For Immediate Release
Contact: Mariel Nanasi (505) 469-4060
Executive Director, New Energy Economy
November 26, 2014
PRC Filings Demonstrate that PNM’s Replacement Power Plan
is a Scheme to Cheat New Mexico Ratepayers
Santa Fe, NM -- Today, New Energy Economy filed its opposition to the stipulated replacement power plan presented to the New Mexico Public Regulation Commission (“PRC”) by the Public Service Company of New Mexico (“PNM”) and others.
“It is crystal clear from the evidence provided today that PNM is defrauding its ratepayers and the PRC by massively inflating costs, rigging the modeling data, and refusing to conduct a transparent, competitive process to ensure the most cost-effective energy to New Mexico consumers,” said Mariel Nanasi, Executive Director and Attorney for New Energy Economy.
Testimony filed today by New Energy Economy reveals a number of crucial facts that show the stipulation to be risky and expensive for consumers, while generating huge profits and reduced risks for the company’s shareholders. Individually, any of these facts should force the Commission to reject the stipulation; taken together, they demonstrate a pattern of blatant corruption and fraud.
The reason PNM is pushing for additional nuclear power from its Palo Verde 3 plant in Arizona is so that the company can force New Mexico consumers to pay more than double (8.1 cents/kWh) what PNM is earning on the open market for that energy (3.7 cents/kWh). In addition, by incorporating Palo Verde 3 energy into its New Mexico rate base, it shifts the liability of future decommissioning, and the risks associated with an aging nuclear plant, from its shareholders to New Mexico consumers.
According to David Van Winkle of New Energy Economy, “PNM acknowledges that PNM is losing money selling PV3 generated electricity on the open market. But by putting PV3 into rates it turns a troubled asset into a profitable asset for PNM, at enormous expense and potentially catastrophic risk to the ratepayers. “
More coal is proposed in the stipulation because its partners in the San Juan plant are fleeing from their reliance on coal, and PNM is taking their interests, notwithstanding that it is acquiring an interest in technology and a fuel source that, according to experts, is essentially defunct. For its justification, all PNM can say is that it would not have reached agreement with the companies who are abandoning the plant unless it agreed to take their shares. So although coal is not cost-effective, and is an unreasonable and imprudent investment, PNM’s acquisition of more interest in this coal plant will be a de facto bailout of out-of-state utilities and of PNM and its shareholders – shifting liability for poor business decisions by the company onto the backs of unsuspecting ratepayers.
After an expert in energy economics analyzed PNM’s modeling data that it has submitted to the PRC to justify shifting Palo Verde 3 into rate base and acquiring a greater interest in San Juan coal unit 4, it became clear that PNM had misled the Commission and consumers by using different costs than the company presented in its other, written filings, and manipulated the model in ways necessary to ensure that coal acquisition appeared to be economical, when it is not, and did much the same with Palo Verde.
“PNM failed to show this Commission a reasonable portrayal of their system, have used internally inconsistent forecasts that bias the selection of San Juan, and constrained their model in such a way that a least cost plan could not be generated,” said Jeremy Fisher, PhD, of Synapse Energy Economics.
For example, PNM artificially reduced the coal costs in its modeling to ensure the outcome it desired: more coal. According to Dr. Fisher, “there is sufficient evidence to suggest that the coal prices used [in its model]…are dramatically lower than either historic prices or those estimated by the Company elsewhere.”
In addition, PNM’s modeling restricted wind energy to a maximum of only 100 MW, even though wind is the most cost-effective energy resource according to PNM’s own numbers. Releasing this constraint, and allowing 400 MW of wind instead -- without any other changes to the model -- reduces consumer costs dramatically, and renders the entire San Juan Generating Station non-economic and unnecessary.
“It is outrageous for this stipulation to force New Mexico consumers to bear massive costs and catastrophic risks to bail out PNM and its shareholders,” said Nanasi. “It is even more shocking that PNM would go to such great lengths to obscure the facts and mislead the Commission and its customers. But the evidence speaks for itself.”
About New Energy Economy
New Energy Economy is a registered nonprofit organization established in 2004 to create economic opportunity in New Mexico with less carbon pollution and more clean energy. New Energy Economy works in partnership with diverse allies to encourage job growth, investment and innovation in a more efficient, sustainable and equitable energy sector. New Energy Economy grounds its work in the research and findings of the world’s leading scientific and technological authorities.
Learn more at www.newenergyeconomy.org