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PRC to consider appeal on San Juan Generating Station

Copyright © 2019 Albuquerque Journal

The dispute over whether the Public Regulation Commission will apply the state’s new energy law when shutting down the coal-fired San Juan Generating Station is expected to come to a climax this Wednesday.

The PRC is scheduled to review an appeal by the environmental group Western Resource Advocates for the commission to “clarify” whether the Energy Transition Act will apply in San Juan deliberations and, if not, to “reconsider” that position after oral arguments on the issue.

Commission Chairwoman Teresa Becenti-Aguilar previously rejected a WRA motion asking for that clarification, instead leaving it to PRC examiners to review the issue during hearings on San Juan.

But WRA now wants the PRC to overturn Becenti-Aguilar’s single-commissioner order and allow the clarification proceeding to take place. Public Service Company of New Mexico, WRA and other parties say it’s critical that the energy law’s applicability be determined at the outset to provide needed legal guidance as hearings on San Juan move forward.

If the commission rejects the law’s applicability, PNM and its supporters will certainly appeal to the Supreme Court. But at this point, even if the commission simply denies clarification and again sends the issue back to hearing examiners for review, the parties may well seek Supreme Court intervention to force the PRC’s hand.

Legal options

PNM Chairman, President and CEO Pat Vincent-Collawn discussed those possibilities during an Aug. 2 conference call with investors about company earnings.

“We can go to the Supreme Court to get certainty,” Vincent-Collawn told investors. “If we don’t get it soon, we’ll definitely consider going to the Supreme Court with other supporters.”

If the commission outright rejects the law’s applicability, PNM will “obviously” appeal to the Supreme Court, Vincent-Collawn added. “You can count on that.”

Given the current deadlock on the matter and the constitutional issues involved regarding separation of powers between the Legislature and the PRC, most parties believe the case will wind up in the Supreme Court either way.

“It wouldn’t surprise me at all,” WRA attorney Steve Michel said. “The bigger question is, when will it happen?”

The bond issue

At issue is the use of bonds that will be charged to ratepayers to help pay the costs of shutting San Juan. The new law explicitly authorizes the use of such bond financing, known as securitization.

If approved by the commission, the bonds would raise $361 million, which would be paid off by customers over 20 years through a monthly surcharge on their bills. That includes $283 million for PNM to recover lost, or “stranded,” investments it made in San Juan, $29 million for plant decommissioning and reclamation, and $9 million in financing costs.

It also includes $40 million for worker retraining and severance, as well as economic development programs in the San Juan region.

Upfront investment recovery would provide immediate funding for replacement power after San Juan shuts down, according to PNM. And even with ratepayer-backed bonds, the utility says, securitization would save customers $22 million in the first year after plant closure, because it would provide low-cost financing and include a PNM commitment to forgo a $109 million return on investment from its previous expenditures at San Juan.

Benefits at stake

Supporters say those benefits will be lost if the law is not applied. That’s because the commission has no regulatory authority on its own to approve the types of economic development measures included in the law.

But some commissioners have said they may want to consider steps to better balance the interests of PNM and ratepayers without being tied to securitization. Without the new law, the PRC could force the utility to write off some of its lost investments in San Juan.

In July, the commission ordered that the plant shutdown and financing issues be reviewed under an existing case docket that precedes the new energy law, generating concern that the PRC might ignore the new legislation. The commission ordered hearing examiners in the case to review the law’s applicability.

The examiners have since ordered PNM to submit by Aug. 23 its position on the issue and its proposals for shutting San Juan. Other parties would submit responses by mid-October.

Securitization opponents

Two organizations – New Energy Economy and Southwest Generation – support that process to allow securitization opponents to present their arguments in hearings. By forcing an immediate commission clarification on law applicability, they say, WRA is attempting to block opposition testimony in hearings.

Most other parties support WRA’s motion, including San Juan County and the city of Farmington, which want to keep San Juan open. They opposed the energy law during this year’s legislative session, but they say its applicability is a “predicate issue” that will influence proposals by case participants during hearings on San Juan.

In a PNM filing on Friday supporting WRA, the utility said parties cannot adequately prepare proposals and positions in hearings if they don’t know what law will govern the process. Refusal to apply the law, it added, would violate the constitutional separation of powers.

“It’s the role of the Legislature, not administrative agencies, to declare policy and establish the primary standards to which the agency must conform,” PNM said. “… The commission is not free to refuse to apply the (law) and impose its own policy.”