ENERGY TRANSITION ACT AMENDMENTS
NEW ENERGY ECONOMY FOUGHT TO PROTECT RATEPAYERS FROM PAYING THE COST FOR UTILITY IMPRUDENCE AND FUTURE DECOMMISSIONING COSTS
ENERGY TRANSITION ACT AMENDMENTS REINSTATE PRC REVIEW OF ABANDONMENT AND CLEANUP COSTS AND PROTECT RATEPAYERS
In 2019 the New Mexico Legislature passed an energy omnibus bill that combined one of the highest Renewable Portfolio Standards in the country with a financial mechanism known as securitization. Securitization provides an avenue for monopoly utilities in NM to recover the "undepreciated" or lost assets of a power plant they retire by selling federally backed bonds on Wallstreet - and paying them back to bondholders through a 25 year non-bypassable charge on New Mexican's electricity bills. The ETA also included transition funds for workers, workforce development and for economic transition. After a critical campaign led by frontline organizers, the bill was amended last year to add some funds (though not nearly enough) for Indigenous impacted communities who have borne the brunt of energy extraction in our state.
But the Energy Transition Act also included clauses that, if left unchanged, will charge struggling New Mexicans for any undepreciated investments and decommissioning ("clean-up") costs the monopoly utilities propose, with no oversight from the regulatory agency. This interpretation of the language in the ETA law is not just that of consumer advocates, but of the utilities themselves, of our regulatory agency, of NM legislative analysts, and of regulatory lawyers throughout the state and country.
WHO WILL PAY WHEN PLANTS CLOSE?
The cost to New Mexican households when regulatory protections have been stripped are alarming. PNM's undepreciated investments for all of its outstanding fossil and nuclear investments are over $2B
The price tag for New Mexicans is estimated at $2,082,027,847 billion
This translates into a minimum "non-bypassable” charge of $6.48/month per household for 25 years BEFORE decommissioning costs are even included or interest rates increase. For households already stretched thin financially and a state economy that needs to keep money circulating locally, that's a lot of money leaving NM to out of state PNM bond holders.
The problem is that the ETA does NOT allow the PRC to reduce this amount at all. New Mexicans deserve to have these proposals evaluated, modified, and decided by the regulatory agency created to protect us.
1. RESTORE PRC AUTHORITY TO DECIDE THE AMOUNT CONSUMERS PAY
Remove the utilities' ability to set the amount to be securitized and reinstate the PRC's authority to evaluate the evidence and determine the amount that is fair, just, and reasonable -- just as they do with all other rate increase proposals under NM law.
2. RESTORE PRC AUTHORITY TO APPROVE OR DENY A UTILITY'S PROPOSAL
Change the language that currently states the PRC "must" approve securitization proposals. This amendment aligns the ETA with best practices in securitization laws across the country. The PRC would maintain the authority to deny a securitization proposal if it is found to include costs that are imprudent (like PNM's Four Corners coal plant with a price tag of nearly $211 million) or not fair, just, and reasonable.
3. REINSTATE THE LEGAL AND CONFORMING 30-DAY FILING DEADLINES
Replace the hyper-narrowed 10 notice for rehearing and appeal filing deadlines with 30-day conforming NM court rules that are standard across the country.
Citizens for Fair Rates & the Environment
Food and Water Watch
New Energy Economy
Physicians for Social Responsibility - NM
Retake Our Democracy
Rio Arriba Concerned Citizens
Interfaith Worker Justice - NM
Common Ground Rising
Tewa Women United
Great Old Broads for Wilderness
Indivisible Nob Hill
Honor Our Pueblo Existence - HOPE
Turtle Island Restoration Network
Los Alamos Study Group
Veterans for Peace - SF
Pueblo Action Alliance
Los Jardines Institute
The Energy Transition Act Amendments have been written to leave the good parts of the law intact (the financial tool of securitization, the Renewable Portfolio Standard, and the transition funds) while making three surgical changes:
WHAT DO THE EXPERTS SAY?
Steven M. Fetter, former Chairman of Michigan Public Service Commission, former bond rater for Fitch, former general counsel for Michigan State Senate, and 3-time PNM expert witness:
"I view the ETA provisions in question as a significant departure from other securitization laws in a way that undermines the core of the NMPRC’s fundamental purpose and role – to regulate on behalf of the public to reasonably protect ratepayers from wasteful expenditure… The NMPRC ordered that the rights and remedies of ratepayers with respect to any imprudence by PNM flowing from the Four Corners Power Plant (FCPP) case would be protected in the next rate case. However, the ETA states that PNM is entitled to securitize any of its undepreciated assets irrespective of a prudence review, … and without an opportunity for ratepayers to be heard to present any claim or defense. Essentially, the NMPRC appears to be barred from altering PNM’s request for 100% cost recovery for undepreciated assets at FCPP… My opinion is entirely consistent with the established law in NM.”
Adam Carlesco, Climate & Energy Staff Attorney, Food & Water Watch:
“The Public Regulation Commission is tasked with regulating industries to ensure fair and reasonable rates, and to assure reasonable and adequate services to the public; yet a portion of the Energy Transition Act has removed this constitutional mandate. Although we are supportive of the clean energy transition initiatives in the ETA, we must maintain the power of the PRC to do its job.
If these issues are not addressed now, ratepayers will be left to foot the bill to decommission fossil fuel and nuclear facilities, foisting the cost of the state’s energy transition entirely upon the general public instead of the corporations that have profited for decades.”
John Boyd, Attorney, Citizens For Fair Rates & the Environment:
“Section 31 C of the ETA removes discretion from the PRC to control the amount that PNM can extract from ratepayers as ’compensation’ when it closes any of its old plants. If PNM acquired them any time before 2015, PNM gets what it wants, 100%, and the PRC has no ability to moderate the amount to balance the interests of PNM’s shareholders, on the one hand, and its customers’ interests on the other hand. Shareholders take all. I do not believe that the legislators knew this bill applied to all coal, nuclear, and gas assets, regardless of prudence. The costs to ratepayers of Palo Verde decommissioning could alone turn out to be astronomical. Amendments to the ETA will restore PRC oversight of the amount PNM takes from ratepayers when it closes a plant."
Mariel Nanasi, Attorney, New Energy Economy:
“There are two purposes to the ETA amendments: 1) to safeguard against potential excessive rates that may result from the future abandonment of all PNM’s coal, nuclear and gas plants other than San Juan Generating Station; and 2) to reinstate PRC oversight in order to accomplish the first goal. Otherwise the average residential ratepayer will face a minimum 10% rate increase on their bill in a non-bypassable charge for the next 25 years. We don’t have to choose between the environment and economic justice – we must amend the bill to ensure that consumer protections are upheld.”
WHAT IF THE EXPERTS ARE WRONG?
Some ETA supporters have a different interpretation of the language. They say amendments are unnecessary because the law does maintain PRC authority to modify securitization proposal amounts to ensure they are fair, just, and reasonable, and to keep imprudent costs off customers' bills. The good news is that we don't need to argue, we just need to clarify the language in these specific provisions to avoid unintended consequences and achieve our shared goals: to protect low-income New Mexicans and ensure PRC oversight as we transition to a clean energy future.