PNM sees diverging load impacts from crypto, supply chain as it awaits court action on Avangrid merger

Dive Brief:

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

Dive Insight:

PNM Resources on Friday raised its 2022 earnings guidance to a range of $2.63 to $2.68/share, “based on the continued strength at 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 anticipates load growth to accelerate next year and is planning a $344 million grid modernization investment in its PNM territory.

The New Mexico Public Regulation Commission is slated 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 the third quarter took PNM a step forward on plans to be emissions-free 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%, and brings our portfolio to 55% carbon-free,” said Vincent-Collawn.

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

For PNM, “the primary driver of growth in our original guidance was from our industrial customers,” Tarry said. “Delays related to customer supply chain issues and other pressures have moved this timing out till next year. ... Looking ahead to 2023, our expectation is for industrial customers to move through their delays and get back to the original forecast of 2% to 3%.”

Residential and commercial load in the PNM territory has also “done better than expectations for the year,” Tarry noted. Because industrial customers pay the lowest electricity rates, the slower growth “does not have significant impacts 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 crypto mining customers has pushed growth up to double-digit levels. Without crypto mining usage, demand-based load has grown consistent with our expectations for the year of 2.5% to 3.5%.”

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

Avangrid and PNM Resources appealed the PRC’s denial in January and the court’s briefing schedule concluded in August. “No response has been provided on the companies' request for oral argument,” the company said in a statement. “There is no statutory deadline for the Court to respond to the request for oral argument nor to act on the appeal.”

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