HEARING EXAMINER ISSUES ORDER DENYING PNM'S REQUEST TO STICK RATEPAYERS WITH A $14.5 MILLION REGULATORY ASSET, A RATEMAKING ACCOUNTING TERM, THAT WOULD ACT AS A GUARANTEE TO COLLECT FUTURE COSTS ASSOCIATED WITH ABANDONMENT OF THE PALO VERDE NUCLEAR GENERATING STATION
We won! In April 2021 PNM filed for abandonment of its leases for Unit 1 and Unit 2 of the Palo Verde Nuclear Generating Station (PVNGS), proposing to sell those Units to the Salt River Project. The proposed abandonment filing asked the PRC to approve regulatory assets totaling $97,544,836 and attorneys fees and costs of $2,293,881 to be added to ratebase in advance of these costs actually being incurred, therefore resulting in $14.5 million dollars interest charged to ratepayers. This is because PNM is allowed to collect a high interest rate on all regulatory assets.
New Energy Economy, the Coalition for Clean Affordable Energy, the Albuquerque Bernalillo County Water Utility Authority, Bernalillo County and Western Resource Advocates filed Joint Motions to Dismiss the proposal, arguing that Commission approval for abandonment is not necessary because the Commission already approved abandonment under the terms of the original case governing the acquisition, and that the regulatory assets requested must be decided in the context of a rate case that considers how much ratepayers have already paid for PVNGS power.
Yesterday the Hearing Examiner agreed with our position, issuing an order dismissing their request to create regulatory assets to recover their undepreciated investments, abandonment costs and losses. She explained:
Creation of a regulatory asset allows a public utility to preserve its ability to recover one-time costs that it incurs between rate cases, which it would otherwise be required to expense in the year the costs are incurred. While this Commission does not oppose the creation of regulatory assets, they should be the exception, not the norm.
She recommends the motion to dismiss PNM's request for creation of regulatory asset for abandonment costs should be granted because if there is no abandonment proceeding, there is no basis to claim recovery of attorney's fees and costs of an abandonment proceeding.
If a utility is not allowed to create a regulatory asset for ratemaking purposes, the costs incurred have to be expensed in the year incurred.
The reasons she gave for the Order:
1. "This Commission has said that approval of regulatory assets should be the exception, not the norm."
2. A utility's request for recovering "costs of undepreciated investments in generation plant are not “unusual.”
3. Interest should not begin accumulating now, before the cost has even been incurred - that would be unfair to ratepayers.
4. PNM should seek recovery in a general rate case if they want recovery.
“PNM’s strategic reasons for not timing the filing of a rate case to preserve its ability to recover undepreciated investments from Palo Verde is not the Commission’s emergency.”
If PNM tries to get that $97.5M at a later date we will fight them with all our power because their imprudent investments in the Palo Verde Nuclear Generating Station should not be borne by ratepayers.
Our Joint Motion to Dismiss does not affect the replacement of 114MW of Palo Verde nuclear with all solar and storage. After more than ten years fighting for competitive all resource Request for Proposals (RFPs), they are now standard practice, resulting in Power Purchase Agreements for Solar Energy and Energy Service Agreements for Battery Storage at the cheapest rates ever seen in our state, and price stability for the life of these agreements. The people win on both counts!