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PNM's CEO, who made $8.9M this year, is surely celebrating today and thanking her policy team who crafted the fine print of the ETA. With the recommended decisions handed down by Hearing Examiner Medeiros in the Four Corners case last week, they anticipate having their cake and eating it too, but New Energy Economy has not given up yet.

As our long time subscribers know, we opposed the Energy Transition Act at the time of its passage, not because we are opposed to securitization as a concept, but only because the law, written by the utility, removes PRC authority to review the prudence of utility decisions, and it still reigns as the only securitization law in the country to do so.

If the ETA had not passed, we wouldn’t be in this situation, with the Hearing Examiner recommending that the PRC grant PNM's sale of its FCPP shares and authorize recovery $300M and securitization of all costs claimed by PNM, regardless of PNM's imprudence for incurring those costs in the first place. But the ETA is the law now, and unless we win in the Supreme Court, the law must be followed.

New Energy Economy will challenge the Hearing Examiners recommendation because the abandonment application filed by PNM does not comply with the ETA itself. PNM's "abandonment" application extends the life of coal, transferring ownership of the plant to Navajo Transitional Energy Company and preventing early closure of the plant. The decision:

  1. is not consistent with the spirit of the ETA - legislators did not intend to extend the life of coal.

  2. is not consistent with the letter of the law - the law clearly states that in order to qualify for securitization under the law, coal plants may not be sold or transferred for continuing operation, and

  3. ignores PRC precedent, to consider climate emissions when determining whether an application meets the public interest standard, which must be applied.

The Hearing Examiner recommends that a provision in the contract forbidding PNM from voting against early closure be removed, but ignores the fact that the Seasonal Operation Agreement that goes into effect when the contract is executed will still ensure that the plant stays open till at least 2029. This despite the fact that multiple experts testified that economic circumstances are likely to lead to early closure of the plant if the deal is not approved (and that his own decision not to decide on a disallowance in this very case is significant to the economic outlook for the plant!). The Hearing Examiner put his trust in the word of PNM with no regard for the life threatening emissions at stake.

PNM is not closing the plant. Period. That’s what the legislators believed the ETA required, the ETA prohibits securitization for transfer or sale of fossil fuel plants, and the application does not meet the required public interest standard, not only because it ignores the impact of climate emissions but also because ratepayers will be stuck with $300 million for the bad business decisions of PNM (they performed no contemporaneous financial study before investing nearly a $1B!!).

If approved by the Commission, the order is not only a climate injustice, but also an economic one. The Hearing Examiner punted when he recommended that the prudence of $300M invested in the plant in 2016 be again revisited in the next rate case - likely to be filed in December 2022 and decided in 2024 - claiming that insufficient evidence was presented to make a decision. However, this is contrary to the Commission's order that the issue of prudence be decided in this case. PNM holds the burden of proving the prudence of its decisions, and if they have not done so then that should be to their detriment.

The Hearing Examiner believes that there is a mechanism in the law to allow for an adjustment to rates for imprudent costs after a bond is issued, but PNM lawyers argue otherwise, and we find ourselves in agreement. Under the ETA, once a bond is issued repayment will arrive on ratepayer bills as a 'non-bypassable' charge, meaning that those charges cannot be changed. It is a fantasy that we will be able to claw back any costs later found to be imprudent. Any attempt to do so would rightfully be challenged as illegal retroactive ratemaking.

We object to the Hearing Examiners granting of abandonment. The application is not in public interest because:

  1. It continues the burning of coal.

  2. It foists $300M onto ratepayers for bad business decisions of PNM

PNM's abandonment application should be denied.

New Energy Economy will continue to oppose this grave injustice and fight for the earliest possible end to coal in New Mexico. Exceptions to the Hearing Examiners order will be filed next week and responses to follow. It's not over until the PRC sings.



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