The New Mexico Supreme Court sided with Gov. Michelle Lujan Grisham, lawmakers and the state’s largest electric utility in a bench ruling Wednesday that allows the company to apply a new energy law to recover investments it made in a coal-fired power plant near Farmington.
The state’s high court ruled that the Energy Transition Act, which the governor signed into law in 2019, does apply to Public Service Company of New Mexico’s plans to close and recover investments in the San Juan Generating Station. The law, which requires the state to transition to zero-carbon electricity generation by 2045, also enables PNM to sell bonds that would be paid off by utility customers to raise $360 million.
The state Public Regulation Commission, which oversees utilities, and PNM were at odds on whether the law applied to the coal plant’s shutdown because the commission began proceedings for PNM’s plan before the energy measure became law.
The court released an official order later Wednesday applying the law to PNM’s plans to recover costs associated with abandoning the coal plant and replacing its power.
The governor applauded the decision in a statement released by her office after the ruling on the law’s application in the PNM case, which has been the subject of heated debate between the utility, environmental groups and consumer advocates.
It also has been a source of frustration for the governor’s administration.
“Today’s unambiguous ruling by the Supreme Court underscores what we have said all along: the Energy Transition Act is the law of the land. I am grateful for the court’s quick and impartial action, and I look forward to continuing New Mexico’s push into a thriving clean energy future,” Lujan Grisham said.
Justices on the Supreme Court wrestled with whether, in the words of Justice Barbara Vigil, the court was setting a precedent “for usurping the utilities proceedings” by having the court intervene or whether the question should be left to the PRC to determine. They also weighed whether the commission should have decided some of the matters in the case at the outset of the San Juan abandonment proceedings.
An attorney for the commission, Michael Smith, argued it was the commission’s legal duty to have hearing examiners consider whether the Energy Transition Act applied to the coal plant closure because of disagreement between PNM and a Santa Fe-based nonprofit, New Energy Economy, which has argued in the past the law is unconstitutional.
Justice Shannon Bacon, questioning Smith, noted that instead of determining whether the law applies at the outset, the PRC opened two separate legal proceedings, one in which the law applies and one in which it does not, and muddied the legal waters.
“Once it’s an issue, why not decide it at the beginning instead of where we are now?” Bacon said.
For critics, the question at the heart of the issue is whether utility customers will save money under the Energy Transition Act.
A host of environmental groups, lawmakers and PNM have argued the energy law ultimately will save money for electric customers and will enable about $40 million in severance payments and workforce aid to coal plant workers who will lose their jobs.
New Energy Economy, on the other hand, argued in past court proceedings the law would cost utility customers more money. Its executive director, Mariel Nanasi, has referred to the energy law as a “corporate bailout” for PNM’s investors.
“The ETA is the enemy of the poor, and the PRC was diligently working to uphold the New Mexico constitution and rights of the people, and the New Mexico Supreme Court just required the PRC to implement the ETA,” Nanasi said Wednesday after the hearing.
Nanasi argues PNM filed paperwork with the PRC regarding its plan to abandon the San Juan Generating Station on Dec. 31, 2018 — a point PNM disputes.
Republicans also decried the court’s decision.
Larry Behrens, a former spokesman in GOP Gov. Susana Martinez’s administration and now a director for the energy group Power the Future, said the ruling “highlights the bait-and-switch scheme behind this disastrous law,” which he said would “cost thousands of jobs and raise electric rates on New Mexicans.”
House Minority Whip Rod Montoya, R-Farmington, said in a statement it would “force utility rates to skyrocket in years to come.”
A witness for PNM, company Vice President and Corporate Controller Henry Monroy, even acknowledged costs associated with transitioning to a new energy source after the utility abandons the coal plant could result in increased rates, according to a transcript of a Dec. 12, 2019, PRC hearing on the San Juan abandonment plan.
PNM spokesman Ray Sandoval said that while the ETA results in cost savings for the company, rates could still increase due to other factors not associated with transitioning away from coal. Sandoval said rates will go up, but they will increase less than if the company had continued to operate the coal-fired San Juan plant.
Sandoval said customers will see an average $7 reduction in their monthly utility bill in 2022.
The Sierra Club and Western Environmental Law Center applauded the high court’s decision Wednesday and maintain the law will save money for utility customers and help the state transition to clean energy.
“As the global market for coal collapses and communities face the consequences of transition, the Sierra Club has really wanted to ensure that we see real community transition and a transition to renewables and batter storage,” said Camilla Feibelman, director of the Sierra Club’s Rio Grande Chapter. “And so for us, the Energy Transition Act represents an opportunity to speed coal closure while making it a just transition.”
Feibelman said the law ensures “high levels of renewables,” money for workers and money for the school district in Farmington that likely will be lost if the city’s largest employer, the coal plant, goes under.
It is still unclear whether the San Juan Generating Station actually will close after PNM abandons it or whether another company that aims to install a carbon capture system will acquire the plant and keep it open.
Sandoval lauded the court’s decision and said it “positively impacts the people of New Mexico” as the state transitions to clean energy.
House Speaker Brian Egolf, who was a party in the case before the Supreme Court, said in a statement the court “affirmed state law and the people’s decision to rapidly transition to an economy built on renewable energy and quality jobs.”
He called it a “bold step addressing the climate crisis and providing meaningful support for workers affected by the transition to emissions-free electricity.”