2.2.0.7 false Regulatory and Rate Matters 11001 - Disclosure - Regulatory and Rate Matters true false false false 1 USD false false Unit12 Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 Unit13 Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 Unit1 Standard http://www.xbrl.org/2003/instance shares xbrli 0 $ 2 Regulatory and Rate Matters 0 pnm_RegulatoryAndRateMatters pnm false na duration Regulatory and Rate Matters false false false false false true false false false false false false 1 false false false false 0 0 false false false xbrli:stringItemType string Regulatory and Rate Matters false 3 Regulatory and Rate Matters 1 pnm_RegulatoryAndRateMattersTextBlock pnm false na duration Regulatory And Rate Matters [Text Block] false false false false false false false false false false false terselabel false 1 false false false false 0 0 <div> <div> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td valign="top" width="4%" align="left">(10)</td> <td valign="top" align="left">     Regulatory and Rate Matters </td></tr></table> Information concerning regulatory and rate matters is contained in Note 17 of Notes to Consolidated Financial Statements in the 2009 Annual Reports on Form 10-K. PNMR First Choice Request for ERCOT Alternative Dispute Resolution In June 2008, First Choice filed a request for alternative dispute resolution with ERCOT alleging that ERCOT incorrectly applied its protocols with respect to congestion management during the first quarter of 2008. First Choice requested that ERCOT resolve the dispute by restating certain elements of its first quarter 2008 congestion management data and by refunding to First Choice allegedly overstated congestion management charges. The amount at issue in First Choice's claim can only be determined by running ERCOT market models with corrected inputs but First Choice believes that the amount is significant. ERCOT protocols provide that ERCOT will notify potentially impacted market participants and subsequently consider the merits of First Choice's allegations. The Company is unable to predict the outcome of this matter. PNM Emergency FPPAC On March 20, 2008, PNM and the IBEW filed a joint motion in PNM's 2007 Electric Rate Case requesting NMPRC authorization to implement an Emergency FPPAC on an interim basis. On May 22, 2008, the NMPRC issued a final order that approved the Emergency FPPAC with certain modifications. PNM implemented the Emergency FPPAC from June 2, 2008 through June 30, 2009. The Albuquerque Bernalillo County Water Utility Authority and the New Mexico Industrial Energy Consumers Inc. filed notices of appeal to the New Mexico Supreme Court seeking to vacate the NMPRC order approving the Emergency FPPAC. On March 19, 2010, the New Mexico Supreme Court affirmed the NMPRC order approving the Emergency FPPAC. The NMPRC order approving the Emergency FPPAC required PNM to pay for an audit of PNM's monthly FPPAC reports and a prudence review of PNM's fuel and purchased power costs, to be conducted by auditors selected by the NMPRC. Costs of the audit incurred by PNM will be recoverable through future rate proceedings. On February 19, 2010, the audit report of findings and recommendations was submitted to the NMPRC. The report recommended operational changes in several areas but did not identify any imprudent activities or find that PNM's fuel or purchased power costs were unreasonable. The audit report findings and recommendations are subject to NMPRC review and approval. PNM is unable to predict the outcome of this matter. The NMPRC order approving the Emergency FPPAC also provided that if PNM's base load generating units did not operate at or above a specified capacity factor and PNM was required to obtain replacement power to serve jurisdictional customers, PNM would be required to make a filing with the NMPRC seeking approval of the replacement power costs. In its required filing, PNM stated that the costs of the replacement power amounting to $8.0 million were prudently incurred and made a motion that they be approved. The NMPRC staff opposed PNM's motion and recommended that PNM be required to refund the amount collected. On January 12, 2010, the NMPRC directed the Emergency FPPAC auditor to investigate whether the replacement power costs were prudently incurred. The order also directed PNM to file a response to the auditors' report, to provide certain additional information, and to show cause why it should not be fined for recovering replacement power costs without prior NMPRC approval. PNM filed its response to the show cause order on February 12, 2010. On February 19, 2010, the auditor's report on replacement power costs was submitted to the NMPRC. The report concluded that the methodology used to estimate the cost of replacement power was reasonable, that PNM purchased power at the lowest reasonable cost, and that outage planning and scheduling and plant operations were reasonable. These findings are subject to NMPRC review and approval. On April 12, 2010, the NMPRC staff filed a request for a hearing on whether the replacement power costs should be approved and whether any penalty should be imposed, to which PNM responded. PNM will continue to assert that its recovery of replacement power costs was proper and did not violate the NMPRC's order, but is unable to predict the outcome of this matter. 