Santa Fe, NM – On Thursday New Energy Economy filed a motion to declare the Energy Transition Act (ETA) Financing Order null and void for the San Juan Generating Station (SJGS) securitized bonds in the amount of $360.1 million. The facts are not in dispute: PNM delayed bond issuance at the time of the SJGS abandonment in violation of the Energy Transition Act and the Financing Order, the specific document that authorized the collection of 100% recovery from ratepayers of undepreciated investments (remaining assets still uncollected) on the 50-year-old coal plant.
The argument was actually rather simple: Under the ETA PNM ratepayers gave up the right to challenge utility cost recovery of 100% of undepreciated investments at SJGS in exchange for PNM's agreement to issue securitized bonds at the time of abandonment and adjust rates to remove the continuing costs of SJGS. PNM promised that this would result in customer savings. Yet PNM failed to make good on its part of the bargain.
Many of you remember that in late 2018 and early 2019 when we were challenging the wisdom of this ETA “deal,” we argued that allowing the utility to control the process turned the regulatory scheme on its head. NEE said that giving PNM "the keys to kingdom" would put ratepayers in a vulnerable position and at the whims of the monopoly. Unfortunately, that is the situation we find ourselves in.
Why didn’t PNM make good on their part of the bargain? In August 2021, PNM made a unilateral decision with Avangrid, notifying no one, not the Commission or parties, to not only continue to collect $93.8M/per year from ratepayers for a closed plant, but also to postpone securitized bond issuance. PNM's delay has also resulted in higher interest rates on bonds, eviscerating any customer savings that bond securitization was to ensure. When PNM applied for its Financing Order it relied on the testimony of its witness Charles Atkins, who testified that the benchmark interest rate was 2.24%. According to PNM, as of October 28, 2022 the interest rate was 5.92%.
If the Financing Order is dismissed because of PNM's own inaction, the company will not be harmed; it can avail itself of traditional ratemaking opportunities for cost recovery. Yet, if the Financing Order is not dismissed, PNM's failure to adjust rates and issue bonds will result in hundreds of millions in unfair and unjust costs to half a million ratepayers for 25 years.
Proponents of the ETA promised customer savings, but PNM wanted to keep those profits for PNM/Avangrid, and testified that its capital and business needs, not costs for ratepayers, were its only concern; this failure to consider the financial impact of PNM's delay - given that hundreds of millions of dollars are at stake, NEE argued, was imprudent per se. To still allow PNM to benefit even though it did not conform to the contract terms and conditions of the Order it authored is not reasonable and fair, and is contrary to law and public policy. New Energy Economy joins the Attorney General and Western Resource Advocates in calling for the court to hold PNM accountable for their brazen greed and prevent this injustice.
FOUR CORNERS ABANDONMENT AND SALE TO NTEC WILL BE ARGUED TOMORROW AT THE SUPREME COURT
In December 2021 the Public Regulation Commission voted 5 to 0 to deny PNM's application for the sale and transfer of its shares in Four Corners Coal Plant to NTEC, a plan that would effectively extend the life of the plant in violation of the letter and the intent of the ETA. Unsurprisingly PNM immediately appealed the ruling at the NM Supreme Court, and New Energy Economy intervened, arguing that any abandonment plan that extends the burning of coal cannot meet the "net public benefit" standard. Tomorrow the Justices will question parties in the case from 10:30 to 11:30AM, and are likely to issue their ruling.
The facts of the case: In 2014 PNM invested nearly a billion dollars in the Four Corners Power Plant (FCPP) without ANY contemporaneous financial evaluation, but the PRC put off the question of whether that investment was prudent (and could thus be charged to ratepayers) until PNM’s next rate case filing, which the company then put off filing for another eight years. In the meantime, PNM was successful in having the Energy Transition Act (“ETA”) passed and in January last year, PNM filed an Application for Abandonment of the FCPP and requested a financing order demanding, per the ETA, $300 Million amortized over a 25-year period plus interest in a non-bypassable charge on every customer’s monthly bill for those same imprudent investments. This flies in the face of a 2019 NM Supreme Court ruling that held that ratepayers should be held harmless for the imprudent actions of utility management.
The application also included PNM's plan to pay Navajo Transitional Energy Company (NTEC) $75 million to take its 200 MW FCPP coal shares off it hands, and would allow NTEC to continue to burn coal until at least 2027, if not 2031 or longer. This dangerous contract also included a clause preventing the other owners of the plant from voting for early closure! After all, NTEC is the coal supplier and has a vested interest in keeping the plant open as long as possible. This sale plan is contrary to the ETA, which was sold to lawmakers as a means to close coal and invest in renewables, and which forbids the sale of coal investments to any other entity. PNM used the ETA to demand repayment from ratepayers for their bad investments in coal, and in the very same application filed to sell their coal plant in direct violation of the very same law - and the laws of climate science. Coal is STILL the leading source of carbon dioxide emissions globally. As of December 2022, coal was on track to produce 15.1 billion metric tons of CO2 annually, compared with 12.1 billion tons for oil and 7.9 billion tons for natural gas.