Bill sponsors were warned by PRC staff, the Attorney General, NEE, Retake, indigenous groups and others that the bill was unconstitutional, with the AG stating it “allows the utility to self-regulate.” Now the Supreme Court decides.
Energy Transition Act Challenged in Supreme Court
On Monday, New Energy Economy along with Co-Petitioners Food and Water Watch, Physicians for Social Responsibility – New Mexico, Tewa Women United, Citizens for Fair Rates & the Environment, Rio Arriba Concerned Citizens, and Navajo Nation Council Delegate Daniel Tso brought a case before the NM Supreme Court which challenges specific provisions of the Energy Transition Act (ETA) as unconstitutional in order to preserve New Mexico’s fundamental regulatory safeguards, protect the public interest, and defend the rights of New Mexicans. As reported in The New Mexican this morning, Mariel Nanasi, New Energy Economy Executive Director commented.
“The monopoly utility must be regulated,” said Mariel Nanasi, executive director of New Energy Economy, one of seven petitioners in the case. “The Energy Transition Act is a deregulation bill that says PNM determines the amount of money it wants and reduces the PRC to a clerk.”Santa Fe New Mexican, August 27, 2019
New Energy Economy, Retake Our Democracy and many other organizations concerned with the legality of the ETA met with bill sponsors and its supporters immediately after the bill was introduced. We offered amendments to the bill that would have addressed concerns that the ETA would sharply circumscribe Public Regulation Commission authority to regulate PNM and could be used as precedent to circumscribe PRC authority in regulating other utilities.
While we supported and still support key elements of the ETA, we were not alone in viewing the bill as being seriously flawed and unconstitutional. PRC staff submitted the following written comment to the Legislative Finance Committee who was responsible for assembling the Financial Impact Report for the ETA. From the PRC staff:
The PRC staff analysis of this bill notes the following:PRC Staff Written Comment on HTA submitted to Legislative Finance Committee
“The ETA contains no mechanism for the Commission to conduct a post-issuance review of financing costs. The Commission must be granted the authority to conduct a post-issuance review of financing costs to determine whether the utility actions were prudent and the financing costs resulted in lowest overall costs. The bill also does not preserve Commission authority to review a financing application under the: 1) “public interest” standard; and 2) to ensure that the financing application results in just and reasonable rates. Finally, the Commission must have the authority to include additional terms and conditions in the financing order for the benefit of ratepayers.
The ETA contains no mechanism for the Commission to conduct a post-issuance review of financing costs. The Commission must be granted the authority to conduct a post-issuance review of financing costs to determine whether the utility actions were prudent and the financing costs resulted in lowest overall costs. The bill also does not preserve Commission authority to review a financing application under the: 1) “public interest” standard; and 2) to ensure that the financing application results in just and reasonable rates. Finally, the Commission must have the authority to include additional terms and conditions in the financing order for the benefit of ratepayers
Essentially, the PRC made it very clear that the ETA essentially gutted the PRC of its authority to do its constitutionally mandated review of utility decisions to determine if they are prudent and reasonable. PNM invested heavily in the PRC elections in 2018 to try to maintain its grip on the Commission, but they lost every race and PNM was very well aware that the PRC installed in January 2019 was going to be far less inclined to do PNM’s bidding.
So PNM turned to the legislature to try to tie the PRC’s hands while PNM assented to the greatly improved RPS. PRC staff were not alone in identifying the problems with the bills constitutionality. The Attorney General also weighed in on the legality of the ETA in an opinion incorporated into the Financial Impact Report. From the Attorney General two germane quotes: Emphasis mine.
Section 5(E) requires the Commission to issue a financing order if the utility includes in its application certain enumerated items, potentially compromising the Commission’s constitutional responsibility of regulating public utilities, by precluding it from reviewing the substance and appropriateness of the financing order and instead allows the utility to self-regulate.New Mexico Attorney General written comment submitted to the Legislative Finance Committee on Feb. 15, 2019
Section 29(B)(3) may be construed as an unconstitutional taking, since this provision would prevent a utility from selling or otherwise disposing of unregulated/decertified property.
