PNM Resources : Application and Proposed Form of Notice

BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION

IN THE MATTER OF PUBLIC SERVICE COMPANY OF	)
NEW MEXICO'S APPLICATION FOR AUTHORIZATION	)
TO IMPLEMENT GRID MODERNIZATION	)
COMPONENTS THAT INCLUDE ADVANCED	) Case No. 22-00058-UT
METERING INFRASTRUCTURE AND APPLICATION	)
TO RECOVER THE ASSOCIATED COSTS THROUGH	)
A RIDER, ISSUANCE OF RELATED ACCOUNTING	)
ORDERS, AND OTHER ASSOCIATED RELIEF	)

APPLICATION

In 2020, the Legislature adopted Section 62-8-13 ("Grid Modernization Statute" or "Statute") of the New Mexico Public Utility Act ("PUA") to encourage grid modernization projects that benefit customers and the State of New Mexico. Public Service Company of New Mexico ("PNM") files this Application pursuant to the Grid Modernization Statute. PNM's approach to grid modernization aligns with the Legislature's statutory goals and balances the interests of customers and investors. The projects included in this Application improve customers' ability to customize their use of energy and ensure that customers, including low-income customers, are a top priority and will benefit consistent with the Grid Modernization Statute. PNM's proposal to modernize its electricity grid through infrastructure and technology improvements also increases the efficiency, reliability, resilience, and security of PNM's electric system.

1. SUMMARY OF PNM'S GRID MODERNIZATION IMPLEMENTATION
   PLAN

Grid modernization is the keystone for achieving New Mexico's energy transition. PNM is re-designing the electricity grid over the next decade to partner with customers on realizing decarbonization goals and tailoring energy usage to meet each customer's evolving needs. Grid modernization, however, is not instantaneous or free. A modernized grid requires two-way

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communications and automation of the system itself. With increasingly sophisticated communications and automation comes the need for increased cybersecurity. A comprehensive and orderly long-term plan is critical to supporting the energy transition with modernized infrastructure and technology.

Importantly, the primary focus of PNM's grid modernization effort is to ensure that its customers experience tangible benefits and new opportunities in alignment with stated customer preferences. PNM undertook an approximately 20-month engagement process, holding customer and stakeholder meetings to receive input and understand customer priorities and answer stakeholder concerns. To ensure that no customer group is left out of this effort, PNM has focused on the interests of low-income customers, prioritizing deployment of metering and distribution infrastructure to low-income portions of PNM's service territory.

PNM's Grid Modernization Implementation Plan ("Implementation Plan") begins in Year 1 with planning, program management and engineering efforts, moving quickly to installation and deployment of advanced metering infrastructure ("AMI"), communications equipment and other technology necessary for the deployment of AMI for PNM's customer base.1 AMI deployment will continue through Year 4. In Year 2, PNM will advance the use of customer energy data by implementing a Customer Energy Management Platform, aiding customers in making informed decisions about their individual energy use and utility programs and rates that support their choices. PNM's Implementation Plan also includes a significant distribution planning and engineering element throughout Years 1-6. Years 7-11 are presented for informational purposes

1 The Implementation Plan is attached to the Direct Testimony of PNM witness Laura E. Sanchez as PNM Exhibit LES-3.

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only, and PNM's actual grid modernization projects and plans for those outer years will be the

subject of a future application.2

1. PNM'S REQUESTED APPROVALS AND TIMING

PNM is filing its Application in accordance with the Grid Modernization Statute, as well

as two relevant orders from the New Mexico Public Regulation Commission's ("NMPRC" or

"Commission") issued in this docket: the March 23, 2022 Order3 and the May 25, 2022 Order.4

In its March 23, 2022 Order at Paragraph 7, the Commission found that:

[T]he implementation of AMI comports with the Grid Modernization Statute, will benefit PNM's New Mexico retail customers and the public, and will provide a net public benefit. Specifically, the implementation of AMI will: facilitate grid modernization; improve the efficiency, reliability, resilience, and security of PNM's system; give customers real time data regarding energy usage that allows them to monitor and reduce consumption as they deem appropriate; allow PNM to maintain reasonable operations, maintenance, and customer costs; improve PNM's ability to develop and implement demand-side management programs; improve PNM's ability to accommodate increased levels of distributed energy resources; reduce emissions; increase New Mexico's capability to supply regional needs through clean and renewable electricity; increase access to and use of renewable energy; support a flexible, diversified, and distributed energy portfolio; improve customer education; and allow for capital investment and skilled jobs in related services.

