State regulators have rescinded a decision that allowed New Mexico's largest electric utility to increase rates for customers but limited the amount of money it could recoup on upgrades at a coal-fired power plant.

The state Public Regulation Commission on Wednesday backed away from the decision and granted the Public Service Co. of New Mexico a new hearing on rate proposals scheduled for next week, the Santa Fe New Mexican reported .

The commission had voted last month to allow the utility to raise rates by about 9 percent for the average customer over the next two years. However, the commission rejected the utility's request to recoup about $150 million for the improvements made to the Four Corners Power Plant and about $37 million in upgrades at the San Juan Generating Station.

The utility filed a request last week, asking the commission to reconsider its previous decision. The utility claimed that an agreement reached in May with other stakeholders would set a better path forward as the company moves away from coal.

Utility officials warned that there could be legal action if the commission doesn't approve the settlement agreement.

Several organizations and agencies that had signed on to the agreement with the utility also requested the new hearing. These entities claimed that the rate case could be sent to court, which could lead to a larger increase.

The entities also argued that the recouping expenses matter could be decided in a separate case.