More On NEE Supreme Court Lawsuit
Truthout and NM Political Report each published articles yesterday covering the lawsuit filed by New Energy Economy challenging the Energy Transition Act (ETA). The Truthout article did an excellent job of laying out precisely what is unconstitutional about the ETA and how it curtails the PRC capacity to regulate. It also details the history of failure to regulate the nuclear industry in NM. The NM Political Report focused on the history of imprudent decisions made by PNM, decisions that were rejected by the PRC, validating the critical important of PRC regulation. The lawsuit asserts that the ETA would severely constrict PRC capacity to regulate, as noted by one key expert witness.
From Truthout, a quote from expert witness Steven M Fetter, emphasis mine:
“The ETA is ‘unprecedented,’ as it would be the only securitization bill in the country that allows the regulated entity to define and set the amount of recoverable cost for itself, without the benefit of Commission oversight.”Truthout, August 27, 201
More from Fetter
Blanket approval of ‘any’ undepreciated assets. along with decommissioning and reclamation costs, without an objective standard of reasonableness, is contrary to the regulatory frameworks across the entire U.S.,” Fetter said in his testimony. “The core concept underlying the regulatory compact is recognition that, before an investor-owned utility is allowed to raise rates, the utility must show that its investments have been prudently made.”
NM Political Report, August 28, 2019
Fetter is not an expert witness cherry picked by NEE to testify on its behalf. Indeed Fetter has served as an expert witness for PNM three separate times. He is also a former chairman of the Michigan Public Service Commission and a former utility advisor employed by the Fitch credit rating agency, So he is respected in the field. Truthout also points out that there is a lengthy history of judicial decisions supporting the sanctity of commission regulation.
To review the Truthout article click here. It is excellent in framing the legal claim being made and the importance of the suit. Click here to review the NM Political Report which does an excellent job of listing the many PNM imprudent decisions that have been reversed by the PRC.
We want to commend New Energy Economy for again having the courage to buck the political establishment in service to environmental and economic justice.
ETA sponsors and bill supporters knew that if wording was changed in the bill to retain PRC authority, PNM would withdraw its support and with that the bill would have died as PNM has been very generous with corporate Democrats in the House and Senate. And so, now the Supreme Court will decide. Below are comments from the co-petitioners. The co-petitioners amplify on the reasons why this lawsuit was necessary.
In solidarity, Paul and Roxanne….but do read on! Emphasis mine throughout.
Daniel Tso, Navajo Nation Council Delegate
“Our communities deserve a thorough review of and oversight over all proposals for decommissioning and reclamation, transition funding, and replacement power that PNM is proposing. Our vehicle for that review is the New Mexico Public Regulation Commission. We have gained jobs and economic investment from the presence of San Juan Generating Station in our community but we have also experienced real sacrifices – of our health, of our land, water, air, and alternative economic potential. While many of our community members have benefitted from jobs, many of our community members have also lost loved ones early to cancer, lung disease, asthma, and heart disease. We support the transition to renewable energy. This transition necessitates a thorough assessment of the environmental damage and public health threats left behind by this plant’s abandonment and a thoughtful and fair assignment of responsibility for cleanup. It also necessitates deep investment in transition planning for impacted communities and local workers. We believe all of these things can be accomplished while maintaining our Commission’s authority and the public’s right to due process, said Daniel Tso, Navajo Nation Council delegate.”
