SANTA FE, N.M. — Public Service Co. of New Mexico has negotiated significant amendments to a bill that would allow it to recover its investments in abandoned coal plants, but strong opposition is casting a shadow over its fate in this year’s 30-day session.
The Senate Conservation Committee is expected to hold its first hearing Saturday morning on Senate Bill 47, which would allow the utility to raise cash from investors with bonds equivalent to 100 percent of the company’s unrecovered, or “stranded,” investments in coal-fired power plants. That’s the money PNM would recuperate over the full life of the San Juan Generating Station near Farmington, which it now hopes to close in 2022.
The bill would also allow PNM to recover 100 percent of its stranded assets from a 13 percent ownership stake in the nearby Four Corners Power Plant, which the utility is considering an early withdrawal from in 2031.
PNM customers would pick up the tab for repaying the bonds over 20 years through a special surcharge on their monthly bills that could total up to $353 million just for San Juan. PNM says the low-interest bonds would save ratepayers money while providing cash upfront for needed replacement power.
But more than 40 environmental and community groups have lined up against the bill, and some large industrial consumers have major concerns as well. Many call it a legislative “bailout” for PNM to circumvent scrutiny at the New Mexico Public Regulation Commission, where it could be forced to write off many of the costs.
The Conservation Committee will hold the hearing in the full Senate Chamber, given the large crowd expected to attend. And with the session already past its halfway point, PNM could face a steep uphill battle to gain approval.
The utility has negotiated a number of key amendments with opponents, resulting in a substitute bill for legislative review. But many say it may be too little too late.
“We’re facing a short clock,” said Western Resource Advocates attorney Steve Michel. “We’ve made progress on issues. But is it enough? Not yet.”
Retaining PRC authority to more evenly balance abandonment expenses between ratepayers and PNM shareholders is a major sticking point. The commission has exercised that authority before, when it ordered PNM to pay 50 percent of the costs for closing two of the four generating units at San Juan. The units were shut down in December.
Nann Winter, attorney for the Albuquerque Bernalillo County Water Utility Authority, said the PRC has the legal authority and expertise to make those decisions. “It should be allowed to do its job,” Winter said.
Peter Gould, attorney for New Mexico Industrial Energy Consumers, said using bonds — which could carry rock-bottom AAA interest rates because repayment would be guaranteed by law — could indeed save consumers money when shutting down coal generation and building replacement power. But he said the bill sets too many limits on PRC jurisdiction to protect consumers.
“It has so many restrictions on the commission’s authority that that almost seems like the primary purpose of the bill,” Gould said.
PNM says the bill does not curtail the PRC’s ability to fully vet the costs associated with coal abandonment, including reclamation and remediation at the plants and related mines. The utility has agreed to “more explicit” language in the new substitute bill clearly outlining PRC authority, said PNM Vice President for Regulatory Affairs Gerard Ortiz.
“The commission can evaluate all costs to see if the investments made were reasonable and prudent,” Ortiz said.
Once the PRC vets those costs, the bill would guarantee recovery of whatever the agency approves for PNM through bonds.
“For years we’ve been hearing that we should transition to a cleaner portfolio with the message that it could be good for shareholders and profitable for future business,” Ortiz said. “This is a way to do that that’s cost-effective for customers without the utility being harmed.”
But that’s a tough sell for some environmental organizations, such as Santa Fe-based New Energy Economy.
“We’re not entirely opposed to bond securitization,” said NEE Executive Director Mariel Nanasi. “We’re opposed to the PRC not being able to fully vet all the issues and PNM going around regulators to do it…If PNM thinks it can justify 100 percent recovery, why not go to the PRC and make a case for it the way the law requires, and then seek securitization at the Legislature?”
NEE says the bill may also be unconstitutional because the Supreme Court is currently considering appeals that could block PNM recovery of investments in San Juan and Four Corners, and the state constitution prohibits legislative acts that change rules of evidence or procedure in pending cases.
Other changes negotiated to the bill include:
- A mandate that PNM procure at least 40 percent of its electricity from renewable sources like wind and solar by 2025, and 50 percent by 2030, if it uses bonds to recover investments, thus easing concern that natural gas would primarily replace coal
- An agreement that independent energy producers could own up to 50 percent of new renewable generation, eliminating potentially “anti-competitive” clauses in the original bill giving PNM ownership of all replacement resources in San Juan County
- A $19 million economic development fund, paid for by ratepayers through the bonds, to buffer the impact of coal shut downs in San Juan County.