PNM Annual Meeting: Vigorous, civil discussion. Rate increase request planned.

Yesterday’s annual meeting of PNM Resources Inc. was quieter than some expected. The questioning of Jeffry Sterba, CEO, chairman and president, was vigorous, but civil, and took around a half hour.
About 125 including PNM staff attended the meeting at Albuquerque's South Broadway Cultural Center. The scripted official business took maybe ten minutes to elect directors, amend the stock purchase plan and continue Deloitte and Touche LLP as the public accountants.. The rest of the 64-minute gathering was devoted to Sterba’s address and questions and answers.
The civility was a little surprising because PNM had a bad year in 2007, or, as Sterba said, a bad eight months in 2007 that started in May. About half of PNM’s shareholder value has disappeared since the stock price hit $30.63 on May 18, 2007. As I write, PNM stock is at $14.63. (Full Disclosure: I own about 175 shares of PNM.)
The major factors hitting PNM in 2007 were:
1. The previous multi-year rate reduction deal lasting, “in hindsight,” a year too long. “I take the sole responsibility for that,” Sterba said. (All following quotes are from Sterba.)
2. Some “circumstances over which we had no control.” These include the projected 2011 power demand appearing in 2006. The demand growth came both from population growth and “all the things we are doing in our homes” that use power. Big price increases for key commodity factors (“building blocks”) in the power business are the second factor. Copper is up 500% and cement 40%.
3. The credit crunch.
4. Unexpected maintenance on PNM’s generating facilities, forcing the company to buy power at high open market rates to replace capacity lost while performing the maintenance.
5. Botching the rate increase request that Sterba announced at the 2007 meeting. Sterba didn’t quite say PNM blew it, but he did say everyone involved was “rusty,” including PNM, the Public Regulation Commission and the third-party participants called intervenors. He also said PNM should file a rate case every couple of years because, otherwise, “you get out of practice.”
For 2008, the plan to regain the financial health pf PNM Resources is:
1. File a new rate care. The rates just approved are based on costs more than two years old. Also, “the fuel adjustment clause (granted PNM last week) is really not a fuel adjustment clause.” There is also the need for practice.
2. Reduce costs.
3. “Simply our business model within PNM” which is a confused legacy of New Mexico not quite deregulating its utility businesses some years back. Sterba didn’t provide details.
4. Complete the sale of the gas business to narrow the focus of the regulated businesses to just electricity.
One questioner asked about the status of PNM’s dividend. Sterba said the board was going to discuss the dividend at a meeting following the annual meeting. As of now, 10:55 a.m., PNM’s Web site has no news of any dividend action.
To close the meeting, Sterba said, “We will get your value back.”