ALBUQUERQUE – Public Service Company of New Mexico investments to assure the current and future reliability of New Mexico’s largest electric system, which supports 500,000 residential and business customers throughout the state, will total more than $575 million through 2011, PNM President and CEO Pat Vincent-Collawn said June 1.
These current and planned investments include the expansion of substations and power lines in Rio Rancho, Santa Fe, Alamogordo and other areas, as well as necessary upgrades to five power plants.
PNM filed a proposal with the N.M. Public Regulation Commission today to raise rates beginning next year.
“A rate request is unavoidable,” said Vincent-Collawn. “Knowing these are difficult times, we will stay focused on balancing the need for reliability and affordability, in part through programs to help customers manage energy bills.”
PNM has requested an overall average increase of 21.2 percent that would be implemented in two phases starting in 2011, if approved. The phase-in is designed to ease the impact on customers. Even with the increase, PNM bills would remain more than 25 percent below the national average.
This will be the first rate increase in five years for PNM’s 51,000 customers in Alamogordo, Ruidoso, Tularosa, Lordsburg, Silver City, Lordsburg and Bayard, who saw their rates drop by 15.8 percent after PNM became their electric service provider in 2005.
To keep service reliable, utilities must make large investments, borrowing large sums to make those investments. Having adequate cost recovery is critical to the company’s ability to access capital at a reasonable cost, the company said in its filing.
The request also includes increases not related to the capital investments, including increases to cover fuel costs and higher employee benefit costs.
Vincent-Collawn said that the company took proactive steps to reduce costs before the rate request. Since 2007, PNM and its holding company, PNM Resources, have reduced the number of employees by 15 percent, and the number of officers, the highest paid employees, by 39 percent. On top of these steps, increases to core operating expenses have been held to half the rate of inflation since that time, she said.
Help for customers
“Energy costs are rising, but there is a lot we are doing to help our customers,” said Vincent-Collawn.
PNM energy efficiency rebate programs help customers cut their energy use and bills. Programs can help residential and small business customers cut hundreds if not thousands of dollars off their bills, she said. Last year, PNM customers using the programs together saved the equivalent of the energy used by 5,400 average homes.
The PNM Good Neighbor Fund offers a once-a-year grant to help customers living on limited or fixed incomes with their past-due PNM bills, according to Vincent-Collawn.
Request reflects changing energy landscape
Two features of the request reflect the company’s need to respond to the changing energy landscape:
• For the first time, PNM’s request is based on the projected cost of service when the rates go into effect in 2011. In past cases, PNM’s rates have been based on cost of service figures that are two years old or older, so by the time the new rates go into effect, they already are out of date.
Using a forward-looking cost projection gives the utility a better ability to align prices with costs as other businesses strive to do. This will benefit customers in the long run by improving the financial condition of the company, thus facilitating access to capital and lowering borrowing costs, according to Vincent-Collawn.
• The proposal also includes modifications that will provide incentives for further energy efficiency efforts while providing adequate rate recovery for fixed costs that remain even if consumption drops.
The rate request does not include the renewable energy proposal currently pending before the commission to add more renewable energy sources required to meet the state’s renewable energy standards, which increase in 2011 to 10 percent from the current 6 percent.
“Our filing today begins a very public regulatory process where the focus will be balancing the need to invest in reliability with the need to keep rates reasonable. Our request will be carefully scrutinized. I look forward to working with customers and regulators throughout this process," Vincent -Collawn said.