June 30, 2022

PRC accuses PNM of misleading regulators, requires utility to issue rate credits upon San Juan unit closures

Hannah Grover

The San Juan Generating Station is pictured Monday, April 19, 2021, in Waterflow.

While accusing the state’s largest electric utility of purposefully misleading regulators, the New Mexico Public Regulation Commission ordered the Public Service Company of New Mexico (PNM) to issue rate credits to customers upon the closure of each remaining unit of the San Juan Generating Station.

In its order, approved by a unanimous vote Wednesday, the PRC adopted the hearing examiners’ recommended decision that was made public earlier this month.

PNM will also be required to include a prudency evaluation of its decision to delay issuing bonds in its next rate case. If it is found that the delay led to increased interest rates, the shareholders could be asked to absorb the costs of the increased interest rates.

Unit One of the San Juan Generating Station will close this week and Unit Four will close this fall. Upon closure of the power plant, PNM must provide funds to three state agencies tasked with assisting the impacted workers and community.

While not included in the order, the PRC could at a later date open a docket looking into whether PNM violated the state’s Energy Transition Act. Commission Chairman Joseph Maestas brought up this possibility and said he would lead such an effort.

PNM has argued that delaying the issuance of bonds and not instituting a rate credit will prevent a rollercoaster of utility rates by decreasing the size of the rate increase that PNM will request once it files its next rate case. 

But, by delaying this, opponents say ratepayers will be paying for the power plant’s operations for years after it closes.

“We’ve been advocating and litigating for more than a dozen years for this moment. Back then we predicted that closing coal was cheaper and better for the environment and our health,” Mariel Nanasi, executive director of New Energy Economy and vocal PNM critic, said in a press release. “Today‘s PRC-ordered victory closes another PNM coal unit at San Juan and the average ratepayer will be enjoying a 10 percent credit per month on their bill beginning in October because solar and wind are less expensive than fossil fuels. The PRC unequivocally chastised PNM for its concealment, for its dishonesty, for its ‘cheating’: it’s time to invest in community care and repair and reap the benefits of community owned renewable energy instead of continued reliance on a corrupt monopoly.”

PRC says PNM lacks transparency

This case demonstrated the PRC’s increasing frustration with PNM and what the commissioners view as a lack of transparency. 

“This is just the clearest illustration I’ve seen since I’ve been on the bench here at the commission of how this company serves its own ends and makes it difficult for us to get the information we need,” she said.

Related: Groups argue PNM will ‘overcharge’ customers by not issuing bonds when SJGS closes

The PRC alleges that PNM changed its plan so that it would not issue the bonds or remove the San Juan Generating Station from rates upon the power plant’s closure this year. Commissioners further say that PNM chose not to inform the PRC about that decision and the PRC learned of it from consumer advocacy groups this spring.

“There are such things as lies of omission,” Maestas said.

PNM spokesman Raymond Sandoval said PNM was transparent and cited testimony a PNM official gave in 2019 stating that PNM would issue bonds along with the upcoming rate case. He further said that the only way for PNM to remove the San Juan Generating Station from the rates is through a rate case. When the COVID-19 pandemic hit, the rate case was delayed and it then was delayed again during a merger case in which a larger utility, Avangrid, attempted to take ownership of the utility.

Judith Amer, PRC general counsel, said that it was clear during past cases that PNM would issue the bonds close to the time the power plant closed so that both shareholders and ratepayers would receive benefits.

Since that has changed, Amer said “the ratepayers are not getting the benefit of the bargain and PNM is simply saying, ‘trust us, we’ll give it to them in the future.’”

PNM maintains that ratepayers could see a large increase following the next rate case. Sandoval said PNM thought it was helping customers by delaying the rate case amid the pandemic and is now being punished for that action.

“We don’t know that they’re doing a favor until we actually go through the rate case and see if a rate increase is indeed justified,” Commissioner Stephen Fischmann said.

At the same time, internal documents referenced in the recommended decision point to PNM hiring an outside firm to develop a messaging strategy that the hearing examiners say PNM used to bill its decisions as altruistic.

