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ALBUQUERQUE, N.M., June 20, 2022 /PRNewswire/ -- Hearing Examiners of the New Mexico Public Regulation Commission (NMPRC) issued a Recommended Decision disregarding the state's Energy Transition Act and arbitrarily penalizing Public Service Company of New Mexico (PNM), a wholly-owned subsidiary of PNM Resources, Inc. (NYSE: PNM) related to its retirement of the San Juan Generating Station (San Juan).
The Recommended Decision calls for an immediate reduction to customer rates related to the retirement of San Juan, eliminating PNM's ability to recover costs necessary to support the transition to carbon free energy until new customer base rates are implemented. PNM has been deferring this new rate implementation for the benefit of customers since 2020. The recommendation would penalize PNM for deferral of the rate review and would be directly contrary to the Energy Transition Act and inconsistent with the prior NMPRC financing order, which was previously challenged and upheld by the New Mexico Supreme Court.
"This recommendation is particularly discouraging because it disregards the Energy Transition Act and its inherent balancing of stakeholder interests, retroactively stripping away the built-in protections for utilities to encourage the exit from coal while ignoring the existing safeguards that prevent the utility from overcharging customers," said Pat Vincent-Collawn, PNM Resources' Chairman and CEO. "We have repeatedly deferred our planned rate filings to avoid increasing customer bills during the global pandemic for the benefit of customers. This recommendation would arbitrarily penalize the utility for exiting coal and putting customer interests first in our decision-making."
The reduction to customer rates in the Recommended Decision is cited as necessary to prevent double recovery. The Energy Transition Act specifically protects against double recovery, which would occur if PNM continued to collect rates based on the cost of San Juan and, at the same time, collected charges for the authorized securitization bonds. PNM has sought to avoid this situation by aligning the timing of new customer rate implementation with the issuance of the securitization bonds, so that San Juan is only recovered under either base rates or securitization charges at any point in time. When PNM agreed to delay its general rate review, the securitization bond issuance was also delayed to specifically avoid recovery of both charges.
The Recommended Decision, if implemented, would instead remove recovery of costs from base rates before securitization bond charges are collected. This absence of recovery would disregard the provisions of the Energy Transition Act, NMPRC financing order and past NMPRC practice.
PNM has not filed for a general rate review in six years and has been carrying the costs of significant infrastructure investments not included in customer rates. To avoid increasing customer rates during the evolving global pandemic, PNM deferred its original plans to file a general rate review in the first half of 2020. These plans were further deferred, at the request of parties, as part of a stipulated agreement in the PNM Resources and Avangrid merger proceedings. The planned timing for the securitization bonds and corresponding customer charges was also shifted to remain aligned with the implementation of new rates and avoid any excess San Juan recovery.
PNM's current plans for a general rate review filing in December 2022, consistent with the stipulated agreement in the PNM Resources and Avangrid merger proceedings, take into account the cost reductions from the abandonment, securitization and replacement of the San Juan Generating Station, reducing the impact on customer bills. Under the arbitrary recommendation, the total credits expected to be issued over 2022 and 2023 would result in an approximately $130 million pre-tax, non-recurring reduction to revenues. The rate credits would expire with the implementation of updated base rates anticipated in January 2024 following the general rate review, resulting in higher customer bill impacts from six years of infrastructure investments.
PNM and other parties will have an opportunity to file any exceptions to the Recommended Decision. The NMPRC is expected to review the case and issue its decision before Unit 1 of the San Juan Generating Station retires on June 30, 2022. Unit 4 is scheduled to retire on September 30, 2022.
Additional materials pertaining to the application and recommendation are available at https://www.pnmresources.com/investors/rates-and-filings.aspx.
PNM Resources (NYSE: PNM) is an energy holding company based in Albuquerque, N.M., with 2021 consolidated operating revenues of $1.8 billion. Through its regulated utilities, PNM and TNMP, PNM Resources provides electricity to approximately 800,000 homes and businesses in New Mexico and Texas. PNM serves its customers with a diverse mix of generation and purchased power resources totaling 3.2 gigawatts of capacity, with a goal to achieve 100% emissions-free energy by 2040. For more information, visit the company's website at www.PNMResources.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Statements made in this news release for PNM Resources, Inc. ("PNMR"), Public Service Company of New Mexico ("PNM"), or Texas-New Mexico Power Company ("TNMP") (collectively, the "Company") that relate to future events or expectations, projections, estimates, intentions, goals, targets, and strategies, including the unaudited financial results and earnings guidance, 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 apply only as of the date of this report. PNMR, PNM, and TNMP assume no obligation to update this information. Because actual results may differ materially from those expressed or implied by these forward-looking statements, PNMR, PNM, and TNMP caution readers not to place undue reliance on these statements. PNMR's, PNM's, and TNMP's business, financial condition, cash flow, and operating results are influenced by many factors, which are often beyond their control, that can cause actual results to differ from those expressed or implied by the forward-looking statements. Additionally, there are risks and uncertainties in connection with the proposed acquisition of us by AVANGRID which may adversely affect our business, future opportunities, employees and common stock, including without limitation, (i) the expected timing and likelihood of completion of the pending Merger, including the timing, receipt and terms and conditions of any remaining required governmental and regulatory approvals of the pending Merger that could reduce anticipated benefits or cause the parties to abandon the transaction, (ii) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement, (iii) the risk that the parties may not be able to satisfy the conditions to the proposed Merger in a timely manner or at all, and (iv) the risk that the proposed transaction could have an adverse effect on the ability of PNMR to retain and hire key personnel and maintain relationships with its customers and suppliers, and on its operating results and businesses generally. For a discussion of risk factors and other important factors affecting forward-looking statements, please see the Company's Form 10-K, Form 10-Q filings and the information included in the Company's Forms 8-K with the Securities and Exchange Commission, which factors are specifically incorporated by reference herein.
Non-GAAP Financial Measures
GAAP refers to generally accepted accounting principles in the U.S. Ongoing earnings is a non-GAAP financial measure that excludes the impact of net unrealized mark-to-market gains and losses on economic hedges, the net change in unrealized gains and losses on investment securities, pension expense related to previously disposed of gas distribution business, and certain non-recurring, infrequent, and other items that are not indicative of fundamental changes in the earnings capacity of the Company's operations. The Company uses ongoing earnings and ongoing earnings per diluted share to evaluate the operations of the Company and to establish goals, including those used for certain aspects of incentive compensation, for management and employees. While the Company believes these financial measures are appropriate and useful for investors, they are not measures presented in accordance with GAAP. The Company does not intend for these measures, or any piece of these measures, to represent any financial measure as defined by GAAP. Furthermore, the Company's calculations of these measures as presented may or may not be comparable to similarly titled measures used by other companies. The Company uses ongoing earnings guidance to provide investors with management's expectations of ongoing financial performance over the period presented. While the Company believes ongoing earnings guidance is an appropriate measure, it is not a measure presented in accordance with GAAP. The Company does not intend for ongoing earnings guidance to represent an expectation of net earnings as defined by GAAP. Since the future differences between GAAP and ongoing earnings are frequently outside the control of the Company, management is generally not able to estimate the impact of the reconciling items between forecasted GAAP net earnings and ongoing earnings guidance, nor their probable impact on GAAP net earnings without unreasonable effort, therefore, management is generally not able to provide a corresponding GAAP equivalent for ongoing earnings guidance.
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SOURCE PNM Resources, Inc.