2008 Electric Rate Case On September 22, 2008, PNM filed its 2008 Electric Rate Case requesting the NMPRC to approve an increase in electric service rates to all PNM retail customers except those formerly served by TNMP. The case was concluded on June 18, 2009 when a stipulation among the parties that authorized a two-phase rate increase was approved by the NMPRC. On April 1, 2010, PNM implemented the second phase increase of $27.0 million. Renewable Portfolio Standard The Renewable Energy Act of 2004 was enacted to encourage the development of renewable energy in New Mexico. The act, as amended, establishes a mandatory renewable energy portfolio standard requiring a utility to acquire a renewable energy portfolio equal to 5% of retail electric sales by January 1, 2006, increasing to 10% by 2011, 15% by 2015 and 20% by 2020. The NMPRC requires renewable energy portfolios to be "fully diversified" beginning in 2011 when no less than 20% of the renewable portfolio requirement must be met by wind energy, no less than 20% by solar energy, no less than 10% by other renewable technologies, and no less than 1.5% by distributed generation. The act provides for streamlined proceedings for approval of utilities' renewable energy procurement plans, assures utilities recovery of costs incurred consistent with approved procurement plans and requires the NMPRC to establish a RCT for the procurement of renewable resources to prevent excessive costs being added to rates. The NMPRC has established a RCT that began at 1% of all customers' aggregated overall annual electric charges, increasing by 0.2% annually until 2011, at which time it will be 2%, and then increasing by 0.25% annually until reaching 3% in 2015. On July 1, 2009, PNM filed its annual Renewable Energy Portfolio Procurement Plan for 2010 with the NMPRC. Under the plan, PNM proposed to rely on a mixture of solar, wind, and biogas resources and the purchase of RECs to meet its renewable energy requirements for 2010 and 2011 and committed to file for additional projects later in the year. In September 2009, the NMPRC rejected the plan and ordered PNM to file a revised plan. In December 2009, the NMPRC approved the biogas resources project and a procurement of RECs. PNM and several parties to the proceeding filed a stipulation and PNM filed its revised 2010 procurement plan. Under the revised plan, PNM proposed to invest approximately $265 million on solar PV facilities and implement a customer-sited PV distributed generation program to replace its current PV programs. The plan and stipulation were opposed by a number of parties, including the AG and the NMPRC staff. On August 31, 2010, the NMPRC issued an order on the revised plan that rejected portions of the plan but approved PNM's investment in 22 MW of solar PV facilities at various PNM sites and the construction of a proposed solar-storage demonstration project. The NMPRC also modified PNM's distributed generation REC purchase program. PNM is allowed recovery of costs associated with the purchase of the RECs and for the investments in the solar PV and demonstration projects, up to $107.7 million, PNM's estimated amounts of these investments. PNM anticipates requesting recovery of these costs from customers through a rate rider.   On July 1, 2010, PNM filed its new renewable energy plan for 2011. The 2011 plan proposed the procurement of 250,000 MWh of RECs from another New Mexico public utility to be used for compliance with the renewable portfolio standard in 2011. On October 5, 2010, the NMPRC issued an order rejecting PNM's plan for 2011 as incomplete because certain planning assumptions in the plan were found to be outdated and ordered PNM to file a new plan within 60 days. The 180-day period for NMPRC action on the 2011 plan will start on the date the new plan is filed. PNM cannot predict the outcome of this matter. NMPRC Inquiry on Fuel and Purchased Power Adjustment Clauses In October 2007, the NMPRC issued a NOI that could lead to the adoption of an amended rule for the implementation of FPPACs for all investor-owned utilities and electric cooperatives in New Mexico. The investor-owned utilities and electric cooperatives have responded to a series of questions and the NMPRC staff made a filing dealing with the need for consistency of FPPACs, streamlining FPPACs, and whether a single FPPAC methodology should be applied to all utilities. Workshops were held to discuss the comments filed by PNM and others and the proposed changes. At the conclusion of the workshop process, the Hearing Examiner presented proposed rule amendments to the NMPRC for its consideration. On April 29, 2010, the NMPRC issued a Notice of Proposed Rulemaking proposing the adoption of the rule amendments that were developed in the workshop process and presented by the Hearing Examiner. A public hearing was held on July 1, 2010. The outcome of this proceeding is not expected to have a material impact on PNM. NMPRC Rulemaking on Disincentives to Energy Efficiency Programs In January 2008, the NMPRC issued a NOI to identify disincentives in utility expenditures on energy