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New Mexico Utility Plans Sweeping Grid Modernization Project

The Public Service Company of New Mexico has asked the state’s Public Regulation Commission to approve a six-year "grid modernization" effort with $344 million in upgrades to its distribution system.

(TNS) — Public Service Company of New Mexico is preparing to overhaul its power grid, installing new "smart meters" and revamped infrastructure that could help restore blackouts and implement new renewable energy projects.

In a Monday filing with the state Public Regulation Commission, the company requested to embark on a six-year "grid modernization" effort with $344 million in upgrades to its distribution system.

The investment is likely to result in higher utility bills for customers.

PNM's filing requests a first-year billing increase of 1.74 percent, or an average of about $1.20 per month, for residential customers that could begin in September 2023 if approved by regulators. The increase would recover $9.8 million for PNM in one year.

The proposed grid upgrades would apply to the company's entire service area and its more than half-million customers throughout the state. The plan is a response to directives handed down from the state as a result of the zero-carbon initiatives of the 2019 Energy Transition Act, PNM spokesman Ray Sandoval said in a news conference Monday.

"If approved, this modernization of PNM's grid will improve reliability, enhance cybersecurity and empower our customers to have decision-making capabilities and cost-saving capabilities at your fingertips," Sandoval said, adding the upgrade plan is "a major step toward ensuring the transition to sustainable electricity."

About $171 million, or half of the total investment, would go toward "advanced metering infrastructure," which would involve upgrading the analog meters used by the majority of PNM's customers to a system of smart meters. The new technology would provide real-time data to PNM and its customers that could improve the company's response to power outages as well as result in customer savings in the long term.

The implementation of advanced metering infrastructure was a core recommendation issued by consensus from an advisory group that was convened by the state Energy, Minerals and Natural Resources Department as a result of the 2019 legislation.

"The primary benefits of AMI to a modernized grid are reliability and resilience," the group's recommendation states, "which are both improved when the utility is able to quickly identify faults in the system, dispatch repair crews, and/or quickly reconfigure the grid to restore power to some areas."

Another benefit of the technology, according to the recommendations, is the potential for new rate structures based on real-time electricity use.

Real-time information about customers' use and changing electricity rates could be accessible on a smartphone or tablet application.

"For instance, suppose you need to run your clothes dryer or dishwasher," PNM spokeswoman Laura Sanchez said. "When it's fully implemented, grid modernization will help you determine when the best time to run them would be."

The real-time feedback on electricity use and fluctuating rates could be particularly valuable for decisions regarding electric vehicles, which PNM predicts will increase among its customers. In its filing for grid updates, the company states it expects 7,800 electric vehicles among its customers by the end of 2023 and 1 million by 2050.

According to PNM's proposed plan, customer meters could be replaced over the second, third and fourth years of the process, with the rollout prioritized for "low-income and underserved communities."

Sanchez listed other new features of PNM's proposed grid upgrades, which she said would be beneficial for energy storage and community solar projects.

The grid modernization plan will require review and approval from the PRC, now a five-member elected body that regulates electric and gas utilities, transportation systems and telecommunications. In 2023, the commission will undergo a voter-approved overhaul in which it will be composed of three commissioners appointed by the governor.

PNM's proposed rate increase of 1.74 percent for the grid upgrades would be separate from a potential rate adjustment the utility plans to request in December.

During an August earnings call, PNM Chief Operating Officer Don Tarry told investors the company will have invested $2 billion "that are not part of our current customer rates" by the time new rates are in place, which he estimated to occur in January 2024.

"In December, we plan to file PNM's general rate review based on a future test year of 2024," Tarry said. "We will share more information about the filing once it's made, but you can expect the primary driver to be recovery of rate base made since our last future test year filing in 2016."

In May, PNM came under fire from several advocacy groups and PRC staff when it was accused of effectively aiming to double-bill customers for charges associated with leaving the coal-fired San Juan Generating Station near Farmington. PNM had proposed to delay rate adjustments at the time it shut down units of the power plant.

The PRC rejected the company's finance plan and ordered it to begin issuing customer credits immediately after the shutdown.

The commission also has denied the company's proposed merger with Connecticut-based Avangrid, which is a subsidiary of Iberdrola, a renewable energy-focused power conglomerate based in Spain.

The case has been appealed to the New Mexico Supreme Court.

©2022 The Santa Fe New Mexican (Santa Fe, N.M.) Distributed by Tribune Content Agency, LLC.