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Southwestern Public Service rate cases advance in Texas, New Mexico

Southwestern Public Service Co. reached a rate settlement in Texas and received a recommendation for a rate increase in New Mexico.

The New Mexico Hearing Examiner on June 29 recommended an increase in annual base rates of $12 million, based partly on 9.4% return on equity and rejected a request by Southwestern Public Service, or SPS, to accelerate the depreciation of the Tolk and Cunningham unit 1 power plants.

In May, the Xcel Energy Inc. had filed a rebuttal request with the New Mexico Public Regulation Commission to increase base rates by $27 million, based on an ROE of 10.25% and equity ratio of 58%.

The utility's original request was a $43 million increase in base rates and an ROE of 10.25%. SPS later filed a request to reduce revenue requirements by $11 million to reflect the federal tax overhaul. The rate case was based on the historic test year that ended June 30, 2017. The Hearing Examiner rejected intervenor proposals to refund the impacts of the federal tax overhaul back to Jan. 1, according to a July 3 filing.

SPS said it plans to file exceptions to the recommended decision with New Mexico regulators.

SPS also on June 29 reached a settlement with the staff of the Public Utility Commission of Texas and other intervenors that the company said resulted in no overall change to revenues after adjusting for the impact of the TCJA and the lower cost of long-term debt, which offset the cost of new infrastructure.

The settlement includes a 9.5% ROE, a transmission cost recovery factor rider that will remain in effect and a 57% equity ratio to mitigate the impact of the federal tax reform law on credit metrics. The settlement terms also allow accelerated depreciation at Tolk units 1 and 2 by 50% of the original request.

The utility initially filed a request with the PUCT to increase retail electric, non-fuel base rates by $54 million, or 5.8%, and a 10.25% ROE. SPS later reduced the rate request to $32 million after calculating the impact of federal tax reform. This request would be equivalent to approximately $17 million after adjusting for the transmission cost recovery factor rider.

The settlement, if approved, will not change current rates, according to the filing, but SPS will be permitted to surcharge customers for unrecovered transmission cost recovery factor charges that were not billed during the period of Jan. 23 through June 10.

SPS also agreed in the settlement to file its next rate case no later than Dec. 31, 2019.

Decision and implementation of both the rate cases are expected in the third quarter.