PNM Extends the life of coal and announces plan to double collect on plant abandonment

Updated: 5 days ago


Today the IPCC released its report titled "Impacts, Adaptation and Vulnerability," detailing the accelerating impacts of rising sea levels, natural disasters and heat waves that have already begun to devastate vulnerable communities around the world, particularly those in the global south who have contributed the least to emissions but will pay the highest price.

“Climate change is a threat to human well-being and planetary health,” the IPCC authors write. “Any further delay in concerted anticipatory global action on adaptation and mitigation will miss a brief and rapidly closing window of opportunity to secure a livable and sustainable future for all.

Even as nations remain woefully far from the emissions reduction goals necessary to keep warming at 1.5, we know that each increment of additional warming matters in terms of the scale of suffering, death and adaptation necessary. Our choices here in New Mexico matter. That is why PNM's dishonesty and continual gaslighting matters, and must be opposed.


PNM ATTEMPTS TO PIN BLAME FOR A POTENTIAL POWER SHORTAGE ONTO PRC WHEN ITS OWN ACTIONS ARE THE CULPRIT

While PNM was telling New Mexicans that we might be facing power shortages this summer, PNM’s CEO told its investors “I can assure you that we do have the resources covered for the summer time.” Why is PNM telling the PRC, legislators, and the public one thing while the CEO is telling her investors that there won’t be any problem? Because PNM can mislead us without consequence, but it can’t mislead investors without facing criminal penalties.

Five years ago, in February 2017, PNM decided it would close the San Juan Generating Station (SJGS) in 2022. PNM was and continues to be in control of the process of abandoning its flagship plant. Since then it has manipulated the regulatory and legislative process for its financial benefit, first sitting on qualified replacement power bids for 18 months, and then proposing a plan that included new PNM owned gas plants, wasting another year litigating a fossil fuel replacement power plan clearly prohibited by ETA guidelines to try to maximize profits.

When a 100% solar, wind and storage alternative was finally approved and contracts were executed, what actions did PNM take when “necessary right-of-way agreement and required transmission interconnection agreements” were not executed? Did PNM demand that a security bond be posted in 2020? Was extending a current Power Purchase Agreement from an independent gas plant (Valencia) evaluated in terms of cost, carbon, and water consumption against burning more coal at San Juan - and what were the results? What evidence has PNM presented of its attempt to utilize demand-side reduction to manage 2022 summer peak load? PNM’s incompetence and mismanagement are the culprit for PNM’s inability to ensure electric service reliability, not the PRC.

In its recent “Emergency” variance filing PNM asked that the PRC accept a regulatory oxymoron: That the PRC grant PNM’s request immediately, without inquiry into whether PNM actually needs the relief it’s seeking, what it will cost, whether there are feasible alternatives to continuing to run SJGS through the summer, and without any discovery. PNM (and the Attorney General) once again “boxed in” the PRC by requesting “the Commission accept this Notice or issue any appropriate variance or modification on or before March 25, 2022.” The filing included NO rate increase/decrease estimates and no environmental impact assessments.

The PRC determined that existing orders do not preclude an extension of operation at San Juan for three months, but agreed with NEE that even if the burning of coal at San Juan is extended, rate recovery should be assessed and potentially withheld. Rate approval must be linked to performance – this is what New Mexicans deserve!

If we could free ourselves from the investor owned utility monopoly stranglehold on our electricity supply and had actual energy competition, with municipal and tribal energy ownership (resulting from a solar/wind+storage contract purchase or its own production or a combination), then we would see if PNM could actually perform and produce customer satisfaction (including cost) that is aligned with climate science.

Xcel, in Colorado, is meeting and exceeding 85% renewables by 2030 and there are no reliability or supply chain issues or associated unreliability scare tactics. PNM’s failure to provide renewable plus storage resource adequacy in conjunction with meaningful energy efficiency underscores management incompetence and greed.


PNM EXTENDS LIFE OF COAL AND AT THE SAME TIME ANNOUNCES PLANS TO DOUBLE COLLECT ON PLANT ABANDONMENT


We learned today that PNM intends to delay issuance of securitized bonds for their $357M undepreciated investments and other costs related to the San Juan Generating Station (SJGS) by 18 months. Why does this matter?

PNM plans to double collect, keeping expensive San Juan coal power generation in rates for 15 to 18 months after abandonment, and then recover that investment again through bonds because the ETA states that the costs to be securitized are the undepreciated San Juan investments on the date of abandonment. Their delay will likely also result in tens of millions in additional costs for ratepayers because interest rates are expected to rise in the coming years.

ETA proponents argued that #1, PNM should get 100% on its losses and #2, that because the abandonment and bond financing would happen simultaneously, ratepayers would actually see a significant reduction in rates, benefitting from an estimated 3% interest rate on securitized bonds vs the 7.2% after tax rate guaranteed to shareholders on capital investments. Is 7.2% always more than 3%? Yes, everyday. But we questioned at the time how much savings there would really be, if any at all, and PNM's delay now verifies our concerns.

These financial shell game shenanigans would amount to approximately $125M, and would wipe out the alleged savings from securitizing PNM's undepreciated assets. Not only is PNM not closing coal, not only are they risking a higher interest rate, which will translate into tens of millions of dollars less savings for ratepayers, but they are once again trying to skirt the law and prioritizing profit above all else. As Western Resource Advocates stated in their Motion opposing PNM's outrageous and illegal actions: "Simply put, PNM’s delay strategy, aside from being illegal, shows a callous disregard by Company management for the well-being of its customers, impacted communities and anyone that is not a PNM shareholder."

If there is any delay between time of abandonment and bond issuance, any related costs or interest rate increases should be borne by shareholders, not ratepayers. (On a side note, PNM spent the last year complaining that New Energy Economy's appeal of the constitutionality of parts of the ETA prevented them from paying out the promised worker severance and Just Transition funds for impacted communities, even though NEE never challenged that portion of the law. It was the law that they must pay out those funds, and it is the law now. PNM has now announced that it plans to wait 18 months to make good on those payments until they issue bonds. No reason given.)


Once again PNM is failing to make good on its promises to anyone but shareholders. As the IPCC publishes its most harrowing report about runaway climate catastrophe yet, PNM claims it must keep SJGS open or New Mexicans will be subject to rolling brownouts and blackouts due to poor planning. As tens of thousands of New Mexicans face mounting utility debt arrearages and disconnection notices, PNM is trying to also get away with double charging ratepayers for its coal asset for the next 2 years. As frontline communities face the growing uncertainty of transition, PNM is continuing to refuse to issue the bonds for the funding securitized by the ETA that includes funds for workers, Indigenous, and local communities. New Mexico must have alternatives!


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