New Mexico’s largest utility and state regulators seemed to be moving closer Tuesday to agreement on a rate increase for the electric company.
Public Service Company of New Mexico filed a conditional acceptance of a Public Regulation Commission order allowing the utility to raise rates by an average of about 1.5 percent over two years.
But PNM’s response said it would agree to the order only if regulators allowed PNM to collect from ratepayers just over half of the money the company spent on improving the aging coal-fired Four Corners Power Plant in northwestern New Mexico.
Shortly after filing its response, PNM announced that Standard and Poor’s — a major financial services company — had moved the utility’s outlook to the negative category, an action that could be a precursor to a credit downgrade.
PNM said a credit downgrade could affect the company’s financial health and its ability to make investments in power-generating projects.
In the rate case before the Public Regulation Commission, the good news for customers is that the amount of money at issue is getting smaller. PNM’s original request in the long-running rate case was for an increase of about 14 percent.
On top of the 1.5 percent increase in rates, PNM now is asking to collect an additional $4.7 million. That is money the company borrowed for Four Corners investments.
It’s not clear how much it would increase rates if the commission agrees with PNM’s new filing. Because the figure is so low, the impact likely would be small.
Public Regulation Commissioner Patrick Lyons said Tuesday he’s not sure what the next step will be in the rate case or whether the commission will accept PNM’s request for the $4.7 million. He said the commission will discuss the filing at its regular meeting Wednesday.
“I guess they don’t agree with our math,” Lyons said.
In the order approved by the commission last week, PNM was denied the right to recover about $9.1 million of its Four Corners spending. But in its filing Tuesday, PNM argued that the commission’s order specified that the company could recover the cost of its Four Corners debt.
A Santa Fe clean-energy advocacy group, New Energy Economy — which has fought PNM’s rate increase from the beginning — filed a motion asking the commission to disregard PNM’s new filing.
“PNM chose to neither accept nor reject the [commission’s order],” said the motion, written by New Energy’s executive director, Mariel Nanasi. “This is simply a rejection that PNM has cast as an ‘acceptance.’ PNM’s response to the Commission’s order should be stricken from the record as unresponsive and of no effect.”
In May, following objections to PNM's original request from a range of environmental groups, government agencies and businesses, PNM agreed to lower the request to about 9 percent over two years. Last week, PNM said it would support an increase of only about 2 percent — a move made possible by the lower corporate income tax rates signed into law by President Donald Trump.
Concerning Standard and Poor’s action, a news release from PNM said, “S&P’s report discusses the challenging regulatory environment in New Mexico, including the financial impact of PNM’s recent regulatory order. In addition, S&P has concerns about the treatment of Four Corners Power Plant throughout the regulatory proceeding. The report says PNM’s continued investments in this plant results in ‘potential regulatory headwinds for the company.’ ”
The news release quoted Chuck Eldred, executive vice president and chief financial officer of PNM Resources, as saying, “Credit ratings have a direct impact on PNM and our customers’ bills. PNM is currently at an investment grade credit rating. However, this change in outlook could have a long-term impact on our financial health, cost-effective funding of capital investments and our ability to support programs for new customers.”
Nanasi said PNM is blaming the Public Regulation Commission for the S&P action, but she said there is no one to blame but the utility.
“PNM failed to perform any valid financial analysis before it committed ratepayers to nearly one billion of investments at a 50 year old non-performing coal plant,” Nanasi said in an email. “Why is PNM’s mismanagement everyone else’s fault? It’s not. PNM needs to take responsibility for its poor financial planning.”