PNM sees divergent load effects from crypto, supply chain as it awaits Avangrid merger lawsuit

Dive card:

• Supply chain constraints affecting industrial customers have slowed forecasts for demand growth this year for Public Service Co. of New Mexico, known as PNM, officials said Friday during the parent company’s earnings call PNM Resources. The tool now expects retail growth in 2022 to come in somewhere between 0.5% and 1.5%, about half the pace of previous estimates.
• Reverse, PNM Resources’ another subsidiary, Texas-New Mexico Power, has seen load growth beat expectations “across the board,” officials said, due in part to a double-digit expansion in cryptomining loads. Volumetric growth has been 2.8% so far this year, and the utility raised its load growth expectations for the year to a range of 2% to 3%.
• PNM Resources is also in a holding pattern with respect to the proposed merger with Connecticut-based Avangrid. New Mexico regulators denied the deal in 2021 due to a number of concerns, but the utility has appealed to the state Supreme Court. “As Tom Petty sang so beautifully, the waiting really is the hardest part,” PNM Resources Chairman and CEO Patricia Vincent-Collawn told reporters and analysts.

Diving Insights:

PNM Resources on Friday raised its 2022 earnings guidance to a range of $2.63 to $2.68/share, “based on the continued strength of the utilities [and] offset by higher interest rates,” Vincent-Collawn said.

In the utility company’s second-quarter earnings presentation, it had estimated ongoing 2022 earnings of $2.50 to $2.60/share. The utility said it expects load growth to accelerate next year and is planning a $344 million investment in grid modernization in its PNM territory.

The New Mexico Public Regulation Commission is scheduled to begin hearings on the grid modernization proposal in March, PNM Resources President and Chief Operating Officer Don Tarry said. The utility requested approval by July, with plans to implement a rate rider beginning in September “after summer rates and customer bills are lower,” he said.

Company officials also noted that in the third quarter, PNM took a step forward in its plans to be zero-emissions by 2040, with the retirement of its last unit at the coal-fired San Juan Generating Station.

“This significantly reduces the amount of coal in PNM’s generation to less than 10%, bringing our portfolio to 55% carbon-free,” said Vincent-The colla.

Officials also discussed load growth prospects for PNM’s utilities.

For PNM, “the primary driver for growth in our initial guidance was from our industrial customers,” Tarry said. “Delays related to customer supply chain issues and other pressures have moved this timeout to next year. … Looking ahead to 2023, we expect industrial customers to see through the delays and return to the original forecast of 2% to 3%.

Residential and commercial load in the PNM territory has also “done better than expected for the year,” Tarry noted. Because industrial customers pay the lowest electricity rates, the slower growth “doesn’t have a significant impact on our EPS,” he said.

Load growth at Texas-New Mexico Power, on the other hand, “has exceeded expectations across the board,” Tarry said. “Usage from cryptomining customers has pushed growth up to double-digit levels. Excluding cryptomining, demand-based load has grown in line with our expectations for the year of 2.5% to 3.5%.

As for the Avangrid merger, officials say they are now awaiting the New Mexico Supreme Court.

Avangrid and PNM Resources appealed China’s refusal in January and the court’s briefing schedule was finalized in August. “No response has been provided to the companies’ request for oral argument,” the company said in a statement. “There is no statutory time limit for the court to respond to the request for oral argument or to act on the appeal.”

Regulators in New Mexico denied the $8 billion deal on warnings of reliability risks, the potential for higher prices and slower development of renewable resources.