PNM Seeks Emergency Increase: Utility, AG Seek Clause To Pass Fuel Costs to Customers

By Jack King

Public Service Company of New Mexico, Mar. 21, 2008 (McClatchy-Tribune Regional News delivered by Newstex) --
with the support of Attorney General Gary King -- is asking for an emergency fuel adjustment clause that would generate an estimated $44 million this year.

The average residential customer using 600 kilowatts a month would see an increase of about $5.

PNM President, Chairman and CEO Jeff Sterba said Thursday the measure is necessary to keep bonding agencies from downgrading the utility's bond rating to junk status -- a move he says will cost ratepayers more as the company tries to obtain credit.

The proposal is a modified version of the clause PNM has asked for in its pending rate case. It was rejected by a hearing examiner in a recommended decision March 6 and is awaiting action by the elected Public Regulation Commission.

While the AG's Office supports the emergency clause, several of the intervenors who opposed both PNM's rate hike and the earlier fuel clause said they would object.

The move is a turnabout for the Attorney General's Office, which is charged with representing residential consumers in rate cases. The AG opposed both the fuel clause and PNM's $76.9 million rate request.

A fuel adjustment clause allows the company to pass the cost of fuel needed to generate power on to customers.

As part of a compromise with the AG's Office, the emergency clause would be billed at .83 cents per kilowatt hour for the first year and capped at a penny after that.

PRC Commissioner Jason Marks said the commission will decide how to act on the request and make a determination as soon as possible. The PRC staff had not yet taken a position.

Reaction to the filing from other parties was mixed Thursday.

Peter Gould, counsel for the New Mexico Industrial Energy Consumers, called it "entirely improper."

PNM is asking that the clause be put into effect at the same time as the rest of rate case, on or before May 7, even though no hearings have been held on this new version, he said.

"How are they going to reopen the record without delaying the case?" he asked. "If they file affidavits of support, we have the right to respond to them in a timely manner. Are they going to ask for further hearings?"

Nann Winter, attorney for the cities of Albuquerque and Santa Fe, and the Bernalillo County Water Authority, said her clients oppose the request.

"Procedurally, the record is closed," she said. "PNM had a chance to present this issue. If they feel they are under-recovering they should file this proposal under a separate docket."

King said Thursday the proposal would protect electric energy consumers.

Assistant Attorney General Jeff Taylor said utility and AG officials had been meeting since Monday on the proposal.

"Not only does PNM need this clause to cover fuel costs, but there are a lot of adverse financial consequences if they don't get it," Taylor said.

"We don't need a bankrupt utility in this state. All kinds of problems could result from that. I wouldn't want them taken over by an out-of-state utility."

Taylor said the AG's Office hadn't realized the company's dire position during the earlier hearings. The AG's Office actually recommended a rate reduction.

The company's stock has fallen from the $34 range last year to close at $9.99 on Wednesday. Its bond rating has been downgraded.

The PRC earlier this week gave the company permission to try to borrow an additional $300 million.

AG spokesman Phil Sisneros said PNM officials appear to have been "in a panic" since the recommended decision was issued. He said King also has concerns about consumers "if PNM were to tank."

The new proposal has a number of changes from the first fuel adjustment clause presented in PNM's rate case.

Among the changes:

Instead of the amount being revised monthly, customers would pay a fixed fuel adjustment charge of .83 cents per kilowatt hour for one year.

At the end of the year, the amount would be raised or lowered, depending on the company's expenses -- subject to PRC approval.

PNM would pay the costs of auditing the costs included under the clause.

If the commission allows a fuel adjustment increase, the amount customers would pay would be capped at 1 cent per kilowatt hour.

If the commission decided .83 cents was too much, PNM would return the difference to customers.

The commission could deny PNM the right to recover costs that were the result of poor plant performance at its base-load power plants. Poor performance is defined as the plants' capacities being below a weighted average of 82.9 percent.

The clause would expire two years after the date rates in the current rate case go into effect, or on the date rates in a second rate case go into effect, whichever is sooner, PNM said.

PNM spokesman Jeff Buell said Thursday that statement doesn't mean PNM intends to file a second rate case within the next two years.

Newstex ID: KRTB-0010-23947082