efficiency and measures to address those disincentives, including specific rate making alternatives, and appointed a Hearing Examiner to conduct workshops to develop proposals for possible rule changes. Based on the workshops, the NMPRC issued proposed amendments to its energy efficiency rule. After a hearing, the NMPRC approved the amended rule on April 8, 2010 to be effective May 3, 2010. The amended rule allows electric utilities to collect rate adders of $0.01 per KWh for lifetime energy savings and $10 per kilowatt for demand savings related to energy efficiency and demand response programs beginning in 2010. In addition, investor-owned electric utilities were required to make filings by July 1, 2010 that propose rate design and ratemaking methods to remove regulatory disincentives or barriers to achieve energy efficiency savings. PNM included its proposals in the 2010 Electric Rate Case described below. After such ratemaking measures become effective, the rate adder for energy saving will be reduced to $0.005 per KWh. Certain intervenors have filed notices of appeal of the NMPRC order to the New Mexico Supreme Court. PNM cannot predict the outcome of these appeals. On May 5, 2010, PNM filed proposed tariffs under the amended rule to recover a rate adder related to 2010 efficiency programs. PNM proposed to recover $6.2 million over a twelve-month period following NMPRC approval. The NMPRC suspended these tariffs through December 1, 2010, and has established a procedural schedule for the case. The staff of the NMPRC filed testimony recommending the recovery of not more than $4.2 million. A public hearing was held on September 14, 2010 and a decision is expected in late November 2010. PNM cannot predict the outcome of this proceeding. PNM Electric Energy Efficiency and Load Management Programs The NMPRC requires public utilities to obtain approval to implement energy efficiency and load management programs. Costs to implement approved programs are recovered through a rate rider. On September 15, 2008, PNM filed a plan, which included new programs, modifications to existing programs and a request to recover program costs. After proceedings before the NMPRC, a final order approving the programs was issued on May 19, 2009. In August 2009, PNM began recovering the costs of the programs through a rate rider amounting to 1.881% of customers' bills, before taxes and franchise fees, based on program costs of $14.1 million. The new programs are being implemented.     On July 7, 2009, the NMPRC ordered an investigation into whether it is prudent for PNM to continue certain load management programs initiated in 2008 with NMPRC approval, considering its recent addition of supply-side resources. PNM offers these programs through contracts with third-party vendors that contain substantial fees for early termination. On March 10, 2010, the NMPRC issued an order concluding that it would not be prudent to terminate the programs, and remanded the case to a hearing examiner to consider whether freezing the programs at current levels would be possible and, if so, prudent. A hearing was held June 22, 2010 on the issues identified in the order on remand. On August 12, 2010, the NMPRC issued a final order approving the continuation of the load management programs without modification. 2010 Energy Efficiency Application   On September 15, 2010, PNM filed an energy efficiency program application for programs to be offered beginning June 1, 2011. PNM is requesting to discontinue one program, add two new programs, revise estimated budgets and participation levels for programs that will be continued, revise the program cost recovery tariff riders, reconcile program costs with revenues through the effective date of the revised riders, and recover disincentive/incentive adders for 2011 energy efficiency and demand response programs, as provided by the NMPRC rules. The total amount that PNM has proposed to recover through the tariff riders is $32.9 million, which includes $6.2 million for the 2010 programs adder discussed above. A procedural order has been issued that includes a public hearing on February 23, 2011. PNM is unable to predict the outcome of this proceeding. Rates for Former TNMP Customers in New Mexico   PNM serves the former New Mexico customers of TNMP ("TNMP-NM" or "PNM South") under rates approved by the NMPRC in its order approving PNMR's acquisition of TNMP. Under that order, rates charged to TNMP-NM customers were set through December 31, 2010. In January 2009, the NMPRC directed PNM to estimate the revenue requirement increase that would be reflected in a TNMP-NM rate application for rates effective January 2011. PNM estimated that the rate increase could be between 40% and 56% depending on fuel costs. In April 2009, the NMPRC directed PNM, the NMPRC staff, and other parties to attempt to reach consensus on ways to mitigate the impact of this potential rate increase and appointed a mediator. Several mediations were held but no agreement was reached. In March 2010, the NMPRC issued its Order Initiating Investigation and Requiring Informational Filings to which PNM and other parties filed timely responses. On May 25, 2010, the NMPRC issued an order setting a procedural