We offer a Legislative Update, a report on Valencia Water Protectors efforts to prevent Niagara Bottling Co. from grabbing almost 400 acre feet of agricultural water, and a report on exactly why the Energy Transition Act needs amending.

Legislative Update

Senate Rules: Full of Surprises. It can happen fast in legislative committees and we learned that first hand in Senate Rules Committee yesterday. After legislator comments on three versions of SJR-3:

• the original bill;
• an amended substitute bill from Sen. Ivey-Soto — sponsors felt there was language that improved the bill but also language that would undermine the bill’s intent; and
• an amended bill from sponsors, who sought to take the best of Sen. Ivey-Soto’s bill and preserve the bill’s authority.

What followed was fascinating. First Republicans moved to table the bill but this effort failed on party lines. Then they moved to pass Sen Ivey-Soto’s version of the bill and this motion was also defeated with Senator Ivey-Soto chuckling about voting no on his own amendment. Then the sponsors’ amendment was introduced and passed, gaining one GOP vote from Sen. Moores. And finally, that amended version was passed and now goes to Senate Judiciary, an eight-member committee with five Democrats from Senate Rules, and those five Senators have already voted for SJR-3. So, in an hour, one of our Transformation bills went from possibly being killed in its first committee to looking like it just might make it to the Senate floor.

During the hearing Senator Ivey-Soto remarked that he couldn’t find his amendment on his phone because “I’ve received so many emails on this bill.” Though he was obviously annoyed, it is clear that the Democrats on the Senate Rules Committee heard our voices loud and clear.

Fusion Voting Killed in First Committee Hearing. Next up on the agenda in Senate Rules was SB 100, the bill that would create fusion voting in NM. After a very clear description of how the bill would foster increased involvement in elections and offer a choice to the 40% of voters who are not registered in either major party, public comment was then skipped. This left bill sponsors perplexed as they had the Secretary of State and Common Cause in the wings to offer their reasons for supporting the legislation, and the SOS prepared to explain how implementation would not be a burden on their office, one of the major concerns expressed by opponents of the bill. After a brisk discussion, a motion was introduced to pass the bill and with Senator Ivey-Soto and Senator Katy Duhigg joining Republicans in voting no, the bill went down to defeat. I am guessing this vote will warrant a paragraph in our 2021 Legislative Report Card to be completed after the session.

Water Chicanery in Los Lunas, Valencia County

From SouthWest Organizing Project (SWOP): Jeansonne and Deirdra Velasquez, residents of Los Lunas, in collaboration with Valencia Water Protectors, have created a petition against the expansion of the Niagara Bottling facility in Los Lunas. The plastic water bottle company hopes to expand their current water usage of 285 acre feet per year to a 650 acre feet per year. This is 118,000,000+ gallons more the company is asking for. This is another story of industry coming into New Mexico, scheming to take water away from our farmers and future generations. New Mexico is already in a drought and the pressure to keep water in the hands of the community continues to be our priority here at SWOP. Residents and water advocates can join public comment by using the following code on Thursday Feb. 11 at 6pm. WebEx Council Meeting/February 11, 2021 (Dial: 1-408-418-9388 / Access Code: 182 536 4002 / Password: 95733467). Join the water protectors and help Los Lunas and Valencia County keep their sacred water resources!  SIGN THE PETITION. In addition to attending this rally, please contact Mayor Griego and our Council members about this issue:

• Mayor Charles Griego: griegoc@loslunasnm.gov
• Councilman Christopher Ortiz: ortizc@loslunasnm.gov
• Councilman Gino M. Romero: romerog@loslunasnm.gov
• Councilman Cruz Munoz: munozcr@loslunasnm.gov
• Councilman Phillip Jaramillo: montoyap@loslunasnm.gov

SB 155 Would Amend the ETA: Why Retake Strongly Supports that Effort

SB 155  Energy Transition Authority Changes is due to be heard in Senate Conservation on Thursday at 8 a.m., so I think it’s important to lay out why Senators Tallman, Sedillo Lopez and Stefanics introduced SB 155. SB 155 would amend the Energy Transition Act (ETA) to address some of the concerns with key passages that prevent the Public Regulation Commission (PRC) from performing their regulatory responsibilities and protecting ratepayers.

