First, thank you to all those of you who signed up to speak at the Public Comment hearing last week on Thursday! Your message was heard loud and clear - the people should not be forced to pay for PNM's mistakes or an increased Return on Equity to pad the pockets of PNM executives and shareholders, especially those who already struggle to pay for necessities like food, medicine and housing. Here is a small sample of your wise words:
PNM WANTS TO CONTINUE CHARGING US FOR COSTS RELATED TO FOUR CORNERS POWER PLANT AFTER CLOSURE, AND FOR PALO VERDE LEASES THAT IT SOLD IN JANUARY UNTIL 2045!
Check out this proposed depreciation schedule from PNM that includes collection on Four Corners until 2041 when the plant is slated to close in 2031, and collection on Palo Verde leases that ended in January until 2045 and 2046.
The gas plants are currently depreciated past 2040 and PNM is seeking in this case to shorten its depreciation to match with PNM's commitments to stop burning fossil fuels by 2040 - this is good. But what about its coal and nuclear assets?
One of PNM's own expert witnesses testified earlier this year in a Southwestern Public Service (SPS) case that depreciation of a plant beyond its useful life is in direct violation of sound depreciation practices "because it would push the costs of this generation plant on to future customers to pay for long after the assets in question have been retired," and said that artificially extending the life of a plant for depreciation purposes is "contrary to established depreciation principles and would lead to intergenerational inequities."
Why is PNM playing this accounting game with coal and nuclear? Because utilities essentially operate like a bank - the longer the term of a mortgage, the more interest a bank can collect - similarly, the longer PNM can charge ratepayers interest on their capital investments, the more money they can make. But this depreciation accounting gimmick is both illegal and unjust according to their own expert witness.
Today the hearing begins. We are working to expose this hypocrisy and continue to argue against PNM's plan to increase rates and force ratepayers to pay for their imprudent investments in the Four Corners Power Plant and the Palo Verde Nuclear Generating Station. PNM has complained that our proposed remedy to remove the Four Corners plant from ratebase will amount to a $17.7M reduction to their requested revenue increase. This is only fair - ratepayers must be held harmless for their imprudent decisions to reinvest in Four Corners with NO contemporaneous or meaningful financial analysis when the plant was on the brink of CLOSING in 2016!!!
Public comment in the case can be made in person or via zoom during bi-weekly open meetings on Thursdays, including this Thursday (instructions here), or you can continue to send written comment using the link below until the Commissioners issue their decision. Your participation is critical to achieving a just outcome in this case.
THIS CASE IS NOT ONLY ABOUT ECONOMIC JUSTICE - IT IS ABOUT CLIMATE JUSTICE. THIS CHART ILLUSTRATES CLEARLY WHY UTILITIES ARE DELAYING THE TRANSITION TO CLEAN ENERGY.
PNM's coal and gas generation resources almost always result in increasing Net Book Value year over year until the asset is abandoned, a result of the continued capital investments necessary to keep such plants operational. Solar, by comparison, results in decreasing Net Book Values year over year as the fixed costs of the installation are depreciated over time.
Compare, for example, the Four Corners plant with Net Book Value of $58M in 2013, increasing to $251M in 2022 vs the Net Book Value of PNM's solar facilities added in 2011 of $99M, decreasing to $55M by 2022.
Utilities collect a guaranteed Return on Equity, in PNM's case 9.575%, on all of these capital expenses. The more they spend, the more they can collect. This illustrates the perverse incentive for monopoly utilities to invest in these expensive and dangerous fuels that require further investment year after year. PNM explains their business model to their investors this way:
Until this perverse business model is upended, putting community care and value for life and the earth above shareholder profits, private monopoly utilities like PNM will continue to delay the transition to clean energy as long as they are allowed to do so.