PRC: Ratepayers Will Pay $361M to PNM for ‘Imprudent’ Investments in Four Corners & Avangrid Merger Call to Action !

This is a most important post. We won’t be fooled again. Throughout the 2019 legislative session Retake, New Energy Economy and others tried to tell legislators, Sierra Club, and other grasstops enviro orgs. what was behind the ETA and they refused to listen. Now, our assertions have proven to be true. We offer more on this ruling and provide a link to our PRC communication strategy on the PNM-Avangrid/Iberdrola merger decision. Read on. Then take action.

PNM-Avangrid Merger Call to Action

This morning Retake published a page devoted to outlining our communication strategy to organize opposition to the proposed PNM-Avangrid merger. As noted in earlier posts, the PRC Chief Hearing Examiner rendered a 450+ page recommended decision to deny the merger, an important win for those opposing the merger. Nonetheless, the PRC process now calls for a vote of the Commissioners to affirm, reject, or amend that decision, and there will be enormous pressure from the Governor and her allies to craft a deal. A vote is due first or second week of December–more likely the second. We must do all we can to ensure that the recommendation to deny the merger is affirmed. We have created an PNM-Avangrid Strategy page that was updated this weekend to include:

  • an outline of all the major problems with the merger, with each problem supported by citations from the Hearing Examiner’s ruling, testimony from witnesses, and/or published reports on Avangrid and Iberdrola;
  • guidance to craft emails or make calls to PRC Commissioners, with suggested language;
  • contact information for Commissioners;
  • guidance to write letters to the editor and contact friends to encourage them to raise their voices;
  • info on our Weds. Dec.1, 6 pm Final Push Zoom Action Strategy session and phone bank, where we will first answer questions and discuss the strategy and then make calls and send emails together, with a goal of sending 75 emails and leaving 75 voicemails for PRC Commissioners. We hope that this Zoom will re-energize all of us as we enter the final push against this proposed merger.

Click here to access the strategy and learn more about the Final Push Action Zoom

PRC Recommends Ratepayers Reimburse PNM for $361M in Imprudent Investments

To catch you up, recall that prior to the Energy Transition Act (ETA) being introduced in 2019, the PRC had issued a recommended decision to deny PNM’S claim for $361M in wasteful investments in Four Corners, determining that these investments in antiquated fossil fuel production were more costly than investing in other available renewable energy resources. I don’t recall or understand why the PRC didn’t take the next step to vote to disallow those costs. But with that step untaken, PNM took a window of opportunity to disarm the PRC by helping to craft and support passage of the ETA, handing the state one of the most aggressive Renewable Portfolio Standards in the Nation. But to secure PNM’s buy-in, PNM was allowed to insert language that stripped the PRC of authority to limit PNM reimbursements on Four Corners.

In defense of the legislature, hundreds of detailed bills are introduced each year, making it very hard for legislators to carefully review every word. So when the Governor, Sierra Club, CVNM, and 350.nm all stand behind a bill, it achieves a level of credibility. So it is easy to understand the impulse to support the bill. In fact, the ETA was initially among Retake’s MUST-PASS bills in 2019, until we read the fine print. Countering ETA supporters were a raft of experts and advocacy groups who had taken the time to analyze every word and offer testimony in advance of hearings and floor votes (summarized below). Our efforts fell on deaf ears. We tried to tell legislators and bill supporters that the ETA would circumscribe the PRC’s authority and could result in Four Corners continuing to operate indefinitely. We were not alone in recognizing the hidden intent of the ETA. The Attorney General agreed with our assessment stating that the ETA “allows the utility to self-regulate.” 

Below we provide testimony and written opinions from PRC staff, a PRC Hearing Examiner, the AG, and nationally recognized regulatory experts. Most all of these opinions were available to legislators before they voted.

From PRC Hearing Officer in the ETA Financial Impact Report, 2019, prior to the ETA’s passage, published in advance of the first hearing :

“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.”

From PRC Staff in the ETA Financial Impact Report, 2019, prior to the ETA’s passage, published in advance of the first hearing :

Section H (2)(c) of the ETA (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.

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.