First a bit of background. In 2016, PNM purchased a 200-megawatt share in the Four Corners Power Plant, an investment of nearly $1 billion at that time. That seems ludicrous given the declining price of renewable energy. At about the same time, El Paso Electric, another electric monopoly, did a financial analysis and determined that it was better to sell their shares and get of coal. As we will see, the PRC also found the PNM investment to be ludicrous, although they used the proper regulatory language, calling the investment “imprudent” because PNM did NO financial analysis and NO comparison to alternative cleaner cheaper resources. But that comes a bit later. So, El Paso Electric takes the time to analyze the market and decides to begin withdrawing from coal, while PNM without doing any analysis decides to invest $1 billion in an aging coal plant.

Before SB 489 Energy Transition Act became law, the PRC and New Energy Economy (NEE) reviewed it closely. They didn’t like what they saw and tried repeatedly to get bill sponsors and the coalition of environmental organizations supporting the ETA to address their concerns, but bill sponsors wanted no amendments. The PRC and NEE were concerned that the ETA would prevent the PRC from reviewing the prudence of PNM claims for costs of recovered assets in the San Juan Generating Station, but also felt that if the ETA became law it would apply to Four Corners NMPRC Case No. 16-00276-UT. Their concern was that the ETA would handcuff the PRC, remove its authority to review the prudence of PNM’s investment in Four Concerns, and allow PNM to recover hundreds of millions in investments, all on the backs of ratepayers. Recall, the PRC had previously ruled these investments to be “imprudent.” That fear is stated in the following excerpt from a brief filed in March 2019:

“In case 26-00276-UT, the Commission initially found PNM had acted imprudently and denied recovery in rates of PNM capital investments and expenses associated with FCPP. However, the Commission temporarily vacated the finding of imprudence indicating that the issue would be addressed again in PNM’s next rate case. Section H (2)(c) of SB 489 appears to now eliminate the Commission’s power to address PNM’s imprudence at FCPP by requiring that the expenses at issue be included in amounts securitized in bond offerings.” (Emphasis ours).

S-1-SC-37552, Response of New Mexico Public Regulation Commission in Opposition to Verified Petition for Writ of Mandamus Filed by Public Service Company of New Mexico, 3/19/2019, p.12, fn. 6.

In the same case NEE warned that:

“This PNM financial giveaway will mean that PNM will be paid in full for its imprudent investments [at FCPP] and the PRC authority will be nullified regardless of any investigation or regulatory oversight. This is a particularly problematic part of the law because it means that there won’t be any corporate accountability – a “no matter what” consumers pay and PNM goes Scott free clause.”

S-1-SC-37552, New Energy Economy’s Response in Opposition to PNM’s Emergency Verified Petition for Writ of Mandamus, Request for Emergency Stay, and Request for Oral Argument, 3/19/2019, p. 15

To unravel the legalese, NEE and the PRC both asserted that the Energy Transition Act prohibited the PRC from finding that any or all of PNM’s Four Corners investment was imprudent and removing ratepayer liability for that portion of the investment deemed imprudent.

Fast forward: on 1/8/2021, PNM filed for “abandonment” of FCPP – they are now demanding $300 million.

Sierra Club, 350NM, and Natural Resources Defense Council all disagree with New Energy Economy and PRC attorneys, feeling that the ETA does not limit PRC authority to review PNM’s desire to recover $300M in investments. However, the NM Attorney General agreed with NEE and the PRC, stating in the ETA Financial Impact Report that the ETA would create a legal framework in which PNM was essentially regulating itself and would be allowed to operate as an unregulated monopoly. This view was also supported by an array of other attorneys with deep regulatory experience, as expressed in Retake Our Democracy’s summary in support of amending the ETA.

So who to believe? Well, it turns out that NEE and the PRC were correct in their interpretation of the ETA in relation to PNM’s claims for recovering their stranded assets in San Juan. In that San Juan case, the PRC gave PNM 100% of the $361M they demanded. In the PRC’s decision they stated: “the ETA constrains the Commission’s ability to adopt the limits on recovery. The Commission lacks the authority to impose the limits.” Recommended Decision on PNM’s Request for Issuance of A Financing Order, 2/21/2020, p.97.)

Of course, Sierra Club retains an attorney to weigh in on regulatory law. Interestingly, he also states in a recent brief that: “PNM’s undepreciated investments in Four Corners are potentially eligible for treatment as an ‘energy transition cost’ eligible for securitized financing under the Energy Transaction Act (ETA).”Citing, NMSA 1978 § 62-18-2(H)(2)(c).  (16-00276-UT, Sierra Club’s Motion to Re-Open Docket No. 16-00276-UT to Implement the Revised Final Order, p. 4, ¶13.)

