PNM Resources, Inc.
Q2 2018 Earnings Call Transcript
Published:
- Operator:
- Good day, and welcome to the PNM Resources’ Second Quarter Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Jimmie Blotter, Director of Investor Relations. Please go ahead.
- Jimmie Blotter:
- Thank you, Cole, and thank you, everyone, for joining us this morning for the PNM Resources’ second quarter 2018 earnings conference call. Please note that the presentation for this conference call and other supporting documents are available on our website at pnmresources.com. Joining me today are PNM Resources’ Chairman, President and CEO, Pat Vincent-Collawn; and Chuck Eldred, our Executive Vice President and Chief Financial Officer; as well as several other members of our executive management team. Before I turn the call over to Pat, I need to remind you that some of the information provided this morning should be considered forward-looking statements pursuant to the Private Securities Litigation Reform Act of 1995. We caution you that all of the forward-looking statements are based upon current expectations and estimates and that PNM Resources assumes no obligation to update this information. For a detailed discussion of factors affecting PNM Resources’ results, please refer to our current and future Annual Reports on Form 10-K, quarterly reports on Form 10-Q as well as reports on Form 8-K filed with the SEC. And with that, I will turn the call over to Pat.
- Pat Vincent-Collawn:
- Thank you, Jimmie. Good morning, everyone, and Happy National Avocado Day. Thanks for joining us today on our second quarter earnings call. Let’s start on Slide 4 with the financial results and some company updates. Our GAAP earnings per share in the second quarter of 2018 are $0.48 compared to $0.47 in the second quarter of 2017. Ongoing earnings per share are $0.53 compared to $0.49 in the second quarter of last year. This is higher than our previous expectations, largely due to improving load growth and hotter temperatures. And as a result, we are raising our 2018 and 2019 earnings guidance. Chuck will go through the details of these results in a few minutes. In Texas, we filed our general rate review on May 30. The filing requests an increase of base rates of $25.9 million. As we’ve talked about for some time, this filing provides the opportunity to rebalance and reset the rates between transmission and distribution. Much of the increase is tied to items with offsetting expenses or the consolidation of AMS recovery in the base rates. So the filing reflects an estimated EPS impact of only $0.03. While the net financial impact may be small, there are some critical items in the case, including return on equity, capital structure and tax reform. Testimony in the case is due in August and the hearings are scheduled to begin on September 7. If settlement discussions occur, it would most likely be right after Labor Day before the hearings begin. We’ll keep you updated on any significant developments. Now turning to New Mexico. Let me start by saying that we continue to await a decision from the New Mexico Supreme Court on the appeal of certain items disallowed by the order issued in September of 2016 on our general rate review. The decision could be issued any time. And once we have it, we will make that information available to you. Turning to Slide 5. I want to talk about how the transformation of PNM’s generation portfolio is proceeding and what to expect as we move towards the potential retirement of the San Juan Generating Station. As you know, there is a regulatory process that we must follow, and we must obtain commission approval to abandon generating facilities as well as secure sources of replacement power. The filing of our Integrated Resource Plan in July of 2017 indicated that the most cost-effective plan for customers included the retirement of the remaining units at the coal-fired San Juan Generating Station, after the existing coal contract expires in 2022. The IRP with the hearing in June of this year and briefings will be completed today. From here, the hearing examiner will make a recommendation in the case to either accept the filing based on its compliance with the rule or to determine that the filing is not in compliance with the rule and reject the plan. The recommendation would then come before the commission for a vote. The commission does not have a statutory time frame to rule in this filing. Regardless of how the commission rules or does not rule, any proposed abandonments or additions of resources must be approved outside of the Integrated Resource Plan process. The second item expected in 2018 is a filing that was required as a conditions to the BART settlement. The settlement specified that we would make a commission filing to determine the extent that San Juan should continue to serve retail customers after 2022. We will include our recommendation, but remember that this filing also does not qualify as an abandonment filing nor will it include any plans for replacement power. In mid-January of next year, the 60-day legislative session in New Mexico will kick off, and securitizations may be addressed during this session. Securitization provides a lower cost-recovery option for the unappreciated costs at San Juan after it is retired. The law is currently not in place in New Mexico to allow PNM to propose recovery under this mechanism. Discussions with stakeholders on securitization legislation have been occurring, and legislative committees had also began to hold meetings on this topic. We will keep you posted as we move through this process. We continue to work through the RFP process for potential sources of replacement power and expect to have the responses evaluated in the spring of 2019. Depending on that evaluation and developments in the San Juan determination filing, we could then make an abandonment filing in mid-2019 that includes plan for replacement power. We anticipate this case could take 10 months to 15 months to resolve. If retirement and replacement power are approved, this timing should still leave adequate time for the construction of any resources prior to the retirement of the San Juan plant after the full contract expires in 2022. And with that, I’ll turn it over to Chuck for a detailed look at the numbers.
