Nearly six months after closing the coal-fired San Juan Generating Station, Public Service Company of New Mexico customers are still paying for the now-shuttered plant on their monthly bills.
That’s because PNM expects to replace charges for the coal plant with low cost bonds authorized by the state’s Energy Transition Act to allow the utility to recover its lost investments in the facility.
But the company has delayed on issuing those bonds, and as a result, the Attorney General’s Office now wants the state Public Regulation Commission to withdraw PNM’s authority to sell the bonds, potentially forcing the utility to instead seek San Juan recovery through its new rate case, which is now under review at the PRC.
If PNM’s cost recovery goes that route, the PRC could end up substantially reducing the amount PNM is ultimately allowed to earn back from ratepayers for its roughly $300 million in lost investments. In fact, that’s why the utility supported the Energy Transition Act in the first place — to pave the way for replacing coal and other fossil fuels with renewables while still ensuring that PNM finances remain whole.
But Attorney General Raúl Torrez filed a joint motion on Friday at the PRC with the environmental group Western Resource Advocates that says PNM’s delay in issuing the bonds is hurting ratepayers and regulators should, in response, remove bond authorization from PNM.
“My office has a duty to protect ratepayers in the state of New Mexico,” Torrez said in a statement.
Had the bonds been issued shortly after San Juan’s closure, average residential customers could have seen an immediate $8 dollar reduction in their monthly bills, reflecting a combination of benefits.
How it works
Under the bonds, PNM would include a monthly surcharge on customers’ bills to repay bond holders over 25 years.
But PNM would forgo any profit on its lost San Juan investments in exchange for upfront bond recovery. And that, combined with low-interest on the bonds — plus replacement of expensive coal generation with cheaper solar energy — would save customers money.
But since last year, interest rates have soared, and they continue to rise, reducing potential customer savings the longer PNM delays issuing the bonds. And, in the meantime, customers have yet to see the shuttered coal plant removed from their bills.
Western Resource Advocates’ local clean energy manager, Cydney Beadles, said PNM has no justification for delaying the bonds.
“Rather than pass needed savings to its customers, many of whom are struggling with high energy bills, PNM has invented loopholes to delay issuance,” Beadles told the Journal. “… (We) hope the PRC will take swift action to prevent further harm to PNM’s customers.”
Supreme Court intervention
PNM says it’s postponing the bonds until after the PRC finishes reviewing its new rate case, which it filed in December. The utility wants to recover about $2.2 billion in new investments it’s made in the grid since 2019, potentially leading to a 9% overall average rate hike for all consumers.
By delaying the bonds to instead apply San Juan-related savings once new rates are approved, PNM says it can significantly offset the coming rate hike, potentially limiting it to less than 1% for average residential customers.
In contrast, if the bonds and San Juan savings are applied now, it would cause a “rate rollercoaster,” with consumer bills immediately dropping, and then surging again when the rate case ends, PNM says.
In any case, PNM estimates customers are currently saving about $36 million a year because the company can’t start charging ratepayers for its new grid investments until its rate case concludes.
Last year, the previous five-member elected commission rejected those justifications and ordered PNM to immediately apply San Juan-related rate reduction to customer bills when the plant closed. But PNM appealed that at the state Supreme Court, which issued a stay on the PRC-ordered rate reduction while it reviews the case.
If the new three-member appointed commission, which took office in January, supports the attorney general’s request to remove PNM’s bond authorization, that will likely end up at the Supreme Court as well, said PNM spokesman Ray Sandoval.
“We believe this is part of the same issue now before the Supreme Court,” Sandoval told the Journal. “We don’t believe the commission has the authority to act on the attorney general’s request. It must defer to the court.”