Dec. 8—The state's Public Regulation Commission staff on Friday recommended new rates that would result in lower bills for customers of the state's largest electric utility.

Commissioners are expected to vote on the rate case in less than a month.

If approved, Public Service Company of New Mexico's residential customers would see their monthly bills decrease about 3%, according to a news release from the commission.

The commission's staff wants the commission to determine the utility acted with "imprudence" in deciding to continue its participation in the Four Corners Power Plant about a decade ago. It also wants the commission to cut $84.8 million from the amount PNM can recover from ratepayers related to costs from the coal plant that sits on the Navajo Nation.

A final decision on the rate case will determine the amount PNM customers are on the hook for regarding the Four Corners plant as well as Palo Verde Nuclear Generating Station — two issues that "have long been outstanding," the release states.

The staff also recommends cutting the company's allowed return on equity — a financial calculation that goes into the rate to ensure regulated utilities can make a profit for investors and pay back debt. Staff proposes cutting it from the current rate of 9.575% to 9.26%. The company requested 10.25%.

Overall, while PNM requested an increase of $63.8 million in revenue for 2024, commission staff instead recommended an increase of $6.1 million.

In an email, PNM spokesman Ray Sandoval said the utility has reduced costs by moving to cleaner energy, and that could be driving the staff recommendation to reduce residential electric bills.

"PNM does not want to get ahead of the process," he wrote in a text message Friday. "The recommended decision is an important part of the proceedings, but there are still other important steps to follow."

CEO Pat Vincent-Collawn said in a statement the company would be filing exceptions to the recommendations before the commission's final vote.

"We understand the sensitivity to any cost increase in today's environment and have taken steps to offset nearly six years of inflationary costs on customer bills," Vincent-Collawn said. "However, the disappointing approach to this recommendation calls for further reductions on traditional power sources and misses opportunities to look forward and implement new solutions to benefit customers as we lead New Mexico's energy transition."

Some government and advocacy groups that have pushed the commission to reduce PNM's revenue during the rate case celebrated the recommended decision.

"We are encouraged that hearing examiners adopted a number of the Attorney General's recommendations that, if approved by the commission, would provide important rate savings for customers," Lauren Rodriguez, spokeswoman for Attorney General Raúl Torrez, wrote in an email.

Rodriguez pointed to the recommended reduction in return and the disallowance for Four Corners investments, and said her office agrees PNM overstated its maintenance outage cost estimates and included a general inflation factor that was too high.

Attorney Matt Gerhart, who represented the Sierra Club's Rio Grande Chapter in the case, said a regulatory decision regarding the company's 2016 investments in Four Corners is "a long time coming."

"We definitely believe that this is the right outcome," Gerhart said. "That it appropriately puts the responsibility on PNM to pay for its poor decision-making processes and to make sure that customers aren't responsible for paying for PNM's mistakes."

New Energy Economy executive director Mariel Nanasi called the recommended decision "a significant victory for ratepayers" in an email Friday morning. The Santa Fe-based group is among several "intervenors" in the case pushing for a rate decrease.

"While there are a lot of good things in the recommended decision, don't let the 3% rate decrease fool you," she wrote. "It ought to be a lot more, given that PNM was reckless in their climate-altering Four Corners Power Plant investment."

Nanasi wrote that the $84.8 million disallowance for Four Corners is "a substantial disallowance but falls far short of the remedy demanded by law in the state of New Mexico — that ratepayers must be held harmless for the imprudent decisions of utility executives."

The utility filed for the rate case in December 2022, and hearings took place in September, during which executives and experts from the company and intervenors gave testimony and arguments.

The recommended decision was issued by hearing examiners Anthony Medeiros and Christopher Ryan, who have acted as the staff's judges in the case.

Two of the state's three commissioners are expected to consider input and vote on the case before the utility's new rates are scheduled to go into effect in early January.

Commissioner Patrick O'Connell recused himself from the case early this year due to past statements regarding the prudence of the Four Corners Power Plant investments while O'Connell worked for PNM.