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Most Important Hearing To Date! Please Attend Senate Conservation Committee Hearing for SB 489 - 9:00AM, Saturday
Join us for a Webinar Today Thursday, 2/21, 5:30pm - NEE proposed changes to SB 489, "Energy Transition Act" to transform a "PNM Bailout" to legislation that adequately protects ratepayers, our communities, and the environment.
Intention, Facts and Misrepresentation on SB 489
First, please attend the Senate Conservation Committee hearing this Saturday, February 23, 2019 at 9:00AM. The hearing begins at 10AM, but we expect the room will be packed and we want you to arrive early enough for a seat.
What: SB 489 Energy Transition Act Hearing in Senate Conservation When: February 23, 2019 at 9:00AM Where: New Mexico State Capitol Room 322
SB 489 is a complex piece of legislation that packages many different issues, and attempting to solve them will have decades-long consequences involving hundreds of millions of dollars.
The issues might have to be separated in order to focus the meaningful attention needed to resolve each issue in a way that benefits New Mexicans:
the abandonment and clean up of PNM's of San Juan Generating Station (SGJS) and associated related costs;
securitization, a Wall St. financing mechanism, in order to reduce interest costs for undepreciated assets at PNM's coal plants (not only SJGS but the Four Corners Power plant (FCPP) too);
replacement power for lost capacity from SJGS and FCPP for PNM ratepayers and who should own that and where it should be located;
New Mexico's renewable portfolio standard;
Economic development for impacted communities around SJGS and FCPP.
There are structural issues at the heart of this debate like, should monopoly power be increased? Should PRC maintain its authority and oversight? Should we open up the renewable energy market and allow independent power producers to produce and sell clean energy at lower costs to customers?
In addition to joining us Saturday, please join us for a Webinar Today Thursday, 2/21, 5:30pm to hear about the proposed changes that New Energy Economy and our allies have crafted to improve SB 489 and give the bill a better shot at achieving all of its lofty goals. CLICK HERE TO REGISTER
As is our job at New Energy Economy, we've taken a critical look at PNM's Energy Transition Act. Read more about our process, analysis, and proposed language to amend and improve the bill, HERE [PDF].
One of the best lobbyists at the Roundhouse recently told us, "it is easy to kill a bill, it takes actual work to craft and pass a law that makes meaningful change." New Energy Economy is focused on fixing legislation to ensure it does what proponents say they are intending to and serves the interests of New Mexicans.
Read below for info that boils down the 83 page bill along with our concerns.
SB 489: "THE ENERGY TRANSITION ACT"
Why many groups, legislators, and PRC Commissioners are opposed to this dangerous legislation, Senate Bill 489.
PNM is closing the San Juan Generating Station ("San Juan"), one of the dirtiest coal plants in the United States, in 2022. This is a celebrated milestone.
Our proposed amendments to achieve the stated intentions for SB 489
Provide competitive procurement - no "baked in" PNM ownership of replacement power for the capacity needed to serve the needs of PNM customers
Maintain or enhance PRC authority over securitization and replacement power
Include consultation with, and benefits for, impacted indigenous communities, especially in the areas of reparations and economic development opportunities.
Maintain Public Regulation Commission regulatory authority and discretion under existing constitutionally mandated law to: 1) determine all true costs associated with San Juan Coal abandonment, 2) approve energy replacement resources which are the "most cost effective resource among feasible alternatives." 3) ensure independent power producers get a fair shake in order to open up the market and build a robust renewable energy market. PNM should not be allowed to own all the replacement power. 4) guarantee Competitive procurement for energy resources to lower replacement power costs to PNM's customers
Include PNM to have a share in the responsibility for clean-up, economic recovery, and worker severance benefits and protect ratepayers from bearing the full responsibility for all costs.
Remove language that could include abandonment and all related costs for nearby Four Corners Power Plant. We should see how this securitization process goes before including another $720M from FCPP.
These issues can be resolved within SB 489 through our proposed amendment language which you may read HERE [PDF]. These necessary changes would truly allow SB 489 to do what it is designed to do: help New Mexico address climate injustice, create a just transition toward 100% renewable energy resources, open a more competitive energy marketplace, and lower costs of energy for consumers.
To our supporters, please contact our Governor, your Senator and Senate Majority Floor Leader, Peter Wirth to express your opposition to SB 489 in its current form.
please include Senator Wirth in your correspondence:
Senator Peter Wirth - (D) - Majority Floor Leader
Office Phone: (505) 986-4727
While we are a small team at New Energy Economy who simply does not have the bandwidth to refute each and every misinterpretation of language in SB 489, we feel compelled to address one BIGGY misrepresentation that is out there. Ready to get wonky?! Here we go.