schedule for the submission of testimony and a hearing. The order further directed PNM and the NMPRC staff to file testimony addressing certain matters related to cost allocation, which was filed on June 17, 2010. On July 14, 2010, the NMPRC vacated the hearing date without setting a new date. The TNMP-NM customers have been included in the rate filing discussed under 2010 Electric Rate Case below. PNM cannot predict the outcome of this matter. Third-Party Arrangements for Renewable Distributed Generation On June 16, 2009, the NMPRC initiated a proceeding and requested legal briefs on the topic of whether third-party arrangements for the sale of renewable energy from customer-sited distributed generation facilities were permissible under New Mexico law. On December 31, 2009, the NMPRC issued an order that in part declared that a third party that owns renewable generation equipment that is installed on a utility customer's premises pursuant to a long-term contract with the customer to supply a portion of that customer's electricity use, payments for which are based on a kilowatt-hour charge, is not a public utility subject to regulation by the NMPRC. PNM and two other parties appealed the order to the New Mexico Supreme Court. In early 2010, legislation was enacted that nullified the NMPRC order and, effective January 1, 2011, excludes non-utility power generators from the definition of public utilities under state law, subject to certain limitations as to size and provided that such generators produce renewable energy, the generators are located on the site of the power consumer, and do not utilize retail wheeling of power. A separate provision of the legislation directs the NMPRC to authorize public utilities to establish rates that assure the utilities' recovery of an appropriate portion of their fixed costs from owners of interconnected generators. After enactment of this legislation, appeals of the NMPRC order were dismissed. On March 9, 2010, the NMPRC issued an order setting workshops for the purpose of obtaining comments and views on implementation of the rate-making aspect of the statute. The workshops are ongoing. Application to Hedge Fuel and Purchased Power Costs In August 2009, PNM filed an application for approval of a plan to manage fuel and purchased power costs by entering into certain forward market transactions relating to the procurement of fuel and purchased power and the sale of excess electrical energy in the wholesale market. PNM's application sought NMPRC authorization to conduct these activities, which involve hedging practices, and to pass through the costs and benefits of the transactions to jurisdictional customers using PNM's FPPAC. The NMPRC staff filed testimony recommending approval of PNM's application with minor modifications. PNM filed rebuttal testimony agreeing with the proposed modifications. A hearing was held on February 23, 2010. The NMPRC approved the program on April 20, 2010 and PNM has begun the hedging program. 2010 Electric Rate Case PNM filed its 2010 Electric Rate Case application with the NMPRC on June 1, 2010 for rate increases for all PNM retail customers to be effective April 1, 2011. The application proposed separate rate increases for those customers served by PNM ("PNM North") prior to its acquisition of TNMP and for the customers formerly served by TNMP ("PNM South"). The proposed total increase of $165.2 million represents a 22% increase for PNM North and a 20% increase for PNM South. The filed revenue requirements are based on a future test period ending December 31, 2011. If the NMPRC grants the entire relief requested, PNM proposes to implement the increase in two steps. Phase 1 would become effective April 1, 2011 (PNM North: $111.1 million, 16%; PNM South: $8.7 million, 14%), and Phase 2 would become effective January 1, 2012 (PNM North: $41.7 million, 6%; PNM South: $3.6 million, 6%). PNM also proposed to implement a FPPAC for PNM South. This is the first rate case filing in New Mexico proposing a future test year consistent with the recently enacted SB 477. The NMPRC suspended the rates until April 1, 2011. NMPRC staff, the AG, and the Albuquerque-Bernalillo County Water Utility Authority each filed motions to either dismiss the case or extend the suspension period. After PNM had responded to the other parties' motions, the NMPRC issued an order on July 27, 2010. The NMPRC granted the other parties' motions in part. The NMPRC determined that PNM's rate filing was incomplete, ordered PNM to supplement its rate application, directed that the suspension period not begin to run until PNM's rate application was made complete, and extended the suspension period by one month. PNM believed that the order was erroneous both in its assessment of the completeness of PNM's filing and in its application of the governing legal standards. On August 5, 2010, PNM supplemented its rate case application in conformance with the NMPRC's order and also on August 5, 2010 petitioned the New Mexico Supreme Court requesting the Court to vacate the NMPRC's July 27, 2010 order and for other equitable relief. The Supreme Court denied PNM's petition on September 13, 2010. A public hearing at the NMPRC on the 2010 Electric Rate Case is scheduled to begin January 31, 2011. PNM is unable to predict the outcome of this proceeding. Transmission Rate Case In October 2010, PNM filed a notice with FERC to increase its wholesale electric transmission revenues by $11.1 million annually. If approved, the rate increase would apply to all of PNM's wholesale electric transmission service customers, which include other utilities, electric co-operatives, and entities that use PNM's transmission system to transmit power at the wholesale level. The proposed rate increase would not impact PNM's retail customers. PNM is unable to predict the outcome of this proceeding.   