Southwestern Public Service Co. reached a settlement agreement with the New Mexico Public Regulation Commission, under which the utility would see an annual revenue increase of $12.5 million.

The settlement will revise the commission's September 2018 order, which granted the company a revenue increase of approximately $8 million, based on a return on equity of 9.1% and a 51% equity ratio.

The original order also directed the Xcel Energy Inc. subsidiary to refund customers $10.2 million related to adjustments associated with the federal Tax Cuts and Jobs Act, retroactive to Jan. 1, 2018. Southwestern Public Service, or SPS, appealed the order to the New Mexico Supreme Court.

SPS in October 2017 originally requested a $43 million increase in base rates, an ROE of 10.25% and an equity ratio of 53.97%. The utility later filed a request to reduce revenue requirements by $11 million to reflect the federal tax overhaul.

On Feb. 15, SPS and the commission filed a joint motion with the New Mexico Supreme Court, requesting to remand the case back to the commission.

The joint motion requires the commission to eliminate the retroactive refund associated with federal tax changes, approve an ROE of 9.56% and an equity ratio of 53.97%.

Under the revised settlement, the $12.5 million increase will consist of $8 million from the original order and $4.5 million for changes in ROE and equity ratio. The new rates are expected to take effect in the second quarter of 2019, subject to further administrative and judicial review.