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PNM Resources continues with rate case, files to build new peaker

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Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


PNM Resources continues with rate case, files to build new peaker

PNM Resources Inc.executives expressed confidence that the company presented "a strong case"to regulators for its requested rate increase at Public Service Co. of New Mexico, noting that three weeksof hearings were concluding April 29.

PNM is seekinga $123.5 million increase in its general rates through a rate case, filed in August2015. The company expects to implement the new rates Aug. 1, though this could legallybe delayed until Oct. 1. The New Mexico Public Regulation Commission staff in Januaryrecommended a $69.1 million rate increase. (15-00261-UT)

The need for the filing, PNM Resources Chairman, President andCEO Pat Vincent-Collawn said during the company's first-quarter conference call, is primarily drivenby more than $650 million of investments it has made since the last increase. "Ourtop priority is to achieve timely cost recovery to support strong credit metrics,"she said. "[W]e are confident that we presented a strong case."

Executives on the call reaffirmed the company's consolidated2016 earnings guidance of $1.55 to $1.76 per diluted share but noted that the rangewas wider than usual because of the ongoing rate case.

Vincent-Collawn said the company filed an application for a certificateof public convenience and necessity on April 26 to build a new $87 million, 80-MWnatural gas peak at its San Juan power plant. PNM aims to bring the facility onlineby June 2018 before the summer peak season.

According to a filing with the New Mexico PSC, the new unit isneeded to respond to expected supply and demand imbalances resulting from increasedamounts of variable energy generation on its system. The new plant would partiallyreplace San Juan units 2 and 3 after their retirement in 2017 and fulfill the requirementsset out in an RFP releasedin 2015. It would use two 40-MW General Electric aeroderivative gas turbines andbe air cold to minimize water usage. (16-00105-UT)

PNM estimates the cost of the plant for the average residentialcustomer using 600 kWh per month would be $15.40 per year.

While the introduction of a new plant would spur another rateincrease, Vincent-Collawn told analysts that she sees little worries of any pushbackfrom policymakers. "Everybody understands that theprimary drivers of the San Juan are the BART settlement," she said. "Everyoneunderstands these are special circumstances with the BART settlement," notingthat it will help with compliance with regional haze standards and the Clean PowerPlan.