PNM Says Employees Insulted: Some suggested company management at fault for financial crisis

Apr 04, 2008 (Albuquerque Journal - McClatchy-Tribune Information Services via COMTEX) -- -- PNM, in a memo to employees, called suggestions by intervenors that the utility might have mismanaged its way into the current financial crises "an insult" to employees.

The memo sent Wednesday and a legal response filed Thursday were the latest rhetoric flying around Public Service Company of New Mexico's request for an emergency fuel adjustment clause that would tack an estimated $72 million onto electric bills over a one-year period.

Company officials insist they must have it to save the company's credit rating from junkbond status.

Attorneys for the New Mexico Industrial Energy Consumers and Albuquerque-Bernalillo Water Authority are asking the Public Regulation Commission for more time to research the request.

They said they had questions about the company's management decisions and relationships with bonding agencies.

PNM officials fired back, promising to "set the record straight."

In a memo to PNM employees Wednesday night, President, Chairman and CEO Jeff Sterba said the intervenors' suggestion that the company's financial emergency could be "somehow self-inflicted" was an insult to employees.

He added that the suggestion PNM faces a "forecasted" emergency was a "chief concern."

"We are not forecasting our utility's deteriorating financial condition, nor its inability to access long-term financing. We are experiencing it today," he wrote.

In the memo, Sterba adds that the utility's woes are not the fault of PNM Resources' acquisition activities in Texas.

"Those businesses stand on their own, as PNM should. New Mexico customers have never subsidized those investment activities in any way," he said.

However, Sterba admitted that PNM utility's financial problems result in part from company decisions in a 2002 agreement that allowed the formation of the PNM Resources holding company.

"Much of the root of how we got to where we are today lies in an agreement we signed with various stakeholders in 2002. At that time, we agreed to a fiveyear rate path that included two rate reductions and no fuel-cost recovery," he said.

"But given an unexpectedly rapid move by customers to refrigerated air, a robust state economy consuming a great amount of energy and rising cost of doing business, these rates fell far short of covering our costs in 2007. In hindsight, this rate path should have been for just four years, not five," he wrote to employees.

Water Authority attorney Nann Winter said Thursday the questions intervenors raised came from studying documents that the 'forecasted' emergency we are referring to is PNM's forecasting of the price of coal in 2008 and 2009, which is in their request for an emergency fuel adjustment clause. That prediction could add $50 million to the cost of that clause," she said.

In a legal response to the request for more time, PNM chief counsel Patrick T. Ortiz wrote that the case for an emergency fuel clause is a "spin-off" of PNM's electric rate case.

In the rate case, witnesses filed testimony both for and against a fuel adjustment PNM had filed in the emergency fuel clause case, including statements from financial analyst Wachovia Securities.

She denied the intervenors had insulted PNM employees.

"Wachovia never said any PNM employees were accountable (for its financial problems), only management," Winter said.

Furthermore, she said, Sterba was incorrect when he implied the intervenors were talking about a "forecasted" financial crisis.

"It's very clear in our motion clause, and were cross-examined. PRC commissioners have said they will refer to that information in deciding the emergency rate request.

In their motion for more time, intervenors fail to acknowledge the information from the rate case already exists, Ortiz said.

Although the emergency fuel clause is a modified version of one requested in the rate case, the differences are not that great, Ortiz told the Journal in an interview Thursday.

"They have all the information they need. It is not that difficult," he said.

Winter countered that there is at least one significant difference in the two cases.

"There's at least $50 million worth of difference, she said.

"In the rate case, there was never a number indicated for how much the fuel clause would cost. Now, they're saying it could cost ratepayers $72 million over 12 months. As much as $50 million of that comes from their 'forecasting' the cost of coal between April '08 and April '09," she said.

"Is that accurate? We just don't know. We haven't had sufficient time to look into it," she added.

Plus, Winter said, Ortiz's emphasis on the rate case points to PNM's request for an emergency fuel clause being premature.

"They are asking for an emergency fuel clause before the rate case has been decided," she said. Winter said PNM's emphasis on its distressed financial condition is a distraction from the emergency fuel adjustment clause issue.

"I think they need to address the merits of the request. The only thing the commission can adjudicate is the $72 million fuel adjustment clause," she said.

To see more of the Albuquerque Journal, or to subscribe to the newspaper, go to http://www.abqjournal.com. Copyright (c) 2008, Albuquerque Journal, N.M. Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

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