the rate increase request in December.

“It is prudent to point out the problems now instead of proceeding with hearings that could prolong the inevitable and risk putting the Commission in a difficult bind,” the statement said.

Contact Rebecca Moss at 505-986-3011 or rmoss@sfnewmexican.com.