The state Supreme Court on Thursday unanimously overturned a state regulator’s order from 2016 that would have allowed a $61 million rate increase for Public Service Company of New Mexico.

However, the high court left in place most of the Public Regulation Commission’s order in the rate case, including the commission’s findings that PNM’s 2015 investment in the Palo Verde nuclear plant in Arizona was imprudent, as were capital expenditures at the San Juan Generating Station near Farmington.

As a result of those findings, the regulatory body limited how much of the company’s spending for Palo Verde power could be passed along to ratepayers.

But the high court vacated the commission’s entire order because the commission violated the utility’s due process right by not giving proper notice when it denied PNM’s ability to recover in rates the future costs of decommissioning the Palo Verde plant.

The commission will have to draft a new order in the rate case, addressing the issue of how much of the decommissioning costs PNM will be able to put in the rate base.

The rate increase in September 2016 raised PNM’s average residential rates by about 7 percent. The company originally had sought a 15.8 percent increase in that case.

In its ruling, written by Justice Barbara Vigil, the court said “virtually all of the commission’s decisions are reasonable and lawful” with the exception of the nuclear decommissioning costs issue.

The entire rate case was sent back to the commission for reconsideration. The court said the PRC can include in a new decision those provisions of the vacated order that were found to be reasonable and lawful by the justices.

“We are pleased with the ruling in favor of PNM on one of the four key issues we appealed to the court,” PNM spokesman Ray Sandoval said in a statement. “We are disappointed with the outcome of the appeal of the other three issues. We are reviewing the Court’s opinion and assessing options on how to proceed.”

Sandoval said the disallowed decommissioning costs for Palo Verde were never included in customers’ rates and were never collected.

Also applauding the court’s decision — but for different reasons — was one of PNM’s fiercest critics, Mariel Nanasi, executive director of New Energy Economy. She called the court’s action “a fantastic decision.”

In a news release, Nanasi said: “This case exemplified imprudence – we submitted evidence that PNM did absolutely no financial analysis before investing hundreds of millions in nuclear in Arizona instead of investing in radioactive-free and affordable solar and wind in Albuquerque and Santa Fe.”

New Energy was an intervener in the case.

In the opinion, Vigil wrote that before purchasing more power and renewing its leases at Palo Verde, PNM did not do sufficient financial analysis regarding Palo Verde and did not look at alternative scenarios.

The court found that while the PRC’s decision to limit the utility’s recovery of decommissioning costs was proper, the denial of all future decommissioning costs for PNM was not legal.

“PNM was not afforded an opportunity to be heard on the issue,” Vigil wrote. “Accordingly, we conclude that the commission’s decision to disallow recovery of any future decommissioning costs as a remedy for PNM’s imprudence deprived PNM of its right to due process of law.”