PNM's Planned Purchase of Expiring Nuclear Leases would saddle ratepayers with a $1.3 billion price-tag for the most expensive electricity in their portfolio and add additional decommissioning and capital improvement costs
25 Organizations File Joint-Petition Requesting PRC Investigation Into PNM’s Planned Purchase of Expiring Nuclear Leases
UPDATE, May 8th 2019: The PRC has ordered PNM (and PRC staff) to respond to our Joint Petition - the first step toward the investigation! Read the ORDER HERE
On the 49th Annual Earth Day, New Mexico organizations representing thousands of constituents statewide petitioned the New Mexico Public Regulation Commission to initiate a formal expedited investigation into PNM’s planned purchase of its expiring leases at Palo Verde Nuclear Generating Station (“Palo Verde”) Unit 1 and Unit 2 in 2023 and 2024, respectively, for which it must provide irrevocable notice to the lessors by January 15, 2020 and January 15, 2021, respectively.
PNM plans to purchase these expiring leases despite high nuclear-generated electricity costs, precarious cost risk exposure (including radioactive waste build up for which the “mature” nuclear industry still has no answer), extremely costly ongoing capital expenditures, the most consumptive water usage of any PNM energy source (in a time of severe drought), little to no social benefit (ex., jobs), and significant decommissioning cost exposure.
The PRC investigation will help determine if PNM’s purchase is a prudent and reasonable investment on behalf of New Mexico ratepayers. The overwhelming public position is that, rather than deepening our investment in nuclear from Arizona, PNM should invest in solar and wind closer to home that is less costly, is better for the environment, and will create thousands of family-supporting jobs.
“A rigorous PRC investigation will likely demonstrate that PNM’s investment in the purchase of the expiring Palo Verde nuclear leases will cause unjustified rate increases for expensive and risky energy,” said Mariel Nanasi, Executive Director, New Energy Economy. “PNM is seeking to shift the cost and liability of their nuclear holdings from Wall St. shareholder investors onto NM households. Let’s spend that billion dollars instead on clean, affordable renewable energy that puts New Mexicans to work.”
In addition to the concerns of nuclear being the highest cost energy resource and the associated risks of hundreds of millions of dollars in decommissioning and capital improvement costs, there are other vital reasons why the PRC needs to investigate the prudence of purchasing nuclear assets for ratepayers:
As of 2016, ratepayers paid PNM $2.083 billion in lease payments for Palo Verde generated electricity. The plant is located in Arizona and not one New Mexico job has been created as a result of those payments.
Purchasing the expiring nuclear leases (114 megawatts) will cost ratepayers $1.3 Billion over the next 22 years. This does not include future decommissioning costs.
Serious health and environmental concerns around nuclear produced energy need to be assessed, including a violent legacy of environmental racism and injustice against Indigenous people and nuclear’s ranking as the most water intensive energy source.
20% of New Mexicans live in poverty, 83% of whom are people of color. Higher nuclear generated electricity costs disproportionately hurt them. In some cases, people facing poverty spend between 20-50% of their household income on electricity, causing enormous hardship.
BACKGROUND: In 1977 PNM sought and was granted authority by the Commission to invest 10% in each of the 3 units at Palo Verde Nuclear Generating Station in Arizona. Palo Verde’s construction was completed in 1985, but capital costs for the plant turned out to be so high that PNM had to come up with an alternative financing mechanism to avoid “rate shock.”
For units 1 & 2, PNM agreed to sell its interests to Wall St. investors (in different megawatt amounts) and then “lease” back the electricity for New Mexican customers whose utility bill payments covered the lease payments. This was called “sale/leaseback.” Importantly, under the sale/leaseback agreements, PNM is responsible for paying all decommissioning costs and capital improvement costs. For unit 3, PNM was not allowed to include those megawatts in New Mexico rates and it sold that nuclear generated electricity on the open market – at a loss because nuclear electricity costs are no longer competitive. Unit 3 nuclear was brought back into rates as a supply resource to serve New Mexico retail customers effective January 1, 2018, over the objection of New Energy Economy and other ratecase interveners. Nuclear power is the most costly of all PNM’s resources.
Despite opposition from consumer advocates, PNM has purchased back all of the leases from the Wall St. leaseholders, except the two leases that are at issue in the Joint Petition. There are two main reasons PNM has purchased back all the Palo Verde leases: 1) PNM is able to recoup 100% of their capital costs from ratepayers, plus a guaranteed profit of 9.575% on the investment; and 2) if PNM uses the Palo Verde nuclear to serve NM customer’s electric needs then ratepayers will become responsible for decommissioning costs and capital improvement costs, plus their 9.575% rate of return.
If PNM does not buy back the leases, then PNM shareholders, NOT ratepayers, are responsible for many hundreds of millions of dollars in decommissioning and capital improvement costs. Through the purchase, PNM is seeking to shield its investors from those costs.
An overwhelming majority of New Mexican voters believe that we should procure as much of our electricity from wind and solar as possible. 1,080 New Mexico voters were polled from January 15-17, 2019, by the polling firm, Change Research. Some key findings from the survey:
● New Mexicans want to maximize renewable energy production and use. 81% of people polled agree with the statement that “we should produce electricity from wind and solar as much as possible.”
● A significant majority of voters believe that New Mexico should produce electricity using 100% renewable energy sources, such as solar and wind, in the future. Nearly three-fourths (72%) of those polled agree with this statement.
● Voters believe that renewable energy is a high-tech industry that generates high paying jobs and that it is less expensive to produce electricity from renewable energy such as wind and solar than from fossil fuels such as coal, oil, and natural gas.
While the joint-petition will not shut down the Palo Verde Nuclear Plant, it challenges PNM’s plan to further invest NM ratepayers’ money in the plant and is a signal to the market that utilities cannot offload their nuclear costs and liabilities through “ratebasing,” and serves to protect NM ratepayers from cost abuse and the risk of hundreds of millions in decommissioning liabilities.