Moral Hazard

The evidentiary hearing for San Juan Generating Station costs began today. We are cross-examining witnesses about why PNM is not following the financing order they themselves pushed for and why they think they are above the law.

The hearing today concluded with a scathing line of questioning from Hearing Examiner Medeiros for PNM Witness, Monroy. The Hearing Examiner asked Monroy about the concept of Moral Hazard, a risk which occurs when each party in a contract may have the opportunity to gain from acting contrary to the principles laid out by the agreement, and one party takes that risk because it can do so without having to suffer consequences.

In our case, PNM planned to double recover for San Juan abandonment. PNM thought they could get away with not complying with the financing order because the PRC would not know and ratepayers would have to suffer the consequences. PNM agreed with the PRC in a financing order to provide a rate adjustment upon abandonment and receive $360M in securitized bonds. PNM made the unilateral choice to postpone the rate adjustment and harm ratepayers by continuing to charge them for the San Juan plant even when it closes which means they would collect more than $135M AND still collect the $360M. Did PNM ever consider whether it was creating a moral hazard, the HE asked? We have to question whether PNM has ever considered morality at all.


Hearing Examiner Anthony Medeiros questions PNM Witness about the Moral Hazard created by PNM's plan to delay issuance of bonds.


We are working to lift up evidence of PNM's ongoing abuse and disregard for regulatory authority, ratepayers, and impacted communities. Specifically:

1. PNM promised the Legislature, the Commission, and the NM Supreme Court that the ETA's securitization mechanism would produce customer savings. PNM has NOT followed the Finance Order issued by the Commission, which specifies that a rate adjustment and bond securitization would take place at the time of abandonment.

2. Ratepayers deserve the promised benefits upon abandonment. Given that the ETA forced ratepayers to foot an unprecedented 100% recovery for undepreciated investments, PNM needs to make good on the few benefits that were traded for that bailout. Instead PNM is trying to collect phantom costs, including salaries of workers no longer being paid and other operating expenses. The law requires that rates are fair, just and reasonable. PNM's delay of the rate adjustment flies in the face of that requirement.

3. PNM should be Sanctioned for non-compliance - in exchange for its monopoly status, the company agrees to be regulated by the PRC. PNM may not take unilateral action that impacts ratepayers - it is the Commission who regulates PNM!

When PNM admitted that they unilaterally postponed bond issuance they did so at the direction of CEO Pat Vincent Collawn and Avangrid, and this decision was communicated to the PNMR Board of Directors in or around August 2021. They did not tell anyone else - not the Avangrid merger signatories, not parties in the San Juan abandonment case, not the PRC. They also did NO study whatsoever to determine the financial impact to PNM ratepayers of their decision. As usual PNM prioritizes profits above all else.

Thank you to all of those who showed up to speak against this injustice. In more than one hour of public comment not one person or group spoke up to defend PNM's plan. Similarly, every party to the case, including ETA proponents, stand united in opposition.

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