On Wednesday, the New Mexico Public Regulation Commission approved rates that may lead to lower utility bills for customers of the Public Service Company of New Mexico.

This ruling came as a result of an application by the utility that would have resulted in a nearly 10 percent rate increase for the average residential customer.

Hearing examiners issued a recommended decision in December that would result in a 3 percent rate decrease for the average residential customer. That decrease would come mainly from the lower fuel costs as it is less expensive to generate power through renewable sources. 

The final order approved Wednesday is similar to the recommended decision, but has a few differences. One example of those differences is that the commission chose to adopt PNM’s proposed time of day pilot rates and requires regular filings regarding that rate.

The commission voted 2-0 on the final order adopting the rates. Commissioner Pat O’Connell recused himself from the case due to his past involvement in some of the key issues addressed.

Commissioner James Ellison described the case as monumental and said it had a lot of issues that had not previously been resolved.

Four Corners Power Plant

The final order also answers a question that dates back to 2016 about whether a decision a decade ago to continue using the coal-fired Four Corners Power Plant was prudent. The commissioners say that PNM did not properly analyze the continued use of the plant.

Because of that, the PRC has decided that PNM cannot profit off of investments into the Four Corners that occurred after it chose to continue using the plant.

Ellison described the remedy as “meaningful yet measured.”

“To me, it’s clear that when a utility is faced with a major resource decision that they should do a timely and thorough analysis and that they should document that analysis,” he said.

Meanwhile, Commissioner Gabriel Aguilera said the remedy “appropriately balances the interests of ratepayers and investors.”

He said not allowing any profits “sends a strong signal that due diligence on behalf of customers needs to be done.”

PNM conducted an analysis in May of 2012 and signed a fuel contract in December 2013. 

Ellison said that does not constitute a timely analysis and that a lot of things happened between May 2012 and December 13, including changes in fuel prices.

“Having a year-and-a-half go by between the analysis and the decision, in my view, is unacceptable,” he said.

But he said it isn’t clear that an updated analysis would have changed PNM’s decision. Ellison said in his view the power plant is and has been both used and useful and contributes to PNM’s reliability.

Natural gas plants

 The PRC did choose to accelerate the depreciation of the Luna and La Luz natural gas plants to 2045. PNM had requested accelerating the depreciation to 2040. 

To depreciate the plants at faster rates, customers would need to pay higher amounts.

Ellison expressed skepticism that the plants could be renovated and transformed into hydrogen facilities.

Aguilera said the 2045 depreciation date is reasonable based on requirements of the Energy Transition Act. At the same time, he said he believes the commission could have accepted the 2040 depreciation dates.

Time of day pilot 

In terms of solar energy, Ellison said he anticipates that PNM will have to curtail some of the power produced by new arrays that are coming online. He said that the time of use pilot rates should take that into account and offer a lower daytime rate. He said that is not being offered for residential customers. While he did have some misgivings about the time of day pilot rates, he said it is reasonable to encourage pilot projects to start collecting data that will help PNM develop a true time of day rate.

“Time of day rates if installed appropriately can help customers reduce their bills and help the system overall in terms of reducing the need for additional capacity and the need for additional investments that we might be able to avoid,” Aguilera said.

He said it is important to implement the program as a pilot and that customers can opt in and are not required to participate.

Aguilera said he hopes the pilot leads to a rate design that will help customers in a few years.

Overcollection related to Palo Verde

At the end of 2022, PNM’s lease of 100 megawatts of power from unit one of the Palo Verde Generating Station ended. But  in 2023, PNM continued to collect money from customers for a lease payment that the company did not have to make, Ellison said.

He said he was surprised that PNM’s lawyers argued that the money should not have to be returned to customers. Ellison said in his view that was an unreasonable argument.

The final order includes a rate credit to return that money to customers.