To: Concerned New Mexico Legislators From: David Van Winkle, Chairman of Board - New Energy Economy
Re: SB489 – Energy Transition Act
I am a utility energy expert witness who has testified in all of PNM's major resource and rate cases since 2013. I have also testified in two NM PRC cases concerning El Paso Electric and Southwestern Public Service. I am writing to you today to highlight several major issues that exist with the current version of SB489.
SB489 may allow for runaway costs to PNM ratepayers to finance the closing of the two remaining PNM coal power plants, and may constrain healthy competition for new generation resources. This memo will outline four issues with SB489 that would make it a cost-effective bill, if addressed with amendments.
Issue #1: Total ratepayer costs have not been fully understood.
Prior discussions at the legislature have indicated that the cost to ratepayers would be about $400M. However, this amount is only the principal for San Juan Generating Station. In addition to the principal, the total cost for any action needs to include return (or interest). Further, as this bill facilitates the retirement of both SJGS and FCPP, costs for both facilities need to be comprehended when discussing the cost to ratepayers. When interest costs and Four Corners costs are properly comprehended, the total cost is $1326M, more than three times the previously discussed amount of $400M.
Issue #2: SB489 ratepayer cost is higher than NM PRC precedent
As shown in the table, the total principal amount that could be securitized is $872M. Interest costs would be about $454M. The total cost for ratepayers is $1326M. NM PRC precedent, as established in 13-00390-UT (the abandonment of two units at San Juan), 2 provided that PNM get 50% of the principal paid by ratepayers at the full Rate of Return. The PRC approach is $923M, a savings to ratepayers of $404M.
To make the costs for the two financing approaches equal, the principal amount financed through securitization would need to be reduced from $872M to $607M, a reduction of 30%. Thus, ratepayers would pay 70% and shareholders 30%.
SB 489, the Energy Transition Act is being heard and debated right now Saturday in Senate Corporations. You can watch the debate on the web HERE.
New Energy Economy can support this bill with amendments. We hope that Senators will make these amendments in order to assist in creating a bill that works for everyone.
CLICK to download 3/2/19 presentation and suggested language for amendments for SB 489 which would allow New Energy Economy to withdraw our opposition to the bill.
Governor Lujan Grisham's chief of staff, John Bingaman claimed today during the hearing that opposition is "quibbling" over details of the bill. Given the enormity of the amount of money involved and the impact it will have for ratepayers for two and a half decades, details matter!