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PNM Files Rate Case Stipulation with New Mexico Regulators

^{Published on 2011-02-03 23:21:18 - Market Wire}
 

ALBUQUERQUE, N.M.--([ BUSINESS WIRE ])--PNM Resourcesa™ (NYSE: PNM) New Mexico electric utility, Public Service Co. of New Mexico, today filed a rate case agreement that a" if approved by state regulators a" would provide PNM with a rate path to increase its electric revenues up to $105 million in three phases beginning May 15, 2011.

"Since 2007, our utilitiesa™ efforts have focused on reducing operating costs. And, every year since, we have taken steps toward facilitating trust and a better understanding of the need for consumer rates to properly reflect those costs"

The agreement, or stipulation, was reached with several key parties, including staff of the N.M. Public Regulation Commission and the state Attorney Generala™s Office. It requires approval from the Commission to be implemented. Among the elements called for by the stipulation are:

• A first-phase increase of $45 million, or 5.7 percent, beginning May 15;
• A second-phase increase of $40 million, or 5.1 percent, beginning Jan. 1, 2012;
• An aAdditions Ridera capped at $20 million, to cover changes in plant-related rate base between June 30, 2010, and December 31, 2012. The rider would be effective Jan. 1, 2013, through Dec. 31, 2013;
• A separate renewable energy rider beginning July 1, 2012, for the recovery of costs associated with Commission-approved renewable energy procurement plans, including PNMa™s investment in its utility-scale solar power facilities totaling 22 megawatts.

According to the stipulation, PNMa™s next general rate adjustment cannot go into effect before Jan. 1, 2014, with the exception that PNM can file for recovery of costs to comply with any federal or state environmental law or requirement effective after June 30, 2010. The stipulation is a ablack-boxa settlement, meaning parties agreed to a specific revenue increase number, but did not agree on a specific cost-of-service or any adjustments in arriving at the rate increase. PNMa™s illustrative cost-of-service that will be filed in support of the rate increase will include an implied return on equity of 10.25 percent on a rate base of $1.8 billion and a capital structure consisting of 47.49 percent long-term debt, 0.52 percent preferred stock and 51.99 percent common equity.

aSince 2007, our utilitiesa™ efforts have focused on reducing operating costs. And, every year since, we have taken steps toward facilitating trust and a better understanding of the need for consumer rates to properly reflect those costs,a said Pat Vincent-Collawn, PNM Resources president and CEO. aThis agreement provides PNM with the certainty of a rate path that stretches to the end of 2013, while balancing the need to keep consumersa™ costs as low as possible. The settlement removes uncertainty for the utility and its customers, provides a roadmap for PNM to earn its allowed return within the three-year period and allows us to continue to focus on cost control.a

Vincent-Collawn said the proposed rate-recovery structure would increase PNM after-tax earnings by approximately $20 million, or $0.22 per diluted share,in 2011, and by an incremental $31 million, or $0.34 per diluted share, in 2012. The stipulation also provides a recovery path for costs associated with the state Renewable Energy Act. Recovery of PNMa™s investment in its solar facilities is estimated to be $18.0 million in 2012, which is expected to add $0.02 per diluted share to current earnings.

In addition to Commission staff and the Attorney Generala™s Office, other signatories to the stipulation include the Albuquerque Bernalillo County Water Utility Authority, the Buckman Direct Diversion Board, the City of Alamogordo and the New Mexico Industrial Energy Consumers.

Below is a table highlighting the major revenue changes from PNMa™s original filing in June 2010 to todaya™s stipulation filing.

RATE CASE PROCEDURAL SCHEDULE

A new procedural schedule for the rate case docket is expected to be established Feb. 11. The stipulation is available at [ http://www.pnmresources.com/investors/regulatory.cfm ].

Background:

PNM Resources (NYSE: PNM) is an energy holding company based in Albuquerque, N.M., with 2009 consolidated operating revenues from continuing operations of $1.6 billion. Through its utility and energy subsidiaries, PNM Resources has approximately 2,630 megawatts of generation resources and serves electricity to more than 877,200 homes and businesses in New Mexico and Texas. The company also has a 50-percent ownership of Optim Energy, which owns nearly 1,200 megawatts of generation resources. For more information, visit the companya™s Web site at [ www.PNMResources.com ].

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Statements made in this news release that relate to future events or PNM's (the "Company") expectations, projections, estimates, intentions, goals, targets and strategies, are made pursuant to the Private Securities Litigation Reform Act of 1995. Readers are cautioned that all forward-looking statements are based upon current expectations and estimates and the Company assumes no obligation to update this information. Because actual results may differ materially from those expressed or implied by these forward-looking statements, the Company cautions readers not to place undue reliance on these statements. The Companya™s business, financial condition, cash flow and operating results are influenced by many factors, which are often beyond its control, that can cause actual results to differ from those expressed or implied by the forward-looking statements. These factors include conditions affecting the Companya™s ability to access the financial markets and negotiate a new credit facilities for one expiring in 2012, including actions by ratings agencies affecting the Companya™s credit ratings; the recession, its disruption in the credit markets, and its impacts on the electricity usage of the Companya™s customers; state and federal regulatory and legislative decisions and actions, including appeals of prior regulatory proceedings, and including provisions relating to climate change, reduction of greenhouse gases, coal combustion byproducts, and other power plant emissions; the ability of PNM to meet the renewable energy requirements established by the New Mexico Public Regulation Commission (aNMPRCa), including the resource diversity requirement, within the specified cost parameters; the ability of PNM to successfully resolve its current electric rate case before the NMPRC; the performance of generating units, including the Palo Verde Nuclear Generating Station, the San Juan Generating Station, the Four Corners Plant, and transmission systems; the risk that recently enacted reliability standards regarding total transmission capacity may limit PNMa™s ability to transmit its generation resources and provide access to transmission customers; the impacts of the decline in the values of marketable equity securities on the trust funds maintained to provide nuclear decommissioning funding and pension and other postretirement benefits, including the levels of funding and expense; collections experience; insurance coverage available for claims made in litigation; fluctuations in interest rates; weather; water supply; changes in fuel costs; availability of fuel supplies; uncertainty regarding the requirements and related costs of decommissioning power plants owned or partially owned by PNM and coal mines supplying certain PNM power plants, as well as the ability to recover decommissioning costs through charges to customers; the risk that replacement power costs incurred by PNM related to not meeting the specified capacity factor for its generating units under its emergency fuel and purchased power adjustment clause will not be approved by the NMPRC; the risk that PNM may not be able to recover costs of renewal of rights-of-way on Native American lands through rates charged to customers; the effectiveness of risk management and commodity risk transactions; seasonality and other changes in supply and demand in the market for electric power; the impact of mandatory energy efficiency measures on customer energy usage; variability of wholesale power prices and natural gas prices; volatility and liquidity in the wholesale power markets and the natural gas markets; uncertainty regarding the ongoing validity of government programs for emission allowances changes in the competitive environment in the electric industry; the risk that the Company may have to commit to substantial capital investments and additional operating costs to comply with new environmental requirements including possible future requirements to address regional haze regulations and related Best Available Retrofit Technology (BART) requirements and concerns about global climate change, and the resultant impacts on the operations and economic viability of generating plants in which PNM has interests; the risks associated with completion of generation, transmission, distribution, and other projects, including construction delays and unanticipated cost overruns; uncertainty surrounding the status of PNMa™s participation in jointly-owned projects resulting from the scheduled expiration of the operational documents for the projects beginning in 2015 and potential changes in the objectives of the participants in the projects; the outcome of legal proceedings; changes in applicable accounting principles; and the performance of state, regional, and national economies.