New Mexico regulators reject utility's effort to recoup some investments in coal and nuclear plants

ALBUQUERQUE, N.M. — Regulators rejected on Wednesday an effort by New Mexico’s largest electric utility to recoup from customers millions of dollars of investments made in a coal-fired power plant in the northwestern corner of the state and a nuclear power plant in neighboring Arizona.

The Public Regulation Commission's decision means Public Service Co. of New Mexico customers will not have to bear some costs associated with PNM’s stake in the Four Corners Power Plant near Farmington or in the Palo Verde Generating Station outside of Phoenix. Commissioners said those investments were not prudent.

Overall, residential customers will see a decrease in rates instead of the 9.7% increase that the utility was seeking.

The commission said in a statement that PNM still will be able to collect a reasonable return on its investments while providing reliable service to more than 500,000 customers around the state.

PNM filed a request for its first rate hike in years in late 2022, saying the nearly $64 million in additional revenue was needed as part of a long-term plan to recoup $2.6 billion in investments necessary to modernize the grid and meet state mandates for transitioning away from coal and natural gas.

The utility also had cited the expiration of lease agreements for electricity from the Palo Verde plant and the desire to refinance debt to take advantage of lower interest rates.

Hearing examiners with the Public Regulation Commission who reviewed the case recommended in December that the commission reject costs associated with the sale of leases at Palo Verde to a third party. They also said PNM’s 2016 decision to invest in extending the life of the Four Corners plant wasn't prudent.

PNM officials said late Wednesday that they were reviewing the commission's order. The utility has until Feb. 2 to seek a rehearing before the commission.

Consumer advocates and environmental groups were pleased the commission opted to reject some of the costs associated with PNM's investments.

“The commission recognized that PNM failed to do its due diligence before reinvesting in Four Corners after 2016, when there were clear signs that coal is a costly and deadly fuel,” said Matthew Gerhart, a senior attorney with Sierra Club.

The utility had tried to divest itself from Four Corners by transferring its shares to a Navajo energy company. However, regulators rejected that proposal, a decision that was later upheld by the New Mexico Supreme Court.

Located on the Navajo Nation, the Four Corners plant is operated by Arizona Public Service Co. The utility owns a majority of shares in the plant’s two remaining units.

Navajo Transitional Energy Co. had sought to take over PNM’s shares, saying that preventing an early closure of the power plant would help soften the economic blow to communities that have long relied on tax revenue and jobs tied to coal-fired generation.

The nearby San Juan Generating Station was shuttered in 2022, sending financial ripples through the surrounding communities. PNM had operated that plant for decades.