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PNM gets rate increase, but regulators cut some of utility's Palo Verde request

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PNM gets rate increase, but regulators cut some of utility's Palo Verde request

New Mexico regulators narrowly approved a $61 millionelectric rate increase for PublicService Co. of New Mexico, which is about half of what thePNM Resources Inc.subsidiary requested.

The increase is more than a state hearing examiner'srecommended hike of$41.3 million, but the utility subsidiary had originally sought an increase of $121.5million in non-fuel test year revenues, according to Hearing Examiner CarolynGlick's recommended decision.

PNM said in a news release Sept. 29 it was disappointed the statePublic Regulation Commission discounted the value of Nuclear GeneratingStation assets it bought and leased and did not approve recovery of thebalanced draft technology for the San Juan coal-fired plant, for which PNM said itrequested that $38.9 million be included in rate base. The company said itplans to file an appeal of these issues to the New Mexico Supreme Court.

PNM said the Sept. 28 order permits recovery of the 64 MW of previously leasedPalo Verde unit 2 capacity at $1,306/kW, while excluding $26.1 million inleasehold improvements and common plant associated with this capacity. Theutility said it asked for $2,550/kW for the Palo Verde unit 2 capacityrepurchase.

The order also permits the recovery of the lease andproperty tax expenses associated with the five remaining Palo Verde leases, butreduces the amount of depreciation expense from the recommended decision by $5million, PNM said.

The commission approved the rate increase 3-2 on Sept. 28,with Commissioners Patrick Lyons, Lynda Lovejoy and Karen Montoya voting forthe decision and Sandy Jones and Valerie Espinoza voting against, PRC spokesmanCarlos Padilla said.

The hearing examiner's recommended decision had beencontroversial, with PNM warning that it would have to cut hundreds of positionsfrom its workforce.

PNM said the order adopts an average rate base of more than$2.26 billion and grants the utility permission to earn a 9.575% return onequity, though the utility had requested a 10.5% return.

Padilla said the PRC granted a 9.54% average non-fuel rates increaseacross all customer classes.Residential customers will see a 12.4% increase.

"We appreciate that the Commission's order correctssome aspects of the hearing examiner's recommendation related to the Palo VerdeNuclear Generating Station," PNM Resources Chairman, President and CEO PatVincent-Collawn said. "We are, however, disappointed that the commissiondiscounted the value of these critical carbon-free assets and did not approverecovery of the balanced draft technology for the San Juan Generating Stationrequired by the New Mexico Environment Department."

Padilla said PNM's new rates will take effect on Sept. 30and that PNM will file a new rate case in December for a 2017 rate case. (CaseNo. 15-00261-UT)

Jefferies LLC analysts said the new rate request will seekto include an 80-MW peaking unit and expenses associated with retirement of SanJuan units 2 and 3. They said the rate case decision also includesall $155 million of PNM's pre-paid pension in rate base, which is in line withthe hearing examiner's recommendation.