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Pending Regulatory Proceedings — NMPRC
SPS – New Mexico 2015 Electric Rate Case — In October 2015, SPS filed a New Mexico electric rate case with the NMPRC for a
net increase in base rates of approximately $24.3 million. The proposed net amount reflects an increase in non-fuel base rates of $45.4
million and a decrease in base fuel revenue of approximately $21.1 million. The decrease in base fuel revenue will be reflected in
adjustments collected through the fuel and purchased power adjustment clause. The rate filing is based on a June 30, 2015 HTY
adjusted for known and measurable changes, a requested ROE of 10.25 percent, an electric jurisdictional rate base of approximately
$734 million and an equity ratio of 53.97 percent.
The major components of the requested rate increase are summarized below:
(Millions of Dollars) Request
2015 base period deficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19.7
Capital expenditures — post-test year adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.3
Depreciation, higher rates reflecting changes in depreciable lives, interim retirements and net salvage. . . . . . . . . . . . 3.7
Transmission revenue and expense, including charges paid to SPP for construction of regionally shared
transmission projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0
ROE, reflecting an increase from 9.96 percent to 10.25 percent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6
Rider revenue adjustments - gross receipts tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8
Requested rate increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45.4
The next steps in the procedural schedule are expected to be as follows:
• Settlement conference — Feb. 29, 2016;
• Staff and intervenor direct testimony — April 1, 2016;
• Rebuttal testimony — April 18, 2016; and
• Evidentiary hearing begins — April 28, 2016.
A NMPRC decision and implementation of final rates is anticipated in the second half of 2016.
In response to the original 2015 electric rate case previously dismissed, SPS has appealed that decision to the New Mexico Supreme
Court. SPS and the NMPRC have filed a joint agreed motion to dismiss the appeal with the New Mexico Supreme Court. The motion
provides for the case to be remanded to the NMPRC for entry of an order affirming SPS’ right to use a FTY that begins up to 13
months after SPS files a rate case. SPS will not resume the previously dismissed rate case and will proceed with the October 2015 rate
case.
Pending and Recently Concluded Regulatory Proceedings — FERC and Other
MISO ROE Complaints/ROE Adder — In November 2013, a group of customers filed a complaint at the FERC against MISO TOs,
including NSP-Minnesota and NSP-Wisconsin. The complaint argued for a reduction in the ROE in transmission formula rates in the
MISO region from 12.38 percent to 9.15 percent, a prohibition on capital structures in excess of 50 percent equity, and the removal of
ROE adders (including those for RTO membership and being an independent transmission company), effective Nov. 12, 2013.
Subsequently, the FERC adopted a new ROE methodology, which requires electric utilities to use a two-step discounted cash flow
analysis that incorporates both short-term and long-term growth projections to estimate the cost of equity.
The ROE complaint was set for full hearing procedures. The complainants and intervenors filed testimony recommending a ROE
between 8.67 percent and 9.54 percent. The FERC staff recommended a ROE of 8.68 percent. The MISO TOs recommended a ROE
not less than 10.8 percent. In December 2015, an ALJ initial decision was issued recommending a ROE of 10.32 percent. Briefs on
exceptions challenging the ALJ recommendation were filed in January 2016. A FERC order is expected to be issued later in 2016.
Certain MISO TOs separately requested FERC approval of a 50 basis point ROE adder for RTO membership, which was approved
effective Jan. 6, 2015, subject to the outcome of the ROE complaint. The total ROE, including the RTO membership adder, may not
exceed the top of the discounted cash flow range under the new ROE methodology. Certain intervenors sought rehearing of the FERC
order granting the ROE adder and FERC action is pending.