Senate Conservation hearing on SB 489 is set for Saturday at 10 a.m. Despite receiving recommendations on Tuesday that they sought last Friday, bill sponsors and bill supporters who were at the Friday meeting have been silent. Despite an Open Letter to the Governor calling for such a meeting, no meeting has been called. Instead, the war of claims and counterclaims continues.
Why Is There So Much Confusion About the CRUCIAL SB 489? Read On!
I had tried to remain relatively neutral, even while being skeptical about SB 489 and seeking clarifications and amendments to fix some obvious flaws. I do not feel equipped to understand the entire 83 pages of legalese that is SB 489, and rather than adding to the banter, I sought a meeting to sort things out. I still do. New Energy Economy has submitted a set of amendments to fix problems in the bill and has been willing to meet and see what can be done. But they have heard nothing.
In the absence of communication and a clearer shared understanding of what SB 489 should do, uncertainty reigns supreme among the public. I was buried in email yesterday with people essentially saying: “I don’t know what to believe.” I can’t tell you what to believe, but I can help you understand why you are confused. And if at the end of this post, you feel that the entire San Juan issue should be adjudicated by the PRC, I have provided contact information for the members of the Senate Conservation Committee and would encourage you to ask them to either table or to reject SB 489.
So I want to offer just a glimpse at how confusing this bill is. Yesterday, I spoke with Senator Bill Soules sponsor of SB 492, the “clean” securitization bill. I interviewed him for 8 minutes that will be part of the Saturday KSFR radio show (8:30 a.m.). I also provide a link to that interview at the end of this post. It is most illuminating. I have also included a summary of SB 492, his clean securitization bill. But, since no efforts are scheduled to sort out the language in 489, I thought I’d give just three examples of why this bill should not be approved as written. I am becoming increasingly convinced that we would be better off passing SB 492, and that training, remediation, and RPS should be handled separately.
Here is the truth. There is a reason that the PRC is better suited to flesh out the details of abandonment, cost recovery, and replacement power options. They have a staff of experts, they have time to deliberate thoughtfully, they have the power to audit assertions made by PNM, and they can require sworn testimony. The legislature has none of those resources or powers. So, buckle up for just three examples of obfuscation. I realize that picking apart bill language is not exactly gripping reading, but it is important for you to understand how tortured the language is, how complex the issues are and how in that context, it is essential that the PRC is authorized to analyze these issues independently.
Example # 1. From p. 9-10 of SB 489 which defines what qualifies as a generating facility. Should be simple, no?
S. “qualifying generating facility” means a coal-fired generating facility in New Mexico that may be composed of multiple generating units that:
(1) has been granted a certificate of public convenience and for which abandonment authority is granted after December 31, 2018;
(2) is owned or leased, in whole or in part, by a qualifying utility;
(3) if operated by a qualifying utility prior to the effective date of the Energy Transition Act, is to be abandoned prior to January 1, 2023; and
(4) if not operated by a qualifying utility prior to the effective date of the Energy Transition Act, is to be abandoned prior to January 1, 2032;
I dare you to see the problem here. Well the problem is in (4). Note that the date is not 2023 as in (3). Typo? Maybe, but could it be that 2032 is used because Four Corners is scheduled for abandonment in 2031? SB 489 doesn’t make a big deal about this date and doesn’t really reference Four Corners, but in this one date, PNM may be able to use SB 489 to securitize its unaudited stranded assets in Four Corners, just as it is trying to do with San Juan. Who knows what those costs could amount to? The costs have not been stated anywhere by PNM. NEE has an approximate accounting of $729 million if Four Corners was to close in 2031. This is the kind of accounting that must be required by the PRC in order to determine financial accuracy in order to adequately protect ratepayers.
Example # 2. This is even more obscure, but really helps clarify why this whole issue belongs in the PRC with securitization authorized through SB 492.
D. The commission shall grant all necessary approvals for replacement resources; provided that the commission may determine that the particular resource proposed by the qualifying utility should not be approved and that, instead, an alternative replacement resource that meets the conditions of this section should be approved. The commission shall not disallow recovery of reasonable costs necessary to comply with the locational directives provided in Subsection A of this section.”