TNMP TNMP Competitive Transition Charge True-Up Proceeding A true-up proceeding to quantify and reconcile the amount of stranded costs that TNMP may recover from its transmission and distribution customers was held at the PUCT. A 2004 PUCT decision established $87.3 million as TNMP's stranded costs. TNMP and other parties appealed the ruling and the appeals are currently pending before the Texas Supreme Court. TNMP is unable to predict if the Texas Supreme Court will review the decision or the ultimate outcome of this matter. Interest Rate Compliance Tariff Following a revision of the interest rate on TNMP's carrying charge, TNMP filed a compliance tariff to implement the new 8.31% rate. TNMP's filing proposed to put the new rates into effect on February 1, 2008. Intervenors asserted objections to the compliance filing. PUCT staff urged that the PUCT make the new rate effective as of December 27, 2007 when the PUCT's order establishing the correct rate became final. After regulatory proceedings, the PUCT issued an order making the new rate retroactive to July 20, 2006. TNMP filed an appeal of this order in the District Court in Austin, Texas. A hearing was held on June 17, 2010. On June 28, 2010, the District Court decided to reverse the PUCT decision and remand the matter back to the PUCT for a determination that is not retroactive. The PUCT and other parties have appealed the decision to the Texas 3rd Court of Appeals. While there is inherent uncertainty in this type of proceeding, TNMP believes it will ultimately be successful in overturning any ruling that the effective date should be prior to December 27, 2007. Transmission Rate Filing On March 2, 2010, TNMP filed an application to update its transmission rates to reflect changes in its invested capital. The requested increase in total rate base is $33.8 million, with a total revenue requirement increase of $5.5 million. The requested updated rates reflect the addition and retirement of transmission facilities, including appropriate depreciation, federal income tax and other associated taxes, and the approved rate of return on such facilities. The PUCT staff filed a recommendation to approve TNMP's application on April 6, 2010. The ALJ filed a proposed order approving TNMP's application on April 13, 2010. The PUCT approved the interim adjustment on May 14, 2010. Energy Efficiency On October 28, 2009, TNMP filed an application for approval of its 2010 energy efficiency programs and requested recovery through an energy efficiency cost recovery factor. TNMP estimated the costs of its 2010 energy efficiency programs to be $2.6 million and requested to collect this amount based on a per customer charge over 11 months. The PUCT staff and intervenors did not take issue with TNMP's application. TNMP implemented the factor effective February 1, 2010. On April 30, 2010, TNMP made a similar filing seeking recovery of $2.7 million of costs to be incurred in its 2011 programs. The 2011 energy cost recovery rider was approved by the PUCT on July 8, 2010. Advanced Meter System Deployment and Surcharge Request On May 26, 2010, TNMP filed a request with PUCT to approve TNMP's proposed advanced meter deployment. The filing also requested a surcharge to collect $158 million in costs over 12 years, including recovery of capital expenditures incurred through 2015 of $70.6 million. On June 1, 2010, the PUCT referred the matter to the State Office of Administrative Hearings. This matter is currently set for hearing in February 2011.   2010 Rate Case On August 26, 2010, TNMP filed with the PUCT for a $20.1 million increase in revenues, requesting that new rates go into effect on October 1, 2010. In its request, TNMP also asked for permission to update its catastrophe reserve fund that would be utilized to pay for a utility system's costs in recovering from natural disasters and acts of terrorism. Additionally, TNMP requested a rate rider to recover costs to storm harden its system. On August 30, 2010, the PUCT referred the matter to the State Office of Administrative Hearings. The ALJ entered an order on September 7, 2010, setting a procedural schedule that will permit the PUCT to determine the case within 185 days from filing. That order scheduled trial for December 2010.  </div> </div> (10)     Regulatory and Rate Matters Information concerning regulatory and rate matters is contained in Note 17 of Notes to Consolidated false false false us-types:textBlockItemType textblock Regulatory And Rate Matters [Text Block] No authoritative reference available. false 1 2 false UnKnown UnKnown UnKnown false true