Groups say PNM will ‘overcharge’ customers by not issuing bonds when SJGS closes
The Western Resource Advocates and the Coalition for Clean Affordable Energy claim that the Public Service Company of New Mexico (PNM) will “illegally charge customers $125 million over the next two years.” These surcharges will come from what they describe as a delay in the issuance of bonds associated with the closure of the San Juan plant in October of this year.
The WRA and CCAE filed a joint petition with the New Mexico Public Regulatory Commission requesting that the commission issue an order essentially requiring PNM to issue the securitized bonds intended to refinance past investments in the San Juan facility and save customers money. The WRA and CCAE say in the filing that the postponement of the issuance of the bonds retains a “decrease of approximately 10% in the tariffs that customers are entitled to receive” when the plant closes.
Following the joint petition, the PRC issued a single-signature order on March 4 asking PNM to respond to arguments and allowing other intervenors in the case to respond to the utility’s response.
In these documents, several intervenors stated that PNM had agreed to provide immediate rate credit to customers upon plant closure. PNM argues that nothing in the Energy Transition Act or the PRC-approved funding order requires the utility to provide this credit.
PNM says it plans to time the issuance of the bonds with the conclusion of a rate case, which it expects to file in December. This could mean that the bonds will only be issued in 2024.
“PNM’s anticipated delay, however, would require the company to continue to collect San Juan costs in tariffs at its full cost of capital after plant abandonment, and then issue securitized bonds at its discretion at a later date,” WRA and CCAE said in their joint motion. “According to PNM’s logic, it could sit for 30 years, taking no action to issue bonds and collect a return on and from its abandoned facility – not to mention O&M and other costs. reflected in the prices. Then, 30 years later, after fully depreciating his stranded asset, issue his bonds and recoup his stranded costs again. This potential double recovery of hundreds of millions of dollars demonstrates why PNM’s position is untenable.
According to PNM, issuing the bonds when the new tariffs come into effect prevents a roller coaster effect where customers would see savings through the closure of the power plant followed by an increase in tariffs to recover the investments that PNM has made. in the network since 2018.
The last time PNM increased rates was in 2019 following the 2016 rate case.
Assistance to impacted workers, communities
The WRA and CCAE also argue that delaying the issuance of the bonds will harm affected workers and communities who, under the Energy Transition Act, will receive financial support from the bonds. ETA requires that a portion of bond revenue be set aside for labor and economic development, as well as supporting the Navajo Nation. This money is supposed to be distributed through the state’s Department of Economic Development, Department of Workforce Solutions and the Department of Indian Affairs.
PNM says funding for affected workers and communities will be provided even if the bonds are never issued.
PNM spokesman Ray Sandoval said the utility pre-funded 25% of the money supposed to go to the three state agencies.
“In October, when the plant closes, PNM will fund the rest, so the full $40 million will be fully covered,” he said.
PNM says it has been transparent about the plans
Sandoval cited testimony from the 2019 PRC funding hearings when a hearing reviewer asked Henry Monroy, chief financial officer of PNM, how the bonds will be issued. Sandoval said Monroy responded that the bonds would be issued with the tariff filing. At that time, Monroy told the Hearing Examiner that the utility would file one in 2020 and a second in 2021. The 2021 rate case would be filed to remove the San Juan Generating Station from customer rates. and to apply the savings of the energy transition law to customers.
“Then the hearing examiner says, ‘Will there be a reduction in the bill?’ And Henry says “no, because at this point the amount of money we’ve spent on new projects and investments is going to be more than the savings for San Juan,” Sandoval said.
The plans for the 2020 and 2021 tariff cases have been put on hold for two reasons, according to PNM. The first of these reasons is the COVID-19 pandemic. Sandoval said PNM didn’t want to hit customers with higher bills as they struggled financially. The second reason was the proposed merger with utility giant Avangrid, which the PRC ultimately rejected. PNM and Avangrid appealed the PRC’s decision in this case. Sandoval said that PNM had made a commitment to Avangrid not to file the tariff case until December of this year and, even though the PRC rejected the merger request, PNM is honoring that commitment.
Mariel Nanasi, executive director of New Energy Economy and a vocal critic of PNM, argued that PNM’s reasoning for delaying the 2020 tariff case was not a concern for customers. She said if PNM was concerned about customers, it would not have taken action to disconnect people for nonpayment as soon as a moratorium on disconnections was lifted.
While PNM says it’s been clear about its plans, a filing Thursday by the New Mexico attorney general’s office says the office became aware of the utility’s plans after reading the WRA and CCAE’s joint petition.
“As state lawmakers consider actions to help New Mexicans pay record fuel prices amid 40-year-old inflation rates, PNM seeks to deny its customers the lower rates owed to them. once SJGS is dropped. The Commission has the power to order PNM’s compliance and it must exercise it now to prevent PNM from unjustly enriching its shareholders at the expense of its clients,” the filing from the attorney general’s office reads.
Rates will increase despite the closure of the plant
While coal tends to be more expensive than renewables, in part due to ongoing fuel costs and the labor-intensive nature of coal, Sandoval said customers will see an increase tariffs proposed in the next tariff file.
However, customers will see some benefits from the San Juan plant closing in January after the fuel clause is reset, he said. This will save customers $3 per month as PNM will not have to purchase coal to run the power plant.
In addition, he stated that the rate case will take into account the closure of the San Juan plant.
“All that [customers] pay to San Juan is going to be compensated when we go back to our rate case because we are going to offer it that way,” he said.
The tariff case will likely take 12 to 18 months, Sandoval said.
Since 2018, PNM has invested $1.2 billion and the utility plans to invest an additional $1.2 billion by 2024. These investments will be included in the next rate case. According to PNM, the rates it will charge in the following case will be 30 to 40 percent lower due to the closure of the San Juan plant and the delay in issuing the bonds.
The proposed increase will be caused by the investments that PNM must make to modernize the network. Sandoval said the way the grid was built allows electricity to flow directly from power plants to urban centers using transmission lines, but the transition to renewable and clean energy sources requires new investments in infrastructure, including new transmission lines.
“Revenue collected from tariffs that covered San Juan will offset $2.4 billion in new infrastructure investment at PNM,” PNM said in a statement emailed to NM Policy Report. “These investments are intended for service reliability for customers. There is no possibility of double deduction by PNM because the fares are fixed by the PRC. PNM’s plan provides for compensation of revenue generated by the San Juan plant after its closure, and the regulatory process itself prevents any double deductions.