Customers of the Public Service Company of New Mexico will likely get some money back on their bills thanks to the closure of the San Juan Generating Station.
The New Mexico Public Regulation Commission approved a settlement between various parties including PNM on Thursday that sets rate credits for customers going forward.
Now it is up to the New Mexico Supreme Court to decide whether to dismiss the case, if PNM files a motion to dismiss. After that occurs, the rate credits could go into effect 30 days after the court order dismissing the case
Cydney Beadles with Western Resource Advocates, one of the parties to the settlement agreement, said PNM is already collecting the necessary signatures to file that motion.
“It’s obvious that PNM wants to get this behind them and move forward,” she said.
The PRC had previously ordered PNM to issue rate credits, but the utility appealed that order to the New Mexico Supreme Court in June 2022. The court remanded the case to the state regulators last week after PNM reached a settlement agreement with the other parties involved.
The parties to the settlement include PNM, New Energy Economy, PRC staff, Western Resource Advocates, Bernalillo County, the New Mexico Office of the Attorney General, New Mexico Affordable Reliable Energy Alliance, Coalition For Clean Affordable Energy and Prosperity Works.
Under the approved agreement, PNM will provide a total of $115 million in rate credits to customers. The rate credits will be dispersed over the course of one year and, during that time, the average residential customer will see a $9.28—or 11 percent—credit on their bill each month.
Beadles said she was impressed by the leadership that the state regulators showed in their decision to approve the rate credits.
During the meeting, Commissioner James Ellison expressed some concerns that approving the settlement agreement could impact the ongoing PNM rate case in which PNM has proposed increasing what customers pay for electricity. He initially favored having a hearing to gather more information.
“When we make this decision, it’s final,” he said. “We can’t go back to think about ‘should we have considered this or that issue’.”
Had the PRC chosen that route, the hearing would have occurred next week.
Beadles acknowledged that Ellison’s concerns were valid and, though she couldn’t get into the specifics of the settlement discussions, said that they were among the topics considered while reaching the agreement.
Commission Chairman Pat O’Connell opposed delaying issuance of the rate credits. He said delaying the issuance could mean pushing out the lower rates for an entire billing cycle and said the settlement involves a diverse set of advocacy groups that unanimously supported it.
“There is another potential rate change coming,” he said. “I don’t know when that’s going to happen. I don’t know what it’ll be. But the lowering of the bills that will result from approving these rate credits will then get lost in the wash of whatever rate change happens in the future. So for families that are managing their bills, not their rates, and making choices about what to pay for this month versus next month…with the amount of process that has already happened in the face of a unanimous settlement, I just can’t justify anything that might cause any delay on issuing the rate credit.”
Ellison agreed that the settlement is “a very promising and welcome development” and said that if a diverse group of parties signed onto it, the settlement likely has “some strong merit to it.”
But, he said, the PRC has not had a hearing on the agreement itself and the total dollar amount in the settlement differs from the amounts mentioned in the San Juan Generating Station closure case.
Commissioner Gabriel Aguilera said that he had some concerns that holding a hearing could “potentially unravel something that is just and reasonable” and lead to further delays.
Ellison initially motioned to hold a public hearing, but the motion did not receive a second.
O’Connell then moved to adopt the settlement including the rate credit and the PRC passed that motion unanimously.
Ellison explained that just because he wanted to have the hearing does not mean that he opposes the settlement.
“This is what should have happened from the beginning,” he said about issuing rate credits. “I think this is the right thing to do.”
Beadles said the commission recognized that the matter needed swift action and that much of the work had already been done by the previous commissioners.
“I was really appreciative of the recognition by the chairman of the…financial situation that many New Mexicans are in and that he did not want to delay…a bill credit by even a day,” she said.
Beadles credited the size of the rate credits to the “calm perseverance” of the New Mexico Office of the Attorney General, in particular Deputy Attorney General James Grayson, who led the settlement process and kept the various parties on board.
“I sincerely believe that the final rate credit amount would not have been so large but for the way they handled the settlement discussions,” she said.
The rate credits are, in fact, larger than what the PRC initially ordered last year, a point that Commissioner James Ellison made on Thursday when discussing the settlement. The rate credits that PNM was ordered to issue last year would have resulted in an average residential customer seeing a $8.19 credit.
“We’re confident that the final settlement figure of $115 million reflects the monthly value of the original rate credit that was ordered,” Beadles said.
She said people calculated what customers should have gotten when the plant shut down last year and took into account the proposed rate increases that PNM hopes to have go into effect in January. The calculations also took into account the fact that the full closure of the coal-fired power plant was delayed by several months.
Beadles said the rate credits are a direct result of the Energy Transition Act and that normally utilities remove closed power plants from the rate base in the rate case following the closure.
The Energy Transition Act created a mechanism for PNM to recover its past investments into the power plant through the issuance of low-interest bonds. That came with a requirement that the savings be passed on to customers.
Beadles said that while those bonds have not been issued—PNM has taken initial steps to issue the bonds—the fact that the utility received the right to issue the bonds meant that it also needed to issue rate credits to customers.
“It was their right to issue those bonds to recover the remaining investment that triggered the pre-rate case requirement to pass through the amounts that reflected removal of that plant from rates right away,” she said.
Camilla Feibelman, the executive director of the Rio Grande Chapter of the Sierra Club, praised the decision. The Sierra Club was not involved in the settlement, but supports it.
“This is the Energy Transition Act in action,” she said. “It’s rewarding ratepayers for the utility leaving coal early.”
She said the Energy Transition Act has also provided other benefits, including increasing the amount of renewables and providing assistance funding for the impacted communities.
New Energy Economy Executive Director Mariel Nanasi, who has opposed the Energy Transition Act and is a frequent critic of PNM, noted that this is the first time her organization has entered into a settlement agreement with the utility. This is because, she said, PNM has agreed to do “what it was supposed to do in the first place: stop collecting money from ratepayers on a closed plant.”
“While we are happy to have reached a settlement with PNM on these overdue rate credits, it’s a shame we had to fight an expensive legal battle to claw back money that PNM has owed to its customers for a year,” she said in a press release. “The people of New Mexico should directly benefit from the transition to cleaner and cheaper energy technologies that make fossil fuels obsolete.”