As utilities race to meet renewable energy targets set forth in the Energy Transition Act, two of the state’s investor-owned utilities have asked the New Mexico Supreme Court to review decisions the New Mexico Public Regulation Commission has made in cases that they say will impact their transition.
The Public Service Company of New Mexico appealed the final orders in both the Four Corners Power Plant ownership transfer and the Avangrid merger. Southwestern Public Service Company appealed the final order in its renewable portfolio standard case in which the PRC rejected its request for a financial incentive to retire renewable energy certificates early so that it could reach renewable energy targets early.
PNM filed the appeal on the Four Corners Power Plant transfer on Dec. 22. The companies filed the other two appeals on Jan. 3.
The PRC issued the final orders in all three cases in December. A spokesperson for the PRC declined to comment on the appeals because they are pending cases.
None of the PRC decisions will prevent the utilities from reaching the renewable energy targets set in place by the Energy Transition Act, but the utilities say the decisions will impact their ability to reach those targets ahead of the statutory deadline.
For example, the transfer of PNM’s 13 percent ownership share in the Four Corners Power Plant to Navajo Transitional Energy Company would allow the state’s largest utility to end its use of coal generation in 2024 rather than in 2031, when the power plant is scheduled to retire. Opponents argued that the coal-fired power plant would continue operations, resulting in emissions of greenhouse gasses, and that NTEC would fight to keep it operating for as long as possible.
Ultimately, the PRC ruled that it needed more information before it could make a decision. The order issued in the case left open the possibility that PNM could receive approval for the transfer if it provides that information to the commission. That includes a proposal for resources to replace the electricity PNM currently receives from the power plant. The PRC also stated that the prudency of past investments into pollution control equipment at the power plant must be determined before securitization—low-interest bonds resulting in a non-bypassable charge to customers to refinance past investments—can be awarded.
The PRC remains the last regulatory hurdle that the PNM and Avangrid merger has to clear, as both Avangrid and PNM highlighted in press releases following the filing of the appeal. Avangrid has also extended the end date of its merger agreement to April 20, 2023.
“We remain committed to the merger between AVANGRID and PNM Resources, two companies
that share a passion for our customers, employees and the communities we serve,” Avangrid’s CEO Dennis Arriola said in a press release. “Uniting our resources would accelerate New Mexico’s clean energy future with a dedicated focus on reliability and resilience. We look forward to one day welcoming PNM into the AVANGRID family, where we would be steadfastly committed to providing economic, social and environmental value to the communities we serve, just as we do in communities across the country today.”
Related: PRC rejects PNM/Avangrid merger
The PRC rejected the merger, citing Avangrid’s past performance managing utilities in New England, a criminal investigation into executives of Avangrid’s parent company Iberdrola and concerns about the potential for rigged power procurement.
“We believe this merger is unquestionably in the best interests of the state. It keeps the local, reliable PNM utility in place and offers a stronger parent company backing to allow PNM to do even more for our customers, our employees, our environment, our state, and our children. If we did not believe this was right for New Mexico, we wouldn’t keep pursuing it,” said Pat Vincent-Collawn, PNM’s chairman, president and CEO, in a press release. “We are merging with a company that is making a commitment to New Mexico beyond just a financial transaction.”
SPS case centers around renewable energy certificates
The SPS case was largely uncontroversial and the PRC approved the utility, a subsidiary of Xcel Energy’s, renewable portfolio standard plans for both 2022 and 2023 as well as a rate rider that went into effect on Jan. 1 to help the utility pay for procurement of renewable resources.
The friction emerged surrounding a proposal to retire renewable energy certificates earlier than required. RECs are created when a utility places renewable energy on the grid and these certificates are used to document that the utility is meeting its target for the percentage of electricity it provides from renewable sources. In testimony filed in the case, SPS’s rate cases manager Mario Contreras said that if retiring RECs is used to determine compliance with renewable energy targets, then utilities should also be able to retire these certificates early so they can exceed renewable portfolio standards.
Retiring RECs early would allow SPS to achieve the 40 percent renewable target earlier than the statutory 2025 deadline, achieving that target in the years 2022, 2023 and 2024. The utility requested a financial incentive of $1 per megawatt of REC retired. This year, if the PRC had approved it, SPS would retire more than 1.6 million RECs early. The PRC hearing examiner’s recommended decision stated that this did not comply with the commission’s incentives rule, which requires utilities to acquire or produce renewable energy to be eligible for an incentive.
The hearing examiner stated in the recommended decision, which the PRC adopted, that while the retirement of the RECs is the method used to document compliance with renewable portfolio standards, it is a “paper exercise” and does not result in new production or acquisition of renewable energy. The recommended decision stated that incentives are available for utilities to reduce emissions or decrease coal generation and that the RECs document past production, acquisition or generation of renewable energy that occurred prior to May 4, 2021. The recommended decision also states that charging customers an incentive for the renewable energy certificates when they have already paid for the energy that those certificates document is not a just or reasonable cost to the ratepayer.
Meanwhile, SPS argues that the Renewable Energy Act provides the PRC with the ability to provide incentives to encourage utilities to exceed renewable portfolio standard goals and to achieve carbon reductions earlier than required.
“Refusing to award an incentive to SPS, which is a statewide leader in renewable energy development, would discourage SPS to strive to accelerate RPS compliance, which the statute specifically encourages,” Contreras said in testimony filed in the case.