Copyright © 2019 Albuquerque Journal
A bill to make New Mexico’s electricity generation 100 percent carbon-free by 2045 will get its first hearing today in the Senate Conservation Committee.
The Energy Transition Act, Senate Bill 489, has a broad coalition of supporters from across the state, representing near-consensus among most leading environmental groups and local utilities to push the state’s electric grid into almost complete reliance on renewable energy over the next 25 years.
It’s priority legislation for Gov. Michelle Lujan Grisham, who campaigned on promises for a clean energy economy.
Rep. Nathan Small, D-Las Cruces, said he and other legislators have worked on the bill since 2017 alongside public utilities, rural electric cooperatives, environmentalists, trade unions and more.
“We all recognize the benefits of investing in renewable energy and the costs of continuing with coal and other fossil fuels,” Small told the Journal’s editorial board last week. “It’s a collaborative approach to move forward.”
There are detractors, most notably Santa Fe-based New Energy Economy, which supports the bill’s clean energy goals but questions some provisions and what it considers a marginalization of the state Public Regulation Commission from the process.
The state’s largest utility, Public Service Company of New Mexico, has thrown its support behind SB 489, marking a turning point that, for the first time, puts environmentalists, state officials and utilities on a shared path for ending fossil fuel generation.
“It takes us out of our comfort zone,” PNM President, Chairman and CEO Pat Vincent-Collawn told the editorial board Wednesday. “But it’s where New Mexico wants to go. … We need to be able to step up to the challenge.”
If approved, the bill would require public utilities to rely on renewables such as solar and wind for 50 percent of all electricity sales by 2030, and 80 percent by 2040.
By 2045, no carbon-emitting resources would be permitted, although the last 20 percent of electric sales could come from new generating technologies, such as carbon capture for natural gas, or advanced battery storage backup to offset the intermittence of renewable resources.
For rural electric co-ops, the timeline is more flexible, mandating 50 percent renewables by 2030 and 80 percent renewables with a 100 percent carbon-free grid by 2050.
PNM and El Paso Electric Co. can continue selling carbon-free nuclear energy under the bill, at least through 2045, from the Palo Verde Nuclear Generating Station in Arizona. That plant currently supplies more than 20 percent of both utilities’ electricity.
Palo’s Verde’s operating licenses will expire by 2047, and it’s unclear what plant operator Arizona Public Service Co. will do after that, said Tom Fallgren, PNM vice president for generation.
PNM will shut down the coal-fired San Juan Generating Station near Farmington in 2022 and pull out of the nearby Four Corners Power Plant in 2031.
To pay for that and provide initial capital for renewable replacement resources, the bill would authorize a new financial mechanism known as securitization. That would allow the utility to sell low-interest, AAA-rated bonds to recover lost investments in San Juan and Four Corners, while also covering expenses for plant decommissioning and mine reclamation at San Juan.
Customers would pay off the bonds as a line item on their bills, but supporters say it’s the lowest-cost option to exit coal and begin building a renewable grid.
To continue operating San Juan would cost ratepayers more than moving to renewables like solar and wind, which have become even cheaper than natural gas, Fallgren said.
After shutting San Juan, PNM could keep paying off the high-interest debt it owes for investments in the plant. It would still earn a profit on those investments, costing ratepayers a total of about $100 million a year.
With securitization bonds, however, the price tag drops to $22 million a year because of rock-bottom interest rates and because PNM would give up all profits from its San Juan investments by paying off all existing debt upfront. That represents a $108 million write-off for PNM.
“We’d give up all shareholder profit, which saves customers money,” Vincent-Collawn said.
If PNM shuts San Juan without securitization bonds, the average residential customer’s bill would drop by between $3 and $4 per month through savings from cheaper, renewable resources. But with securitization, the monthly bill would drop by $6 to $7, Fallgren said.
Securitization bonds would also pay for a $20 million fund for severance and retraining for laid-off workers, plus a $20 million economic development fund for San Juan County to mitigate the impact of losing the San Juan plant and mine.
New Energy Economy says the bill would take away the PRC’s authority to vet all costs for closing San Juan, including a potential PRC decision to deny PNM recovery of all its investments in the plant. The commission approved only 50 percent recovery when PNM shut two of the plant’s four generating units in 2017.
But even with 50 percent recovery, it would still cost ratepayers about $22.5 million a year to continue paying off San Juan debt, or about $500,000 more than with securitization bonds.
To go that route only punishes PNM without saving customers money or mitigating economic impact on the Four Corners Region, said Noah Long of the Natural Resources Defense Council.
“This bill allows the utility to come out whole while saving customers money and providing safeguards for local San Juan communities,” Long said.