PNM courts lawmakers to pay for closing San Juan Generating Station

Public Service Company of New Mexico is poised to close the San Juan Generating Station this year.

Numerous organizations joined forces this week to argue against the Public Service Company of New Mexico’s method of leaving San Juan Generating Station near Farmington.

In testimony this week before the Public Regulation Commission, PNM officials contended their plan to depart from the coal-fueled power plant, including costs and timing, is fair and appropriate.

But Western Resource Advocates, the Attorney General’s Office, New Energy Economy and PRC staffers, said the utility company has changed its plan to the detriment of customers.

Most or all of the organizations accuse PNM of an attempt to double-bill customers for remaining, or “stranded,” costs at the San Juan Power Plant. PNM denies the charge and spokesman Ray Sandoval said Thursday the utility is “on the right side” of the argument.

PRC hearing examiner Anthony Medeiros asked PRC utility director John Reynolds on Thursday about his view of the double-billing accusation. “Is that the staff’s assertion?” Medeiros, an administrative law judge for the agency, asked.

“Yes, it is,” Reynolds answered.

The evidence hearing took place over parts of four days this week after Western Resource Advocates filed an official complaint early this year about what it contended was a change in strategies by PNM in its departure from San Juan, which is expected to come in two phases this year.

Medeiros said at the end of the hearing the parties involved in the case should file briefs early next month because the commission is on a tight deadline. PNM expects to leave part of the San Juan plant at the end of June and the second part at the end of September.

Western Resource Advocates, joined by many other groups, said PNM intended to renege on its plan to issue low-interest bonds to cover remaining debt on the power plant upon leaving the facility. Instead, the company would issue those bonds after a rate increase takes place in 2023 or early 2024.

Cydney Beadles, an attorney for Western Resource Advocates, said this week in an email message that groups have joined in rare fashion to fight this battle. Beadles wrote that “in all my

26 years of doing this work, I have never before seen regulatory experts for both consumer and environmental advocates so completely aligned.”

The organizations say they believe PNM’s strategy will allow the utility to double-charge customers for the same San Juan costs. First, those charges will remain in customers’ monthly bills after PNM leaves San Juan this fall, then they will be additionally lumped into the customer-funded, long-term, low-interest bonds allowed for PNM under the state’s 2019 Energy Transition Act.

The same organizations also maintain it’s PNM’s responsibility, under an agreement with the commission, to credit customers as soon as the company leaves the plant so there isn’t



double-billing.

PNM has argued its timing for a commission-reviewed rate increase was thrown off by COVID-19 and by the company’s efforts to merge with Avangrid of Connecticut. PNM says it made more sense to issue the $360 million in bonds at the same time that it received approval for a rate increase next year or the following year.

Ray Sandoval, a PNM spokesman, said his company has piled up $1.2 billion in costs and hasn’t had a rate increase in several years. He contended customers actually are benefiting far more from keeping their rate flat now than they would if PNM gave them a credit upon leaving the plant. He said giving customers “a little bit of sugar” now would cost customers more in the long run.

Sandoval said PNM should have clearly communicated its intention to hold off on floating the bonds until its next rate increase in roughly 18 months.

“We thought everyone was on the same page,” he said in an interview Thursday. “We really believed that everyone understood this.”

PNM Resources President and Chief Operating Officer Don Tarry testified this was the plan all along.

“We’ve always assumed that they go together,” Tarry said of the bonds and rate increase. “We’ve always grouped them together.”

But the organizations say issuing the bonds at the same time there was a rate increase was never in the agreement with the commission. Instead, they say, PNM hoped to do that without informing the commission of the change in strategies.

“They’re gonna blame the commission no matter what happens here,” attorney Stephanie Dzur said in an interview, referring to PNM’s difficult relationship with the PRC. “They’ve [PNM officials] complicated this so much.” Dzur represents another organization in the case, the Coalition for Clean Affordable Energy.

At one point in the hearing, Medeiros asked a PNM official if he considered this issue to be a “moral hazard” in which PNM had tried to conceal its plan from the commission and others. The official said the company didn’t consider it that way.

PNM declined during the four days to cross-examine five or six expert witnesses provided by the organizations. Mariel Nanasi, head of New Energy Economy of Santa Fe, said that was evidence of how badly the hearing had gone for the company.

Nanasi said this is a case of customer protection. “You’ve got to live by the deal” that has been made, she said.

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