Food and Water Watch, Adam Carlesco, Climate & Energy Staff Attorney
“A private for-profit utility company operating in a state-sanctioned regional monopoly must not be allowed to self-regulate in contravention of the New Mexico Constitution. The Public Regulation Commission (PRC) is tasked with regulating industries to ensure fair and reasonable rates, and to assure reasonable and adequate services to the public; yet a portion of the Energy Transition Act (ETA) has removed this constitutional mandate. Although we are supportive of the clean energy transition initiatives in the ETA, we must maintain the power of the PRC to do their job. If these issues are not addressed now, ratepayers will be left to foot the bill to decommission fossil fuel and nuclear facilities, foisting the cost of the state’s energy transition upon the general public instead of the corporations that have profited for decades. The only real way to avoid a perilous future of continued dependence on fossil fuels is to transition immediately to a truly clean, renewable energy economy while ensuring equity for the populace. Food & Water Watch supports this petition as part of an ongoing campaign to transition to the clean energy future necessary to avert the worst effect of climate change,” stated Adam Carlesco, Climate & Energy Staff Attorney at Food & Water Watch.
Physicians for Social Responsibility, Dr. Robert M. Bernstein, MD, NM Chapter President
“The ETA requires ratepayers to pay for all clean-up costs without any review. This is highly unfair, and an affront to the public interest. Coal ash is the waste that is left after coal is burned. Medical science and the Environmental Protection Agency agree that coal ash is dangerously toxic and poses a threat to human health, causing cancer, heart damage, lung disease, birth defects, and more. Unfortunately, many tons of coal ash have been produced by PNM’s San Juan Generating Station and have been buried without protective liners. Physicians for Social Responsibility, a national organization of 30,000 health care providers, of which I am the NM Chapter President, has long been alarmed at the public health risks of coal ash,” said Dr. Robert M. Bernstein, MD, with Physicians for Social Responsibility- New Mexico.
“For the health of New Mexicans, it is critical that this industrial waste stream of coal ash be investigated to determine the extent of the threat to our health. If coal ash has been leaking and/or leaching, it must be cleaned up to avoid a public health disaster. The clean-up must be monitored to eliminate contamination, and the company must be held responsible for the costs, not ratepayers.” continued Dr. Bernstein.
Rio Arriba Concerned Citizens, Bill Clark, President
“Rio Arriba Concerned Citizens believes that due process for PRC oversight is required to assure plant closures and replacement power purchases are prudently planned in the best interests of ratepayers. Utility plans and costs need review and concurrence by the PRC before costs are incurred. Oversight is needed to assure facility closure planning and purchase of other energy sources follows PRC due process. This oversight must include assurance of competitive bidding; review of the utility’s accurate financial analysis and cost estimates; environmental justice and planning; ratepayer and employment impacts; and accurate utility cleanup and liability estimates consistent with timely scheduling,” stated President Bill Clark with Co-Petitioner RACC.
Tewa Women United, Dr. Corrine Sanchez, Executive Director
“Tewa Women United has joined this Petition in defense of the regulatory and democratic safeguards that allow our families and communities to protect our water, land, and health. While we support the increase in the Renewable Portfolio Standard as well as the investment in the transition needs of impacted communities, we are challenging the aspects of the ETA that strip away the review process for the costs associated with abandoning coal and nuclear facilities, cleanup costs, and more. We must close these plants YES. We must transition immediately to renewables YES. We must support those directly impacted YES. And we must do so in a way that retains our communities’ rights to challenge the proposals of the electric utilities who continue to invest in dangerous and expensive nuclear and gas and who have a vested interest in passing off the costs of cleanup and abandonment to New Mexicans. We must protect meaningful regulation and due process as we work together to transition our state’s electricity sector.”
Citizens for Fair Rates & The Environment, Tom Manning, Lead Advocate
“We embrace legislation that moves us urgently on a path to a renewable energy future. However, we need the law to do so in a manner that maintains the regulatory authority of the PRC, ratepayer protections, and ratepayers’ due process of law. The sections of this law that undermine these protections are unconstitutional and unnecessary. We can achieve the renewable portfolio standard, transition support for impacted communities, and securitization while maintaining consumer protections,” said Tom Manning, lead advocate with Citizens for Fair Rates & the Environment. “PNM has been dragging its feet for years, reinvesting in coal power when other utilities determined that renewables were the prudent path forward; now they want to get rewarded for their malfeasance and claim that others are delaying the needed transition.”