- Chuck Eldred:
- Thank you, Pat. Good morning, everyone, and thank you for joining us today. Let’s start with a review of load on Slide 7. Beginning the discussion with the strengthening New Mexico economy, we see growth in personal income as wage and salary increase and state finances that are much stronger than they were a couple of years ago. The state continues its efforts to spur economic growth and attract more jobs. When you consider the monthly employment growth for January through May of this year, Albuquerque has shown more strength than the prior year and is competitive with the national averages. The state’s economic development efforts are paying off, an example of this is a new outsourced customer service company that may bring 700 jobs to Downtown Albuquerque. Turning to our results. We’re showing positive load growth of 1% for the quarter, bringing our year-to-date average to down 0.1%, nearly flat to last year and at the top end of our previous load guidance. We believe that we’re finally seeing some strength in the local economy. As a result, we’re increasing our load forecast to flat to up 0.5% over the 2018 and 2019 period. The Texas economy continues to be robust and ranks high for business growth. Texas has led the U.S. in job creation through the first quarter of this year. With respect to our service territory in Texas, we continue to see growth in West Texas related to oil and gas production in the Permian Basin. New large customer interconnections continue to be strong in the second quarter. We’re also seeing load additions in the Gulf Coast area related to petroleum refineries. For volumetric load, our year-to-date 2.5% growth is at the midpoint of the guidance range for 2018. Demand-based load from our large industrial customers continues to be strong. And we have adjusted our guidance for 2018 and 2019. We now expect 2018 to show 5% to 7% growth. In 2019, we expect to see an additional 6% to 8% growth over 2018. Now let’s turn to Slide 8 for second quarter earnings. As Pat indicated, ongoing earnings per share are strong at $0.53. PNM’s earnings were up $0.02. We’re also seeing the impacts of both load and weather in that increase, which I’ll discuss in a moment. We also had several items that were in our guidance for the year that impacted earnings, such as the combined effects of the retail rate basin, tax reform and a generation portfolio changes that included bringing Palo Verde Unit 3 into rate base. The change in the timing of the San Juan outage was also discussed last quarter, and depreciation and property tax expense increases from our capital investments. We have talked for some time now that as Palo Verde 3 becomes a jurisdictional resource, that we would also move our Nuclear Decommissioning Trust to a heavier waiting of fixed income assets. As a result, our gains will not be as strong this year as they have been in the past years. In addition to the guidance-related drivers, we’ll likely see other utilities, as similar other utilities have a sizable pickup on weather. Cooling degree days were 36% higher than the prior year and 36% above normal as well. We saw temperatures begin to heat up early than usual in May of this year. And as a result, the cooling season began earlier and hasn’t let up. This resulted in the hottest second quarter in the last 20 years. Earnings from third-party transmission contracts and our annual formula rate true-up are also coming in at the top of our expectations, along with the impacts of retail-load growth in the quarter that I described in the previous slide. We’re also seeing increase in AFUDC. TNMP is up $0.04 versus Q2 of last year. Drivers include TCOS volumes that have been implemented since last year and increase in load being offset by the increase in depreciation and property tax expense. In addition, TNMP had $0.01 of improvement tied to weather. Finally, Corporate and Other was down $0.02 for increased interest expense and a reduction to the interest income that resulted from Westmoreland paying off their loan in May. When Westmoreland paid off the remaining $50 million on their loan, we’re also able to pay down the reciprocating loan that supported the financing of the coal mine, reducing our debt level as well. Now let’s turn to Slide 9. Weather during the quarter was certainly warmer than usual, particularly in PNM, which is considered in our 2018 guidance changes. We’re also spending