Does PNM have a lawful right to full cost recovery ($320 Million) for its investment in San Juan Generating Station (SJGS)?
This claim by supporters of the bill has generated the most confusion. Bill proponents are circulating misinformation that PNM is entitled to all of the earnings they would have received if the plant kept running until 2053 and securitization allows a lower interest rate than what PNM normally receives and therefore "customers will save money."
Here is NEE's answer: NO legal entitlement exists that allows PNM, or any utility, to get any amount of undepreciated assets (or any other associated costs) once the plant closes. This assumption is not based in law or precedent.
Everyone knows that the 4% return on equity promised by SB 489 is lower than PNM's current 9.575% return on equity. This is not disputed. What is disputed is the initial assumption, which has no basis in law or fact: PNM IS NOT ENTITLED TO THE FULL AMOUNT OF UNDEPRECIATED ASSETS OR ANY OTHER ASSOCIATED LIABILITY (LIKE DECOMMISSIONING AND RECLAMATION COSTS) WHEN A RESOURCE (Coal Plant) IS ABANDONED.
Under current law, after the plant closes, PNM is not allowed to collect any amount of money from ratepayers for that plant or any associated liabilities until it shows the PRC that it is reasonable and prudent to do so.
Since SJGS will be inoperable, hence not "used and useful", the burden of proof falls to PNM to demonstrate that they should be allowed to recover funds from ratepayers. This legal principle is called "cost causation" - meaning a utility is only allowed to charge ratepayers a cost for the resource and ancillary charges that are actually used. Under cost causation, "all approved rates [must] reflect to some degree the costs actually caused by the customer who must pay them." K N Energy, Inc. v. FERC, 968 F.2d 1295, 1300 (D.C. Cir. 1992).
So, once SJGS is abandoned, PNM is NOT entitled to get "extra" from ratepayers as a result of undepreciated assets or funds not already collected to cover decommissioning or reclamation.
Here is some current New Mexico Supreme Court law: From ATTY. GEN. v. PUBLIC REGULATION COM'N, 359 P. 3d 133, 138 - NM: Supreme Court 2015: "For example, if a utility were to prepay for natural gas with investor funds, the utility should expect to receive a reasonable return on its investment. Zia Nat. Gas Co. v. N.M. Pub. Util. Comm'n (In re Zia Nat. Gas Co.), 2000-NMSC-011, ¶ 22, 128 N.M. 728, 998 P.2d 564. Conversely, if ratepayers have paid in advance for the natural gas, the utility would have no expectation of a return because its capital was not used to buy the natural gas. Id." (emphasis supplied) And at p. 140: We note, however, that (investments) should be scrutinized to ensure that utility investments are "used and useful" so as to inure to the benefit of consumers. See N.M. Indus. Energy Consumers v. N.M. Pub. Serv. Comm'n,1986-NMSC-059, ¶ 29, 104 N.M. 565, 725 P.2d 244
If PNM were not orchestrating an end-run around PRC through SB 489, PNM would have to face these legal standards and their request to cover these uncollected costs would be scrutinized by the PRC. The PRC would likely apply another legal principle to "balance the interests between PNM investors (shareholders) and ratepayers." This has generally meant a 50/50 split of costs, but that IS NOT a guarantee and may be less - a determination made only after a vetting of the facts in a particular circumstance!
Public regulators may decide for a 50/50 splitting of costs between ratepayers and shareholders, and for the other Four Corners Power Plant (FCPP), regulators might say 20% is fair.
The bottom line? 100% recovery for PNM's undepreciated assets is not a given and is not guaranteed by law. And neither is the rate of return on that money - the PRC may not award PNM its usual return on equity of 9.575% it could award PNM the interest on the cost of debt, which the PRC just did with respect to Four Corners Power Plant in Case No. 16-00276-UT (a New Energy Economy victory on behalf of consumers).
So, applying the facts at SJGS to the law: It is likely that PNM will only receive $160M (of its requested undepreciated asset request of $320M) and at a 3.5% interest not 9.575%. And this will actually save customers a lot more money than securitization. Also you should know that the national securitization experts explained that securitization was only applied after a PRC hearing not before.
It is a challenge to answer every single alleged "fact" being circulated, but we want to give you an idea how misleading some information actually is.
Did you make it this far? Congratulations. You are now even better equipped to be a renewable energy champion! We hope to see everyone Saturday and hear from you online during the Webinar Thursday evening.
The New Energy Economy Team