Sandoval said when PNM has complicated topics that it needs to communicate with customers, it will use outside firms to help in that process. That involves getting customer feedback about the messaging.

He further criticized the PRC as lacking transparency, saying that the commissioners are lecturing PNM about being transparent when they, on Tuesday, had a two-hour long closed session for deliberations about the case. He said this did not follow normal commission procedure of having the hearing examiners present the recommended decision in an open meeting followed by having the general counsel present the exceptions, or arguments against, the recommended decision also in an open meeting prior to the commission voting on the order.

Additionally, he said the order violates the commission’s policy to avoid what is known as piecemeal, or single issue, rate making. The hearing examiners acknowledged this in their recommended decision.

Related: PRC hearing examiners: PNM ‘scheming’ and engaging in ‘guileful manipulation’ of the Energy Transition Act

Commissioners take turns criticizing PNM

During Wednesday’s meeting, each commissioner took a turn criticizing PNM’s action with language accusing the company of attempting to cheat and trying to hide information from the commission. Maestas accused PNM of trying to benefit shareholders or pad executives’ bonuses.

Sandoval said that is not the case. He said the money that would have been used to pay for San Juan Generating Station will be used to cover rising expenses in other areas.

He compared it to a coffee shop that charges $5 for a cup of coffee to cover the expenses of an espresso machine that keeps breaking down. He said if the coffee shop gets a new espresso maker, it won’t have to pay those maintenance costs anymore, however if the cost of coffee beans is going up, it doesn’t make sense for the owner to reduce the price of a cup of coffee just because it is no longer paying to repair the espresso machine. Instead, he said the business owner would use the money that would have been spent on repairs to cover the increasing costs of coffee.

Commissioner Theresa Becenti Aguilar and Commission Vice Chairwoman Cynthia Hall said that PNM’s actions in this case will impact their future credibility before the commission and Becenti Aguilar questioned some of the other decisions that the utility has made. Becenti Aguilar said she believes PNM misled the public about the need to extend operations of unit four of the San Juan Generating Station.

Even Commissioner Jefferson Byrd, the sole Republican on the commission and the commissioner who most frequently opposes imposing fines for companies, had some harsh words for PNM. He said he generally gives companies the benefit of the doubt, but, when it comes to PNM, he said it is evident that the utility has tried to mislead the commission. He said the hearing examiners outlined the ways that PNM attempted to do so. He voiced support for Maestas’ proposal to open a docket to investigate PNM’s behavior and possibly issue fines.

While PNM claims it was transparent and that its plan will save customers money in the long run, all the parties that intervened in the case, including the New Mexico Attorney General’s Office and consumer advocacy groups, supported the commission adopting the recommended decision.

The concern is that PNM could collect $94 million annually from ratepayers and then potentially also collect on the past investments into the power plant that it has not yet paid off by including them in securitized bonds that it is authorized to issue under the Energy Transition Act should the utility choose to issue them.

“For the layperson, all this could look very confusing, but actually it’s quite simple,” Fischmann said. “We have the ETA. It’s very clear what it was meant to do and where it was meant to go. And the bottom line is PNM has made an attempt to cheat on its obligations under the ETA. They’re just trying to cheat customers out of money.”

Fischmann said PNM officials were aware they were cheating because they chose not to inform the commission because internal documents show they were concerned.

“In my opinion, their credibility is now nil,” he said.

Case could go to the courts

PNM plans to appeal this decision to the New Mexico Supreme Court.

“We wholeheartedly and unconditionally stand in continued support of New Mexico’s landmark energy policy laid out in the Energy Transition Act and its provisions for carbon-free energy, reduced customer costs and support for impacted communities. Despite external challenges, our teams have worked to go beyond adoption of the legislation and find ways to achieve the carbon-free transition earlier and more cost effectively for customers,” PNM Resources Chairwoman and CEO Pat Vincent-Collawn said in a statement. “It is disheartening for PNM to be arbitrarily penalized today for opting not to file its planned customer rate increases over the last two years, a change made for the benefit of customers as we navigated the energy transition amidst an unforeseeable global pandemic. We will appeal today’s order.”