Below is a quote from the Attorney General from the 2019 Financial Impact Report by Leg. Services Council, which was available to legislators prior to hearings. In asking the legislature to amend the ETA before passing it, the AG validated what the PRC staff, New Energy Economy, and Retake had stated in blogs, e-blasts, and letters to legislators:

“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.” 

Other experts commenting in hearings follow:

From Adam Carlesco, Climate & Energy Staff Attorney at Food & Water Watch:

“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. 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.”

From Steven M. Fetter, former Chairman of the Michigan Public Service Commission, former bond rater for Fitch, former general counsel for the Michigan Senate, and three-time PNM expert witness.

“I view the ETA as a significant departure from other “securitization” laws in a way that undermines the core of the NMPRC’s fundamental purpose and role – to regulate on behalf of the public to “reasonably protect ratepayers from wasteful expenditure.”

From John Boyd, Attorney, Citizens for Fair Rates & the Environment:

“The ETA’s fine print removes discretion from the PRC to control the amount that PNM can extract from ratepayers as ‘compensation’ when it closes any of its old plants. There are many other states with ‘securitization’ laws like the ETA. Not a single one of those laws removes regulatory oversight of the amounts their utilities receive from ratepayers when the utility closes an old plant.” 

Efforts to amend the ETA to respond to these concerns were roundly rejected by the Governor, bill sponsors, Sierra Club, CVNM, and 350NM, asserting that with the amendments, the bill would never pass. The unstated implication being that amending the bill would lead to PNM opposition. And so PNM’s needs were prioritized more highly than the needs of ratepayers and constituents.

In the end, the concerns summarized above were validated by a subsequent PRC decision:

From PRC Decision on PNM’s Request for a Financing Order, 2/21/2020, p. 97, 19-00018-UT:

[T]he ETA constrain[s] the Commission’s ability to adopt the Attorney General’s limits on recovery. The Commission lacks the authority to impose the limits.”

Because they were constrained by the ETA, PRC Hearing Examiners recommended giving PNM 100% of its financial request, $361M, in its financing order for San Juan Generating Station plus an unknown interest rate and the ability to upwardly adjust the financing order based on “actual costs” expended.

Fast forward to last Friday (Nov. 12), when the PRC announced another decision that handed PNM another huge payday. While I have not been able to read the 150-page decision just yet, given that the Hearing Examiner had already ruled the Four Corner investments to be imprudent and hence not recoverable by PNM, it seems obvious that this new decision, like the one referenced above in relation to San Juan Generating Station, is yet another ETA gift to PNM.

Despite a plethora of expert witnesses warning legislators, they were seduced and pressured by the Governor, the Sierra Club, CVNM, and 350NM, who repeatedly asserted that if we didn’t pass the ETA displaced workers and transitioning communities would be abandoned, as if the only way the state could have achieved those goals was by embedding that support in a bill that henceforth allowed PNM to regulate itself (never a good idea).

We hope that this post alerts you to the critical importance of being part of a coordinated advocacy effort to ensure that PRC Commissioners stand in opposition to the merger and uphold the Chief Hearing Examiner’s recommendation to deny the proposed PNM-Avangrid/Iberdrola merger. Click here to review our strategy and find out what you can do.

The stampede to pass whatever the Governor proposes and whatever Sierra Club et al support has consequences. Retake has already published posts on all that is bad about Net Zero and a brief post on MLG’s ill-conceived Hydrogen Hub initiative. Expect a deeper dive into the Hydrogen Hub next week.

In solidarity and hope,

Paul & Roxanne

Categories: Climate Justice, Uncategorized

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2 replies

  1. Governor MLG and Speaker Brian Egolf, I do not want an uncritical bunch pushing for NET ZERO or Hydrogen Schemes…Lorraine UPton

  2. Thanks for how complete this package for advocacy is. I recommend another reason to oppose–related–pointed out in VB Price’s blog yesterday, which talks about the critical downside of energy monopolies:
    Finally, can you give a little guidance on the press release that Avangrid is saying it will meet most of the hearing officers’ recommendations, and that some in opposition to Avangrid are now on board with that? Can that can prove to be an obstacle to success with getting the PRC to oppose the merger? Guidance on how to address that in our advocacy rather than just ignoring it?

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