The New Mexico Public Regulation Commission staff strongly opposed granting PNM Resources Inc.'s principal utility permission for a $95 million smart meter project to serve 531,000 homes and businesses. In Dec. 5 posthearing briefs, the commission, or PRC, staff and the Attorney General said that the Advanced Metering Infrastructure Project is nonessential and that PNM has failed to show it would benefit anyone other than its subsidiary, Public Service Co. of New Mexico. (Case No. 15-00312-UT)
"Staff strongly opposes the issuance of a CCN [certificate of public convenience and necessity] or other approvals for the AMI Project, as it is proposed by PNM in this case," the PRC staff said. "Without grid modernization and customer engagement features, PNM's AMI Project is more about automation and achieving savings through job losses than anything else."
PNM wants to install a meter data management system and communications equipment in 2018 and replace all meters in 2019 and 2020. In addition to total project capital costs that have increased from an initial $87.2 million estimate, the company wants to amortize $33 million over 20 years to force ratepayers to pay the stranded costs of existing meters that would be removed before the end of their usefulness, the staff said. The staff quoted testimony from PNM's Regulatory Affairs Vice President Gerard Ortiz, who said that though the project is not necessary to provide adequate service, PNM has asked the PRC for advance approval of future capital investments and regulatory assets to pay for the project.
"Simply stated, before proceeding with a discretionary expenditure of this magnitude, PNM needs assurance that all of the costs of the project, as well as the costs of its remaining investment in existing meters, will be recoverable in rates," Ortiz was quoted as saying.
Flawed projections
The staff said the projected savings for the smart meter deployment are "speculative and intrinsically unreliable," as they are based on numerous assumptions. What is certain is residential customers' bills would increase by almost 1% to pay for the project, staff said. Ratepayers would only save money if they change their behavior, and that could take years to accomplish, the staff continued. To win approval, PNM must first propose a comprehensive set of measures to ensure that ratepayers realize the projected benefits, including improved time-of use pricing, dynamic and critical peak pricing rate schedules, plus customer outreach and education, the PRC brief concluded.
Assistant Attorney General Joseph Yar wrote earlier that the project is not cost-effective because the record shows numerous areas of uncertainty in PNM's estimates of benefits. PNM has understated costs and overstated benefits such that the project could cost ratepayers, rather than save them money, Yar argued.
"While any cost savings are dubious, what is certain is that the AMI Project will result in the loss of approximately 125 good paying jobs," he said. "PNM's shareholders would make millions of dollars in additional profit from the AMI Project while 125 New Mexico families stand to lose a critical source of income."
In its posthearing brief, PNM said the project will result in $16.1 million in financial benefits to customers over 20 years. PNM offered to limit recovery of its undepreciated investment in existing meters over 10 years and forgo recovery of $5 million in employee severance costs. Customers will get faster and more accurate notifications of outages as well as more detailed, up-to-date information on their electricity consumption so they can better control their energy costs, the utility argued. Saying that AMI will serve as a foundation for future grid modernization, the company also listed numerous operational and financial cost savings in labor, transportation, field services, billing collections and bad debt.