additional O&M that will be used to accelerate our Vegetation Management cycle. We’re seeing a number of other items that are coming in with a stronger earnings than we originally expected such as load, transmission and AFUDC. As a result, we’re increasing our guidance ranges for both 2018 and 2019. In 2018, we have also narrowed the guidance range to reflect the reduced downside exposure. Consolidated ongoing guidance for the year is now $1.91 to $1.98. PNM is $1.48 to $1.52 and TNMP is expected to be $0.60 to $0.62. Corporate and Other will be lowered, largely driven by Westmoreland’s payoff of its loan, which lowered expected interest income and rising interest expense. In 2019, we have increased the total range to $2.08 to $2. 18. PNM increases to $1.57 to $1.63, and TNMP to $0.67 to $0.69. TNMP’s range reflects the addition of $0.03 for a rate recovery related to the filing we made in May. Now turning to Slide 10 for an update on our capital forecast. 2018, we have allocated additional capital to serve the growing needs of TNMP. We expect to spend $215 million there this year, which is $30 million higher than our previous plan. This brings our rate-base compound annual growth to 12.9% from 2018 to 2021. Also, I want to point out that we have not made capital adjustments to the 2019 to 2021 forecast, but we plan to do that at our third quarter conference call. We are working through the forecast and expect our growth in TNMP will continue to require additional capital spending in the future years. Overall, our business remains strong. Our increase of guidance demonstrates this. And we continue our commitment to the 6% long-term earnings growth target through 2021. We also expect our dividend growth will continue at a similar pace to earnings growth. We’re pleased to see some strength in New Mexico economy and the need to allocate incremental capital to support TNMP’s growing customer demand. But before I turn it over to Pat, I’ll ask the question of the day. But Pat will answer this. What does the pope call Avocado Day? And the answer is…
- Pat Vincent-Collawn:
- Holy guacamole. All right. Got a little fun here. Thanks, Chuck. We’re certainly pleased with the strength of our business. As we move into the third quarter, our peak season, our crews are off, faced with some additional challenges from Mother Nature. In July, we saw ERCOT log record peaks in Texas, while in New Mexico, the hot temperatures are being met with the heavy rains from our monsoon season. Our crews have been going the extra mile to keep the power on for our customers in both states. And I’ve said it before, but I’m always proud to say that I am honored to work on the same team as these crews who are so dedicated to our customers. And I could never thank them enough for the work that they do each and every day. Thanks again for joining us today. Operator, let’s open it up for questions.
- Operator:
- Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Nicholas Campanella from Bank of America. Please go ahead.
- Nicholas Campanella:
- Hey there, good morning.
- Pat Vincent-Collawn:
- Good morning, Nick.
- Chuck Eldred:
- Good morning.
- Nicholas Campanella:
- So just in terms of the higher New Mexico load, can you specifically tie that together against what’s embedded in the 2017 IRP, i.e does the capacity need – is going to remain the same, is that correct?
- Chuck Eldred:
- Yes. Again, more of what’s in the capital plan for the replacement of San Juan is more about reliability and peaking capacity to help with the imbalanced load we have with the increase in renewables on the system. So no change into our load forecast that drives that generation expectation for replacement power.
- Nicholas Campanella:
- Got it. And then for New Mexico, specifically, does this change your expectations around the next rate case filing? Or how do you think about timing there now?
- Chuck Eldred:
- No, the timing is still as we’ve talked about. Likely file at the end of 2019 for an effective rate case in 2021.
- Nicholas Campanella:
- Got it. And then lastly, I know you shifted CapEx already a little bit, PNM, T&D moved out and TNMP seemed to move up. I think you kind of alluded to updating some of the longer dated forecast to the balance of the year here. Should we be kind of thinking about a similar increase at TNMP given all of the strength you’re talking to? Or can you just provide a little bit more color there?
