Copyright © 2022 Albuquerque Journal
Public Service Company of New Mexico took a verbal beating from state regulators Wednesday for its plan to withhold savings from customers after it shuts down the coal-fired San Juan Generating Station.
The five-member Public Regulation Commission voted unanimously to force PNM to immediately provide an initial rate credit on customers’ monthly bills after the first of San Juan’s two operating units closes down this Friday. That would mean a $1.76 per month savings for average residential customers starting in July.
Then, after the second San Juan unit closes on Oct. 1, the rate credit will jump to $8.19 a month under the new PRC order, reflecting all savings from full plant shutdown.
PNM had wanted to continue charging customers for the plant even after closure to help pay for new investments it’s made in the grid since 2019, and then use that additional income to offset its next rate hike, which will likely come in early 2024.
But that plan elicited an unusually harsh response from the commission, which adamantly rejected PNM’s justifications for withholding savings. In fact, all five commissioners berated PNM, accusing it of deliberately taking advantage of ratepayers.
“PNM is trying to cheat customers out of money – that’s what’s happening here,” said Commissioner Stephen Fischmann. “We just won’t tolerate cheating and milking customers.”
Commission Chair Joseph Maestas agreed.
“It’s so unfair and unjust that it shocks the conscience,” Maestas said. “PNM should frankly be ashamed of itself.”
PNM to appeal
Following the PRC meeting, PNM executives said they will appeal the commission’s order to the New Mexico Supreme Court.
PNM Resources Chairman, President and CEO Pat Vincent-Collawn said the PRC is unfairly punishing the utility for postponing a new rate case over the past two years to spare ratepayers from additional financial burdens during the global pandemic. PNM also wanted to avoid sidetracking PRC deliberations last year over its proposed merger with Connecticut-based energy giant Avangrid.
But PNM now expects to file its next rate case in December to recover about $2.1 billion in new investments it’s either already made in the grid, or expects to make next year. Customers won’t begin paying for those investments until the PRC authorizes utility recovery through the upcoming rate case.
Those costs need to be “trued up” alongside savings from the San Juan shutdown, according to PNM, and imposing an immediate customer rate credit now violates standard regulatory practice to make such decisions through a formal rate proceeding.
In addition, customers could experience a “rate roller coaster,” with an immediate rate credit followed by a much larger rate hike than might otherwise occur if savings from San Juan were used to offset the future rate increase.
“It is disheartening for PNM to be arbitrarily penalized today for opting not to file its planned customer rate increases over the last two years, a change made for the benefit of customers as we navigated the energy transition amidst an unforeseeable global pandemic,” Vincent-Collawn said in a statement. “We will appeal today’s order.”
PNM already petitioned the PRC late Wednesday for a stay on enacting the rate credit to avoid the Friday start date for applying it to customers’ bills, PNM spokesman Ray Sandoval told the Journal. And on Thursday, it will request a stay directly at the Supreme Court.
For the PRC, however, the issues go well beyond ordering an immediate rate credit.
Commissioners believe PNM’s actions directly violate the state’s Energy Transition Act, plus a PRC financial order in 2022 setting terms and conditions for PNM to recover nearly $300 million in lost investments in San Juan after the plant closes.
The ETA, which requires PNM to replace coal and other fossil fuels with non-carbon generation, authorized a financial mechanism known as “securitization” that allows the utility to sell low-cost bonds after plant shutdown to immediately recoup its investments and pay them back over 25 years through a monthly surcharge on customers’ bills. That “secures” PNM’s financial stability, while also saving customers money, both by replacing expensive coal with cheaper renewables, and by using low-interest bonds to reduce customer payments for past investments in San Juan.
Securitization aims to balance the interests of ratepayers and PNM shareholders. It also includes $40 million in funding from the bonds to assist workers and local communities impacted by the plant shutdown.
To rapidly facilitate those benefits, both the ETA and the commission’s 2022 financial order require the bonds to be issued almost immediately after plant shutdown so that all savings and worker and community benefits can promptly kick in.
But now, having postponed previous rate cases, PNM wants to issue the bonds after concluding its next rate case to true up all its new investments with San Juan savings before removing the coal plant from base rates. To justify that, PNM says neither the ETA nor the PRC financial order actually established any clear date to issue the bonds, leaving it to the utility’s discretion.
Commissioners called that deliberate manipulation that violates both the ETA and the PRC financial order. It could also offer PNM double billing on its investments in San Juan, according to the PRC, first by continuing to charge customers for the plant after shutdown, and then later by issuing the bonds for investment recovery.
Commissioner Cynthia Hall said PNM has undermined its own credibility through “subterfuge” that twists the ETA and the PRC’s financial order to its own advantage.
Commissioner Jefferson Byrd called it “double speak” that contradicts PNM’s previous commitments.
Apart from the rate credit, the commission ordered PNM to immediately transfer all worker and economic development funding to local communities by the end of July. And with interest rates rising, PNM must also report any potential losses from delaying bond issuance to potentially compensate customers in its next rate case.
The commission will also consider possible fines for PNM’s actions at a later date.