PNM Resources' New Mexico Affiliate Files For Rate Increase

PNM, the New Mexico affiliate of PNM Resources, Inc. (NYSE:PNM) , has filed for a rate hike proposal with the New Mexico Public Regulation Commission. On approval, it would result in an increase of $99 million in electric rates and be effective from Jan 1, 2018. The average customer bill would increase 11.2%.

Rationale of the Rate Hike

The proposal for the rate hike is consistent with PNM’s objective of delivering electricity from environmentally sustainable sources. With similar aim, the company has recently closed operations of the coal-fired San Juan Generating Station Units 2 and 3, while trying to meet customer demand with eco-friendly nuclear energy produced by the Palo Verde Nuclear Generating Station Unit 3.

The proposal includes other environmental upgrades of PNM’s power generation resources and capital expenditure for providing uninterrupted service to customers.

Through this filing, PNM has proposed changes in the pricing structure that will better align rates with the actual costs of delivering electricity, and offer room for energy efficiency measures while eliminating the disincentives associated with the same alongside load management programs.

Forecast

PNM Resources projects capital investment of $1.9 billion over the 2016-2019 timeframe, primarily to invest in acquisition and replacement of generating assets and to comply with environment regulations. These will drive a rate base growth of 4-6% compounded annually at PNM, over 2015-2019.

Price Movement

PNM Resources has outdone the Zacks categorized Utility – Electric Power industry over the last 12 months. During this timeframe, share price of PNM Resources gained 11.8% while that of the industry improved 5 %.

Robust third-quarter results, above-average rate base and earnings growth projection, and high capital investments are the key catalysts for growth.

Zacks Rank & Key Picks

PNM Resources carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space include Avista Corp. (NYSE:AVA) , Ameren Corporation (NYSE:AEE) and DTE Energy Company (NYSE:DTE) .

Avista has seen one upward estimate revision for 2016 over the last 60 days. During this period, its estimates increased from $2.08 to $2.09. The stock carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ameren Corp., another Zacks Rank #2 stock, has seen five upward estimate revisions for 2016 over the last 60 days. During this period, its estimates increased 6.7% from $2.53 to $2.70.

DTE Energy has seen three upward estimate revisions for 2016 over the last 60 days. DTE Energy carries a Zacks Rank #2 as well. During this time frame, its estimates were up 2.1% from $5.16 to $5.27.

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