There is no legal definition of “necessary,” and PNM will define what’s necessary. That the “alternative replacement resource” must meet the conditions of this section is also problematic because the “conditions” are not clear. I also worry about the phrase: “the commission shall not disallow.” Isn’t their function to examine proposed replacement power? While in early communication about SB 489 and in my conversations with Sierra Club president David Coss, he stated unequivocally: “If they propose gas we will oppose.” Maybe, but in today’s Sierra Club exhortation on 489, they claim that it will “make it much less likely that PNM will replace coal with gas.” Emphasis mine.That doesn’t sound very certain. How about a clause saying: “natural gas can not be used as an energy source for replacement power?”
It could be argued that “necessary” from paragraph D is explained in paragraph F (below) F. “As used in this section, “replacement resources” means up to 450 megawatts of nameplate capacity identified by the qualifying utility as replacement for a qualifying generating facility, and may include energy storage capacity; provided that such resources are located in the school district in New Mexico where the abandoned facility is located, are necessary to maintain reliable service and are in the public interest as determined by the commission.” Emphasis mine.
PNM can easily argue that gas is “necessary to maintain reliable service” – gas is reliable. That is not the problem with gas. The problem is that gas is climate altering and costs more than other reliable, feasible alternatives, like solar, and wind, and storage. This is KEY! Because the legal standard today is better than an undefined “necessary” standard. The PRC standard today: is the resource a “net public benefit” AND “the most cost effective among feasible alternatives.” SB 489 constrains PRC oversight to review PNM’s stated desire for more gas.
In early communication from Sierra Club, CVNM, and others in the Alliance, there were assurances that the PRC authority was protected fully by SB 489. Now this week, more and more misinformation is being spread about the PRC’s failing to live up to its promises of reforming the PRC, and how it is legal for the legislature to limit PRC authority. Wow. The new PRC has been in place a month, has voted 5-0 to reject El Paso Electric’s plan for a solar installation on its land, at its cost, and without any competitive bidding. This is a vote that would have gone 3-2 to approve the plan before the new PRC. I will have more on this issue on Saturday.
Example # 3:
F. As used in this section, “replacement resources” means up to four hundred fifty megawatts of nameplate capacity identified by the qualifying utility as replacement for a qualifying generating facility, and may include energy storage capacity; provided that such resources are located in the school district in New Mexico where the abandoned facility is located, are necessary to maintain reliable service and are in the public interest as determined by the commission.”
Problem here is that the “replacement resources” are “identified by the qualifying utility.” It also limits those resources to a specific location: “where the abandoned facility is located,” on PNM–owned land, which eliminates competition, and which locates the resources hundreds of miles from the largest customer loads in Albuquerque and Santa Fe. It also eliminates the possibility of indigenous ownership of the facility and of any independent power producers. Do you recognize the implications of this one sentence? Two more points: Speaker Egolf’s analysis of the bill states very clearly that gas would be allowed and to underscore this, NEE has published PNM planning drawings submitted to San Juan County, showing quite clearly that they are drilling holes to assess the suitability of the stipulated location as a site for a gas plant.
Another claim being bandied about by SB 489 proponents is that New Energy Economy has lost its way, it is so obsessed with punishing PNM. Let’s decode this a bit. We have a non-profit organization that is seeking to protect ratepayers’ interests and that is somehow a bad thing? They are asking for PNM and its shareholders who have profited in the tens of millions of dollars over the years to pay a share of the cost, and this is somehow losing one’s way. NEE is not asking PNM to pay all the costs of their stranded assets, just some. NEE is also asking that the PRC be allowed to assess just how much those stranded assets should be, not just use as a starting point PNM’s own estimation of $320M.
As a matter of fact, the national securitization experts who presented at the PRC on February 13 stated that in all 64 securitization efforts adopted in the US not one of them allowed the utility to define the cost it wanted to securitize. They all urged for PRC’s active participation, involvement, and oversight, because these costs would be charged to customers every month for 25 years – “set in stone” is the phrase former chair of the Texas PUC said.
