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Market Price (5/18/2017): $36.45/share; ST-Target: $49/share; NIV: $80/share
- On Friday, May 12, 2017, the Hearing Examiner (HE) rejected the current settlement agreement, but not for economic reasons, but more due to rate design and procedural timing issues
- The HE felt that due to a lack of precedents of approving a rate case while certain items, mostly due to rate designs, are being held aside to be negotiated and finalized, the HE felt that the settlement agreement (SA) could not be approved as is;
- Given that the suspension period goes through mid-January 2018, the HE also felt that there was no time to file new rate design proposals, get them approved and in place before the suspension period is over and, therefore, felt that the current SA couldn’t be approved; and
- Lastly, the HE did not like that certain rate increase were to be implemented on a pro rata basis, but that the water-pumping and processing customers were to be given a subsidy, and given that such matters lacked a precedent, the HE felt that it was not in their purview to make any ruling on this matter.
- In response to the HE’s decision three avenues of action would have been possible:
- Try to negotiate all of the particulars in the rate designs that were being held over for future negotiations and have it approved before the suspension period is over;
- Ask for rehearing, and provide the precedent necessary for the HE to rule on the particular issues, and failing to achieve the objectives, go through legal channels and continue to appeal the process up through to the NM Supreme Court; or
- Remove the offending articles, have the existing SA approved then separately negotiate the items that were removed and file it separately or through future rate cases.
- We feel that the last option is the best choice and appears that PNM is following this track