- Chuck Eldred:
- Well, we’re obviously – we’re moving up $29 million or close to $30 million this year for TNMP. It looks like, based on some preliminary analysis, $15 million to $20 million run rate for capital increases at the TNMP. So typically, we’re at about $170 million. You might think of that being closer to $190 million as we go forward. But again, we’re still going through the capital allocation and prioritization process. But to give you some indication, probably the $15 million to $20 million based on the current expectations we see in the growth in Texas would likely support the increasing capital of that level.
- Nicholas Campanella:
- Great. That’s it from me. Happy Avocado Day.
- Chuck Eldred:
- Yes, okay.
- Pat Vincent-Collawn:
- You too.
- Operator:
- And the next question comes from Greg Gordon from Evercore ISI. Please go ahead.
- Greg Gordon:
- Thanks. Can you tell us, has there been any sort of public feedback on the plans to retire the plants yet? And what are the key constituencies that we should be focused on that you think matter the most in terms of, again, coming to a resolution on the IRP?
- Pat Vincent-Collawn:
- Sure. The IRP hearings have finished and I – when you went to the process, staff was supportive of the IRP. In general, most of the folks were supportive of the IRP. A couple of parties, not surprising, the New Energy Economy and Southwest Generation were not supportive of the IRP. But that was not surprising. In terms of, I would say, the more general public discussion about the shutdown of San Juan, I think the general community is in support of it. The environmental community is especially supportive of it because of the fact that it’s cheaper for customers, like for the general public. The one group of folks that is struggling with it is, obviously, the communities up in the Four Corners area. I think they understand why it’s being shut down. And the issue with them is what do they do about their economy after the shutdown, because it provides incredible source of jobs for them. And so some of the discussions that we’re having and have been – had in the securitization legislation is what the state and what we would do to help jump-start their economy into a new future. But I think, overall, the plan is pretty well received because it starts to transition us into a very low-carbon energy future. We have so much wind and solar here that people are accepting of it.
- Greg Gordon:
- And pardon me because I don’t recall, but is battery storage a significant piece of the longer-term part of the IRP? We recently saw in Nevada – Nevada Energy sign some battery solar contracts with NextEra that were for, would look like, pretty compelling prices for four-hour load shifts in the low 200s per megawatt hour.
- Pat Vincent-Collawn:
- Yes, it is part of that. And there is actually a part of the RFP as for battery storage. And we just have to keep monitoring that as the prices go down and the capability of storage goes up. But it is an explicit part of our replacement power.
- Greg Gordon:
- Right. My last question is – and you may not answer this. But the New Mexico economy is clearly improving and that’s great. Texas continues to be quite hot. Would you have any aspiration to potentially grow your footprint in Texas?
- Chuck Eldred:
- Well, Greg, we’re very pleased with the growth that we have and the demand in the areas of Texas that we serve. And obviously, with a favorable regulatory environment, it makes it very attractive. I’m gaining greater confidence in our ability to invest in Texas. And certainly, if we – and we’ve always said this, if we see opportunities in Texas, we would certainly take a hard look of – anything that meets our interest and continue to grow our footprint in Texas.
- Greg Gordon:
- Okay, thanks guys. Great quarter, congrats.
- Pat Vincent-Collawn:
- Thanks, Greg.
- Operator:
- And the next question comes from Ali Agha from SunTrust. Please go ahead.
- Ali Agha:
- Thank you, good morning.
- Pat Vincent-Collawn:
- Good morning, Ali.
- Ali Agha:
- Good morning. Chuck or Pat, when I look at the earnings power numbers that you’ve updated for us on the outer years, particularly, you talked about 2018 and 2019 as for the guidance. Can you give us a little more insight? TNMP’s earnings have gone up quite considerably in the outer years. The PNM FERC contribution has gone up as well. Corporate and Other has gotten higher costs. Just give us a little more insight on what’s changed in those assumptions, particularly in the outer years to drive those numbers.
