PNM Resources Inc. (PNM, Financial)(2.2%) (PNM – $28.05 – NYSE) is a public utility holding company headquartered in Albuquerque, New Mexico. Regulated electric utility subsidiaries include Public Service Company of New Mexico (PSNM) and Texas-New Mexico Power Company (TNMP). PNM expects rate base growth of 5%-7% per annum at both PSNM and TNMP. PNM’s 2015-2019 capital plan totals $2.2 billion, including $577 million in 2015, $527 million in 2016, $448 million in 2017, $302 million (excluding $165 million for Palo Verde Unit 3) in 2018, and $382 million in 2019. PNM reached a settlement agreement regarding the final environmental retrofit plan and ownership changes for the San Juan coal units, and is awaiting final approval of that plan from the NMPRC. Additionally, PSNM refiled an important New Mexico rate case on August 27, 2015. It requested a $123.5 million annual revenue increase, based on a 10.5% allowed ROE using a rate base of $2.5 billion, for the test year October 2015-September 2016. Roughly $95 million of higher rates are necessary to recognize roughly $655 million of rate base additions. $31 million of the revenue deficiency is due to forecast load decline, including an 11% decrease in large customers, an 8% decrease in average commercial use, and a 5% decrease in average use among residential customers. In addition, the filing requests structural rate design changes, including higher fixed and demand charges, lower customer subsidies, and a decoupling pilot program. PSNM expects a NMPRC rate order in the third quarter of 2016. TNMP benefits from annual distribution and transmission rate adjustments, as well as well above average sales growth, but may file a general rate request in the near future. Assuming fair regulatory treatment, PNM targets 7%-9% annual earnings growth, which includes a 2016 earnings power of $1.90-$1.97 per share.
From Mario Gabelli (Trades, Portfolio)'s Gabelli Industrials Fund shareholder commentary for third quarter 2015.
