Albuquerque Journal

PNM Granted $34M Rate Hike
By Jack King; Journal Staff Writer

SANTA FE— State regulators on Thursday approved a $34 million rate increase for Public Service Company of New Mexico.
   
The roughly 6.4 percent bump, an increase of about $6 on a $100 monthly bill, is about half of the $76.9 million PNM requested.
   
But it was a boost from the $24 million increase recommended by a hearing examiner last month.
   
PNM was still working to determine how the $34 million would be divided among its 487,000 residential, business and government ratepayers.
   
The utility's request for a provision allowing it to automatically pass along fuel costs to consumers is still pending.
   
Commission Chairman Jason Marks said a rough estimate of the increase approved Thursday is about 6 percent more to each ratepayer's bill.
   
In a statement sent to community members Thursday afternoon, PNM Chairman, President and CEO Jeff Sterba said the rate increase was welcome, but not enough.
   
"Today's action— an improvement over a hearing examiner's recommended decision— unfortunately does not restore financial health," he said.
   
"Complicating our financial situation was the decision last week by national credit rating agency Standard and Poor's to downgrade the credit rating of PNM Resources and our utilities PNM and TNMP to one notch below investment grade. This action shrinks the pool of capital available to us ... and makes borrowing more expensive," he added.
   
Sterba also said getting the requested fuel adjustment clause is "critical to restoring the health of the utility."
   
Commissioners said they would wait to decide on the fuel adjustment clause until after testimony and oral arguments May 15.
   
Commissioner David King surprised his colleagues by moving they approve an interim fuel adjustment clause that would stay in effect until their decision.
   
The interim clause would be based on PNM's recently announced emergency fuel clause proposal and would send a signal to bond rating agencies that the commission is concerned about PNM's financial condition, King said.
   
Commissioner Sandy Jones said he shared "a little bit of Commissioner King's concern."
   
"It's been a long rate case. We have a company on the brink of disaster and I would hate for the regulatory agencies to be the cause of that," he said.
   
King's motion was defeated on a 3-2 vote, with Commissioners Jones and King voting for it and Commissioners Marks, Ben R. Lujan and Carol Sloan voting against.
   
Jones then proposed a "compromise motion," requiring a formal statement that the commissioners would "take every reasonable step" to render a decision on the clause as soon as possible after oral arguments are completed May 15.
   
That motion received unanimous approval, but only after further talk.
   
Lujan said agreeing to decide the fuel clause issue immediately after oral arguments would "tie the hands of the commission in advance" should concerns arise that require extra time.
   
In the end, he accepted Jones' compromise language that "every reasonable step" would be taken.
   
Lujan insisted PNM and commission staff provide information by this afternoon on how the increase will affect each rate class.
   
He said he wanted to be sure PNM's rate increase doesn't create the kind of sharp, unexpected increases that occurred last year when El Paso Electric attempted to institute a new rate increase and collect payments on its old fuel adjustment clause at the same time.
   
Lujan said the commission's rate case decision could be revisited as soon as Tuesday, should any party raise concerns about its effects.
   
'Adjustments' approved
   
To get the 2 percent increase over the hearing examiner's recommended revenue increase, commissioners approved all or part of eight "adjustments" requested by the utility.
   
Among the largest was an increase in the company's allowed return on equity.
   
PNM had requested a return on equity of 10.75 percent. The hearing examiner had recommended 9.71 percent, but the commission approved 10.1 percent. The change resulted in an increase of about $3.9 million in the company's favor.
   
Other adjustments included allowing the company to recover its costs for the acquisition of power lines from Tri-State Generation and Transmission Association, for its repurchase a portion of the capacity of Palo Verde units 1 and 2 in 1989, for payments into a pension fund, for a stock options program for employees and lower management, and for litigating the price of off-system sales before the Federal Energy Regulatory Commission.