- Chuck Eldred:
- Yes. So the obvious on TNMP is the capital investment. We continue to see the opportunity for growth in building rate base and the rate mechanism and the TCOS filings to support the transmissions out of that. So it’s clearly a glide path in Texas of increase in capital investment. On the Corporate and Other, really, the driver there is losing the earnings interest income that we had off at the Westmoreland loan. And certainly, increases in interest expense for the amount of debt that we have at the holding company. So nothing unusual. Just a change in which focus of the business, with opportunities in Texas and some impact from our losing the Westmoreland loan affecting the amount of debt we have at the holding company.
- Ali Agha:
- And on the PNM FERC side?
- Chuck Eldred:
- Yes, PNM’s – certainly, it’s just driven by our continued – and are best seen in the capital in PNM retail. Nothing unusual there. We focus on, really, earning our allowed return and our ability to continue to manage the expectations of earning that allow a return until we file for our next rate case. Also, transmission, keep that in mind. We’ve had some third-party true-ups in our transmission filings that we’ve done and also continued potential opportunities. Pat had talked about replacement power. But we’re also seeing, as renewables become a possibility for some replacement power, transmission also becomes an opportunity for us to allow renewables to come to our system. So we haven’t updated capital, but just to give you some indication that transmission could play into an opportunity going forward.
- Ali Agha:
- Okay. And then as you talk about updating your CapEx forecast, et cetera, on the third quarter, is then the assumption, Chuck, just to be clear, that, that may also lead to an increase in the earnings power side as well? Or is the earnings power now capturing some of the – this upside that you’re talking about?
- Chuck Eldred:
- Yes. We’ll refine that as we go forward. We just made in these minor adjustments based on that we’ve updated in the capital. What you see in the presentation. But as we go forward and we make changes to the capital plans, we talk about in third quarter, then we would fine-tune and update in the earnings power slide as well.
- Ali Agha:
- I see. And Pat, as you look at the likely changes coming up at the New Mexico Commission post the November elections, from a bigger picture perspective, are you expecting a significant change in the tone or the make-up there or in terms of your dealings with them? Or how do you see the scenario post the November elections?
- Pat Vincent-Collawn:
- Well, one of the commissioners has already won because there’s no Republican running. Theresa Becenti-Aguilar was a commissioner before. Commissioner Liz. So we have dealt with her before. We understand what her issues are in terms of the economy of the Four Corners area. The – one of the candidates in – for Pat Lyons’ seat used to work at an oil refinery. He has an engineering degree, so he understands the business. And the two candidates for down South, one of them Pat – or excuse me, Ben Hall, was a commissioner before. So we know him. And Steve Fischmann has been active in some cases. So we know all of them. All of them have the ability to the job and we just look forward to who’s ever elected to the commission.
- Ali Agha:
- Okay. But you don’t expect a philosophical or any such – sort of macro change in the commission thinking post the elections?
- Pat Vincent-Collawn:
- No. No, Ali, I don’t.
- Ali Agha:
- Okay, thank you.
- Operator:
- And the next question comes from Anthony Crowdell from KeyBanc. Please go ahead.
- Anthony Crowdell:
- Hey, good morning, Pat. Good morning, Chuck.
- Chuck Eldred:
- Good morning.
- Pat Vincent-Collawn:
- Good morning, Anthony. And Anthony great no title.
- Anthony Crowdell:
- Hey, thanks. Thanks. I wish I could say this same about the joke, but…
- Chuck Eldred:
- Oh, come on.
- Anthony Crowdell:
- You don’t get many people jokes on their earnings call, but we appreciate the effort. That TNMP capital, do we – should we see a displacement of New Mexico capital in the outer years or view this as more incremental to the PNM Resources capital plan?
- Chuck Eldred:
- Yes, Anthony, we haven’t fine-tuned the capital relative to PNM and TNMP to balance that. So we’ll continue to update the capital, focus strongly at – in New Mexico, on the T&D side of the business where we see some opportunities and some issues around aging infrastructure. And then we’ll fine-tune the capital on the generation side as we think about the closing of San Juan and our maintenance in support of that. So there’s adjustments in all aspects of the different categories. And it’s just too early to for us to make a commitment as to what that looks like. So the good news is that we definitely see sustainability and growth in Texas, and we have a stronger demand for capital. And then PNM, there are certainly some shifts in capital and opportunities to support transmission and the aging infrastructure. And then we’ll take closer look at generation. But that’s about all I can really update at this point.
