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    PRC rejects San Juan coal plant finance plan


    June 30, 2022 - Cynthia Miller, The Santa Fe New Mexican

     

      Jun. 30—The state Public Regulation Commission on Wednesday ordered New Mexico's largest electric utility to begin issuing credits to customers immediately after it shuts down two units of the coal-powered San Juan Generating Station, a decision commissioners said will save ratepayers a combined $94 million a year.

      The ruling, a day before Public Service Company of New Mexico was scheduled to take one unit offline at the power plant near Farmington, comes after a contentious monthslong case in which Western Resource Advocates and other environmental organizations had challenged PNM's plan to finance its departure from the plant.

      While PNM argued it was taking steps to save customers money in the long run by delaying short-term rate reductions, commissioners found the company in violation of a state energy law and its financing order for the San Juan shutdown — and accused PNM of bad behavior meant only to benefit itself and its shareholders.

      "They're just trying to cheat customers out of money," Commissioner Stephen Fischmann said before making a motion for what would be a unanimous vote to uphold a recommendation earlier this month by two of the agency's hearing officers.

      The recommendation to reject a PNM financing plan that would delay customer savings cited concerns of a potential for the utility to double-bill customers for San Juan costs. The company also failed to get PNM approval for a shift in the financing plan, the recommendation said.

      PNM intends to appeal the decision to the state Supreme Court. It filed a motion with the commission Wednesday seeking to halt the order until its appeal is resolved.

      "We were taken aback," PNM spokesman Ray Sandoval said in an interview. "... We're really kind of shocked by all the vitriol from the commission."

      He called the commission's action and rhetoric during the meeting "political grandstanding."

      Under the commission's order, customers would begin to see initial credits averaging $1.76 a month beginning Friday.

      On Oct. 1, after the second unit is shut down at San Juan, the average savings would rise to $8.19, PRC data showed.

      Over 18 months, the savings are projected to be $126.37 for an average customer.

      Sandoval said if the commission's decision is upheld, customers will see lower rates during that time but then face steep rises following a rate review and likely increase to cover the true costs of providing power. The utility plans to file a rate case in December.

      He said he couldn't estimate the future hike ahead of the review, during which the commission will thoroughly vet the utility "to make sure customers are getting value for their money."

      The last rate review was in 2016, Sandoval said.

      The case decided Wednesday centers on the time frame for when PNM issues bonds to cover costs associated with San Juan. The commission said under the New Mexico Energy Transition Act the utility must issue the low-interest bonds immediately after shutting down the two units at the plant.

      PNM had planned to delay issuing the bonds until the rate case was finalized — which also would delay customer credits.

      Sandoval defended the plan, arguing the loss of an estimated $94 million a year through customer credits could hurt its credit rating, leading to higher interest rates and more costs for customers later. He also cited setbacks the company has faced, such as a delay in getting solar arrays up and running to replace power from the San Juan plant, due to supply chain issues. This forced PNM to keep one unit of the plant operating for several months after it was scheduled to shut down.

      The company has invested in $1.2 billion in infrastructure since 2016, largely to address a shift to renewable energy, and plans to invest another billion dollars in coming years, he said, adding the savings from the San Juan shutdown could be used to pay down the debt, which would mean a lower rise in electricity rates.

      Judith Amer, with the PRC's Office of General Counsel, told commissioners the Energy Transition Act intends for customers to receive the benefits right after the shutdown.

      Commissioners also raised concerns that delaying the bonds would lead to higher interest rates for repayment, costs that would passed down to customers.

      Another concern was the possible delay in millions of dollars from the bonds for workers and communities in northwestern New Mexico affected by the shutdown, a provision included in the Energy Transition Act.

      Sandoval countered that PNM is voluntarily covering the costs to ensure severance payments, job training and other initiatives to aid those communities.

      Fischmann said at the meeting PNM could not be trusted to adhere to its promises to customers and displaced workers. "It appears to be a feint and a fake-out," he said, "because we can't trust what they're going to do in the future."

      He added, "For the layperson, all this could look very confusing, but actually it's quite simple. We have the ETA. It's very clear what it was meant to do and where it was meant to go. And the bottom line is PNM has made an attempt to cheat on its obligations under the ... ETA."

      He suggested the company should face future penalties.

      Other commissioners also blasted the utility.

      Commissioner Cynthia Hall expressed "deep disappointment, concern, really anger" over what she called the company's "manipulation."

      Commissioner Joseph Maestas of Santa Fe said he was "deeply dismayed" and said PNM had "broken promises to ratepayers without an ounce of credibility."

      Sandoval disputed those characteristics. The company had planned to seek rate increases in recent years but delayed those to avoid placing heavier burdens on customers struggling with the effects of the coronavirus pandemic, he said.

      Pat Vincent-Collawn, PNM Resources Chairman and CEO, said in a statement Wednesday, "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."

      The commission previously rejected PNM's plan to abandon the Four Corners Power Plant and its method of financing the abandonment and shot down the utility's proposed merger with major power companies focused on renewable energy — Connecticut-based Avangrid and its parent company, Iberdrola of Spain.

      PNM has appealed both cases to the state Supreme Court.

      They could linger into 2023, when the current five-member commission, an elected panel, will be replaced by three commissioners appointed by the governor under a measure passed by voters.

      Sandoval said he expects a resolution regarding the customer credits to come more quickly — within 30 days.

      ___

      (c)2022 The Santa Fe New Mexican (Santa Fe, N.M.)

      Visit The Santa Fe New Mexican (Santa Fe, N.M.) at www.santafenewmexican.com

      Distributed by Tribune Content Agency, LLC.

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