And in Sierra Clubs’ newest Motion in PNM’s FCPP Abandonment case – they state:

“it would be a manifest injustice for the Commission to permit investments that the Commission previously deferred determining the prudence of, to now acquire an unrebuttable presumption of prudence and be included in a financing order with no vetting.”

(21-00017-UT, 1/26/2021, Sierra Club’s Motion for Supplemental Testimony  Or, in the Alternative, to Dismiss PNM’s Application, p. 6.)

Here, as above, the legalese requires some translating to be fully grasped. In 2018, before the ETA had been introduced, the PRC had determined PNM’s Four Corners investments to be imprudent but set aside that judgment so it could be reconsidered and integrated into the next rate case coming in a few months. Surprise, surprise, PNM-crafted language incorporated into the ETA gave them unregulated capacity to claim whatever amounts they wanted in exchange for exiting San Juan and Four Corners. Bill sponsors may not have realized how ETA bill language would eliminate PRC authority to prevent PMN from recovering $300M in imprudent investments from ratepayers, but PNM staff who helped to develop the bill almost certainly did.

Retake agrees with the Sierra Club in feeling that it would be “manifest injustice” to allow PNM to get whatever it wants when it sells its shares in Four Corners. I only wish Sierra Club would admit that they got hoodwinked a bit by PNM in the ETA. There is much to appreciate about the ETA, the national standard in RPS, the millions of dollars in aid to the San Juan community and to workers at the San Juan plant who are losing their jobs when San Juan closes. But those benefits could all be retained by accepting the surgical amendments proposed by Senators Tallman, Sedillo Lopez, and Stefanics. The amendments do nothing to undermine any of the good things in the ETA.

One more thing needs to be stated. While the ETA possibly accelerated the closing of the San Juan plant by allowing PNM to securitize its imprudent investments in San Juan, it is highly likely that market economic forces would have resulted in the plant closing even without the ETA. Indeed, in April 2017 PNM had already announced its plan to close San Juan by June 2022.

What’s more, while the ETA may have incentivized PNM to close San Juan, it certainly won’t result in Four Corners Power Plant closing, it just rewards PNM for its imprudent investment while the plant will continue operating for at least another ten years. What, you ask.

PNM has made an agreement to sell ownership interest in the FCPP to Navajo Transitional Energy Company, LLC (“NTEC”) and it is NTEC’s intent to continue to operate the FCPP. So, PNM’s exit from FCPP will not result in any temporary or permanent retirement, shut-down, closure or decommissioning of the FCPP. NTEC and the other remaining owners of that plant have stated their intent to continue operating the full capacity of that coal plant until at least 2031, if not longer. PNM is paying NTEC $75 million to absorb their coal contract obligations. What does this mean?

It means that in 2016 PNM bought a liability in Four Corners. Now they want to turn around and demand $300 million from ratepayers, allowing PNM to escape any financial responsibility for their bad business decision? Is that what you want the ETA to do?

Here is my takeaway from all this:

1. PNM’s sale to NTEC doesn’t transition us from climate-altering coal. The PNM/ NTEC contract specifically states that: “Seller [PNM] shall Not … reduce the production or cease the operation of the Plant prior to the end of the Coal Supply Agreement [.]”. i.e. 2031, and that is the earliest date of closure.
2. The ETA was not supposed to insulate PNM or any other company from buying a liability, literally a toxic asset, and then be able to turn around and collect from ratepayers. There is simply no way a majority of NM state legislators would have signed on for that. But here is the deal. In 2019 the ETA enjoyed support from two dozen justice-focused agencies and the support of dozens of legislators before any of them had seen the bill. They supported the idea of benefits for workers losing their jobs; they supported the idea of closing San Juan. But they most certainly did not support PNM receiving $361M in stranded San Juan assets and another $300M in imprudent investments in Four Corners.
3. The PRC has found PNM to be imprudent when it invested in and extended the life of FCPP – then PNM wrote sections of the ETA to protect them from their imprudence!
4. And unless amended, PNM enjoys another $300M payday, escaping any liability for another imprudent investment.

Or we amend the ETA. If you want to offer public comment on SB 155, you must send an email by Wed., Feb. 10, at 5 p.m. to SCONC@nmlegis.gov and give your name, if you favor or oppose the bill, and if you are affiliated with any organization. Time to raise your voice!

In solidarity & hope.

Categories: Climate Justice

Tags: 350NM, Energy Transition Act, Featured, Natural Resources Defense Council, New Energy Economy, NM State Legislature, PNM, read more, Sierra Club