- Anthony Crowdell:
- Got it. If I shift gears to the IRP, I’m sure this is not the first IRP the utility has filed in New Mexico. What, in the past, had the commission done with the IRP? Have they opined on it? Have they not done anything with it? Like – and what have they done and what could we expect here?
- Pat Vincent-Collawn:
- Well, Anthony, the last IRP was just closed. It was never accepted or rejected. So whatever the outcome is, I don’t think we’re particularly concerned because of the fact – some states, if it’s in the IRPs, that’s what you go ahead and build. Here, you have to file separate filings for abandonment or CCNs for replacement power. So it’s been all over the board in terms of IRP acceptance or rejection or just no action on it. That’s why I didn’t put no action in my notes because last time we had an IRP, all the parties just agreed to close it.
- Anthony Crowdell:
- Do you think the current commission waits for the new year, with the new commission members would take their positions before they opine on this IRP? Or that has no – you don’t think that’s going to come into play at all?
- Pat Vincent-Collawn:
- I don’t think that comes into play. I mean, it may not ask us because they may not ask and they don’t have to. But I don’t think they will wait for the new group to come in.
- Anthony Crowdell:
- Okay. And lastly, just on the securitization legislation I think you had given, there’s a window of opportunity over the next calendar in 2019. Do you get multiple bites at that apple if nothing happens in 2019 that you could can apply in 2020 or 2021?
- Pat Vincent-Collawn:
- Well, you can go back at every legislative session for it. But we’ve really already started – we’ve actually already started the education process on it. There was a committee hearing up in the Farmington area. And we did a high-level session on the regulatory compact, the benefits of securitization, the state of renewables, the status of San Juan Generating Station. So we’re starting the process very early. But to answer your question, yes, we could go back again in 2020 and 2021. But obviously, we’re hopeful that wouldn’t happen.
- Anthony Crowdell:
- Great. Thanks for taking my questions.
- Pat Vincent-Collawn:
- Thanks, Anthony.
- Operator:
- And the next question comes from Jonathan Reeder from Wells Fargo. Please go ahead.
- Jonathan Reeder:
- Hey, Chuck. Just to kind of clarify, before the revised kind of guidance ranges and earnings potential for 2019 and beyond, does that reflect the preliminary higher CapEx needs? Or if not, what exactly drove those higher at this point?
- Chuck Eldred:
- Yes, it’s really the capital that we have. And the presentation is really reflective of what we see rate-base growth to be in New Mexico and as well as the TNMP adjustment we made for 2018 and 2019. Beyond that, there’s just some adjustments related to Corporate and Other. We talked about the AFUDC, because of the capital investments, slight increases there that’s driving some of this. And then some additional opportunities in PNM FERC that we’re seeing, some slight true-up and some increases in capital there. So nothing significant, but there’s just a lot of moving pieces. And certainly, if there’s more detail, just call Jimmie and Lisa and they can go over it with you.
- Jonathan Reeder:
- Okay. So the $15 million to $20 million of higher at TNMP that you said preliminary, you’re thinking that doesn’t at all impact your kind of earnings potential increases that you laid out today?
- Chuck Eldred:
- Yes, there’s still opportunity to think about with increases in the $15 million to $20 million I alluded to, for investing in Texas has not been reflected in the earnings power.
- Jonathan Reeder:
- Okay. All right, thanks for the clarification. Appreciate it.
- Chuck Eldred:
- Okay.
- Operator:
- [Operator Instructions] And the next question comes from Lasan Johong from Auvila Research Consulting. Please go ahead.
- Lasan Johong:
- Thank you. Allow me some guacamole. I got to be thinking about this now.
- Pat Vincent-Collawn:
- Make sure, you get New Mexico blue contour THF to go with your guacamole Lasan.
- Lasan Johong:
- [indiscernible]
- Pat Vincent-Collawn:
- Good. I’m sorry, go ahead.
