ALBUQUERQUE, N.M. (AP) — New Mexico’s largest electric provider is seeking its first rate hike in years as it looks to recoup $2.6 billion in investments that executives say are needed to modernize the grid and meet state mandates for transitioning away from coal and natural gas.
Public Service Co. of New Mexico filed its request with state regulators Monday, telling reporters that much of the proposed 9.7% increase in base rates for average residential customers will be offset by savings from the recent closure of the coal-fired San Juan Generating Station.
Other factors include the upcoming expiration of lease agreements for electricity from the Palo Verde nuclear power plant in Arizona and the refinancing of utility debt to take advantage of lower interest rates.
Utility executives say that when factoring in the savings, the increase will amount to about 75 cents more per month for average residential customers starting in 2024 if the proposal is approved by the Public Regulation Commission.
Ron Darnell, senior vice president for public policy, likened it to checking out at the grocery store and getting the total before swiping a frequent shopper card or presenting coupons.
“That final total of what you actually pay is much lower, just as the final total for the average residential customer is much lower than 9.7%,” he said.
Darnell also acknowledged that rising costs have been a concern for PNM and that the utility is sensitive to the fact that customers also have been feeling the pinch amid economic fallout from the coronavirus pandemic, persistent supply chain issues and inflation.
Darnell said the cost of goods has risen by about 19% in recent years and yet the proposed rate increase will result in residential customers paying less than 1% more.
The filing triggers a lengthy process of public hearings that will carry through next year.
Aside from dealing with inflation and rising costs, PNM is looking to recoup $2.6 billion in investments aimed at modernizing the grid and meeting state mandates for more renewable energy. Under New Mexico’s Energy Transition Act, investor-owned utilities are on the hook for being carbon-free by 2045.
Solar and battery projects that were meant to replace the lost capacity with the closure of the San Juan Power Plant have been delayed and costs have been rising.
There also was a legal battle over when the utility would pass along the savings of the San Juan closure to ratepayers. The attorney general and consumer advocates recently asked the New Mexico Supreme Court to reconsider a decision that allowed the utility to delay the credits and work them in as part of the rate request filed Monday.
PNM, which serves more than 530,000 customers in communities statewide, has argued that issuing the credits now would leave ratepayers on the hook for a bigger increase down the road.
The utility said Monday that it tried to balance many factors in proposing what the executives described as “a modest increase.”
PNM’s proposal also includes increases for small business customers, commercial and industrial users, universities, water and sewer utility operations and for the electricity that municipalities use to power street lights.
Consumer advocacy groups are expected to weigh in on PNM’s request. In past rate cases, debates over whether the utility’s investments were prudent resulted in some reductions of the rates approved by the regulatory commission.