Consistent with the Commission's orders, the Application seeks authorization to implement grid modernization projects that include AMI, intelligent grid devices, communication networks, distribution system hardening, and physical and cybersecurity, among other

technologies ("Grid Mod Projects" or "Projects"). PNM requests approval of the first six years of

investments in Grid Mod Projects that will total $344 million, with this total investment subject to

2 PNM's 11-year strategic vision for grid modernization is discussed in EnerNex's Guide for PNM's Grid Modernization Implementation ("Guide"), which is attached to the Direct Testimony of PNM witness Laura E. Sanchez as PNM Exhibit LES-2.

1. Order Requesting Public Service Company of New Mexico to File an Application for Authorization to Implement Grid Modernization Components that Include Advanced Metering Infrastructure, Case No. 22-00058-UT(Mar. 23, 2022) ("March 23, 2022 Order").
2. Order Granting Extension of Time to File an Application for Authorization to Implement Grid Modernization Act, Case No. 22-00058-UT(May 25, 2022) ("May 25 Order").

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an annual review and reconciliation proceeding through which PNM will file both updated forecasted costs for the following rate year based on the best available information and will true- up forecasted costs from the prior year to the actual costs incurred. The estimated revenue requirement for Year 1 is $9.8 million.

The Application seeks to recover the costs of these Projects through a Grid Modernization Rider ("Grid Mod Rider" or "Rider"), for which PNM will file an advice notice after Commission approval of PNM's Application. In this Application, PNM seeks approval of the proposed ratemaking methodologies used to develop the Grid Mod Rider, as well as PNM's proposal to collect the Grid Mod Rider as a fixed monthly charge per customer. PNM also seeks approval of the monthly charge amount by customer class listed in the proposed Grid Mod Rider, subject to the Commission's approval of this Application.

Specifically, PNM seeks approval of the following actions:

1. Approval of PNM's Application by July 1, 2023,5 authorizing PNM's Implementation Plan, which represents the first phase (Years 1-6) of PNM's overall 11- year strategy for grid modernization;
2. Approval of Grid Mod Project costs and related ongoing operations and maintenance ("O&M") costs identified in PNM's Implementation Plan and discussed in witness testimony;

5 In order to begin timely deployment of projects necessary to implement AMI technologies, PNM requests that the Commission issue a Final Order on PNM's Application during the second quarter of 2023, within six to nine months of the filing date, or by no later than July 1, 2023.

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1. Approval of the proposed Grid Mod Rider by September 1, 20236-for which an advice notice will be filed after the approval of PNM's application-subject to an annual review and reconciliation process;
2. Authorization for PNM to create related regulatory assets and liabilities, permitting PNM to record for recovery or refund the following:
3. 1. costs incurred for the development and implementation of PNM's Implementation Plan between the requested approval of the Application on July 1, 2023, and the implementation of the Grid Mod Rider by September 1, 2023;
   2. undepreciated investments associated with legacy meters being replaced with AMI meters; and
   3. over- or under-collection of costs through the Grid Mod Rider;
4. Approval of the proposed format of an Opt-Out Consent Form, for which PNM will file an advice notice with the Commission prior to AMI meter deployment;
5. Approval of the methodology to determine PNM's proposed cost-based opt- out fees, which includes a one-time fee and a monthly fee, for which PNM will seek approval in separate advice notices;
6. Approval of the reporting criteria by which PNM proposes to establish a baseline regarding the deployment of the Grid Mod Projects and track PNM's progress;
7. Approval of variances from Commission Rules 410 and 530;

6 Should the Commission approve PNM's Application prior to July 1, 2023, PNM would prefer to implement the Rider prior to September 1, 2023, taking into consideration PNM's concerns with implementing the Rider during the summer peak season. PNM witness Stella Chan addresses implementation of the Rider during the summer months of June, July and August.

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