- Lasan Johong:
- Just a couple of questions on the fringe. I remember that the New Mexico Commission was not happy about the way PNM was dealing with wind resources and how it was going to be developed. And specifically, five projects were kind of rejected by the TRC. Is there any more development on that front as to how PNM may be handling development of these resources going forward?
- Pat Vincent-Collawn:
- Yes, Lasan, I think that might be Xcel, may had an issue with giving some of their wind projects approved in terms of some cost recovery. And they finally came up with a compromise and got that done. Because we haven’t developed any of our own wind. The wind that we have right now is from NextEra. And it encourages power agreements.
- Lasan Johong:
- Yes, I might be mistaken there. I thought it was PNM. But there was also a solar development project similar to the wind project development.
- Pat Vincent-Collawn:
- Yes, they have some issues on our solar – absolutely, they had some issues on the solar piece, where they were – some of the commissioners were concerned that they didn’t think we bid it out appropriately. And they wanted us to open up, basically, our own land to others to use it to bid out. Because one of the reasons we’re so cost-competitive is that we have land that connects into our substations. But no, we got those solar projects approved and have had no issues with them since that. But that’s what you were thinking about, was the solar development.
- Lasan Johong:
- Yes, it must have been the solar piece. I apologize.
- Pat Vincent-Collawn:
- Yes, yes, no problem. And we’re okay with that.
- Lasan Johong:
- So how are guys going about getting around the objections?
- Pat Vincent-Collawn:
- Well, they actually approved the last ones that we had because we continued to show them that that’s the cheapest alternative. And I think they also now understand that we cannot be forced to let others to bid on our land. So as long as we continue to be cost-competitive, we’re fine. And even with Facebook, all those projects get bid out. If we’re cost-competitive, we get selective. And if we’re not, we don’t.
- Lasan Johong:
- Okay, that’s good. Couple of other things, time of use and revenue decoupling, we haven’t heard anything about that in a while. Just wondering what, if anything, is going on there. And the status of the AMI program as well.
- Pat Vincent-Collawn:
- There’s a couple of things. On the time of use and decoupling things, there are some workshops going on about incentive for energy efficiency or revenue decoupling or some sort of mechanism. And those are in the process of going on right now. We’ve had very good participation with staff and the attorney general. We’ve had the NRDC out here. So those are still ongoing right now. The AMI filing, the commission decided to that it didn’t make sense for our customers right now. So they asked us to put in a pilot program in the next time we file a rate case. So until we file a rate case in New Mexico, as Chuck mentioned, on 2019, AMI is kind of off the table for us.
- Lasan Johong:
- so that would mean the filing in 2019, late 2019 would increase a pilot program?
- Pat Vincent-Collawn:
- It would include – if they’ve asked us to include a pilot program in it, yes.
- Lasan Johong:
- Interesting. Lastly, this is kind of out of left field, but, it’s kind of been the topic of the day, in California. You guys have a couple of small wildfires going out north and west of San Jose. Just I know there’s not going to be a big issue here, but I just want kind of calm myself, so to speak. If there were problems involving your assets, would this be a big deal in terms of negligence or responsibility or liability?
- Pat Vincent-Collawn:
- No, Lasan. We’ve had a little bit of wildfire damage before, which we have had not any issues recovering. One of the co-ops were not directly under rule. Unfortunately had their system wiped down and they weren’t able to recover it. We do not have the inverse condemnation statute here. So obviously, if we were negligent, there’s going to be issues. But we do not – for two reasons, we don’t see what’s happening in California. There law in precedence is different. And we – thankfully, our wildfire season is not as bad.
- Lasan Johong:
- Perfect. Thank you very much.
- Pat Vincent-Collawn:
- Thank you.
- Operator:
- And this concludes our question-and-answer session. I would now like to turn the conference back over to Pat Vincent-Collawn for any closing remarks.
- Pat Vincent-Collawn:
- Well, again, thank you all for joining us this morning, and we look forward to seeing many of you and talking to you all of the next earnings call. Have a great day. Thanks.
- Operator:
- The conference has now concluded. Thank you for attending today’s presentation. Happy Avocado Day. You may now disconnect.
Other PNM Resources, Inc. earnings call transcripts:
- Q1 (2024) PNM earnings call transcript
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