I could provide a dozen other slights of hand that appear throughout the bill. But that would just generate another round of counter claims and leave your head spinning. What is the more important take-away is that SB 489 is incredibly complex and the issue of determining fair abandonment costs and appropriate replacement power requires close scrutiny, testimony, audited numbers, and adequate staff and time to study the issues closely. The legislature has none of that, not the time, not the staff, and not the expertise. That is why NEE stands ready to meet with bill sponsors or bill supporters to discuss the amendments that they have crafted. That is why Retake has repeatedly asked for a meeting to sort out the issues, or failing that, is asking our supporters to call all of the members of the Conservation Committee and ask that they either table or vote down SB 489 and tell bill sponsors that these amendments need to be incorporated.
Retake anticipates hearing from bill advocates that NEE amendments are a “poison pill.” I’d flip that and suggest that SB 489 is the poison pill with the amendments being the remedy. If there is no will on the part of the sponsors to consider amendments, I’d suggest that too much is at stake with too many competing claims. I have seen bills tabled for far less confusion over bill language. Why should we pass forward something that no one really understands? Please call and email all members of the Senate Conservation Committee, especially if you are a constituent of one of the members, and ask them to table or reject SB 489 as currently written. Contact info can be found below. If we can’t come to agreement on amendments, maybe it is time to take a closer look at SB 492 (summary below).
SENATE CONSERVATION COMMITTEE
- Dist. 31 – Las Cruces – Joseph Cervantes-D, Chair, (505) 986-4861, Rm 328B, Joseph@cervanteslawnm.com
- Dist. 16 – Albuquerque – Antoinette Sedillo Lopez-D, Vice Chair, Rm 416D, (505) 986-4389, firstname.lastname@example.org
- Dist. 7 – Broadview – Pat Woods-R, Ranking Member, (505) 986-4393, Rm 415D, email@example.com
- Dist. 34 – Alamogordo – Ron Griggs-R, (505) 986-4369, Rm 414A, firstname.lastname@example.org
- Dist. 5 – Española, Richard C Martinez-D, (505) 986-4487, Rm 319, email@example.com
- Dist. 20 – Albuquerque – William H Payne-R, (505) 986-4703, 109B, firstname.lastname@example.org
- Dist. 37 – Las Cruces – William P Soules-D, (505) 986-4834, Rm 328C, email@example.com
- Dist. 39 – Cerrillos – Elizabeth “Liz” Stefanics-D, (505) 986-4377, Rm 416C, firstname.lastname@example.org
- Dist. 25 – Santa Fe – Peter Wirth-D, (505) 986-4727, Rm 119, email@example.com
Senate Bill (SB) 492, the Ratepayer Relief Act (RRA). The RRA is an alternative to the securitization provisions of SB 489, the Energy Transition Act (ETA). Unlike the ETA, the RRA does not link securitization financing to any increase in the renewable portfolio or a zero-carbon standard. Nor does the RRA mandate any particular outcome at the New Mexico Public Regulation Commission (NMPRC). The provisions of SB 492 talk about straightforward clarity and in 1/3 the pages of SB 489.
- Establish a financing mechanism that would facilitate the use of low-cost AAA rated bonds to help utilities recover their undepreciated investments (i.e., stranded costs), in any abandoned utility-owned or leased generation plant;
- Establish a non-bypassable customer charge on every customer’s bill to allow full-cost recovery of the approved bonds;
- Grant the NMPRC the discretion to require a utility to use securitization financing in connection with an abandonment application even if the utility has not applied for such financing;
- Preserve the NMPRC’s authority over the total amount of the stranded costs to be financed;
- Preserve the NMPRC’s authority to rule on a securitization application under the “public interest” standard;
- Require the Commission to determine that securitization financing results in just and reasonable rates;
- Require NMPRC oversight of all the terms, conditions and costs of the securitization bonds, in order to ensure that the “structuring and pricing of the bonds result in the lowest bond charges consistent with market conditions”;
- Give the Commission full discretion over the allocation of the securitization charges to the various customer classes;
- Require an immediate reduction of the utility’s rates to reflect the abandonment savings;
- Preserve parties’ full rehearing and appeal rights under current law;
- Ensure that New Mexico investment entities and private citizens have the opportunity to purchase the securitization bonds;
- Would not prohibit the transfer or sale of the abandoned plant to a third party;
- Would not predetermine the types, amounts, locations of, or ownership of replacement power resources in an abandonment proceeding;
How about 8 minutes of integrity, honesty and straight shooting: Senator Bill Soules on SB 489.
Paul & Roxanne