In December PNM filed an application at the Public Regulation Commission to increase electricity rates by 9.7%. The Hearing Examiner and the Commissioners will finally decide whether to hold PNM accountable for its imprudent investments in expensive and under-forming coal at the Four Corners Power Plant and even more expensive and toxic nuclear power from the Palo Verde Nuclear Generating Station - decisions the company made without required cost and resource alternatives analyses that have already cost New Mexican families hundreds of millions - an economic and environmental injustice. The Commission's decision about these issues will determine responsibility for costs that could add approximately $13 per month for the average residential customer for seven years. PNM is also requesting an increased Return on Equity - a premium collected from customers on capital expenditures - from 9.5% to 10.25%. The Hearing will begin September 5th.
A public comment session has been scheduled for Thursday, August 31st at 4:00PM via Zoom. To sign up click on the link below to send an email to public.comment@prc.nm.gov and inform Patrick Rodriguez that you would like to sign up for public comment in Docket No. 22-00270-UT. Comments will be limited to 1.5 minutes each.
PNM'S 2012 INVESTMENT IN THE FOUR CORNERS COAL PLANT KEPT THE PLANT OPEN AND COST RATEPAYERS HUNDREDS OF MILLIONS
PNM has successfully delayed a decision on the prudence of its decision to reinvest nearly a billion in the coal-powered Four Corners Power Plant (FCPP) in the 2016 rate case. The law states that a utility can only be permitted to pass costs onto ratepayers for "prudent" investments, but when PNM made the decision to ensure the continued life of the coal plant by investing in pollution controls and other capital expenditures to prop up the non-performing old plant, it failed to conduct a required analysis of costs and resource alternatives.
In 2017, when we asked PNM to run its financial modeling software without FCPP, the model showed that it would have saved ratepayers $445 million to transition away from coal at that time. Instead we have been stuck paying for PNM's failure to abandon expensive and polluting coal power for the past seven years, an outrageous economic and environmental injustice. Without PNM's investment the polluting plant would have closed.
PNM attempted to argue, again, that the Energy Transition Act guarantees 100% repayment of their investments in the plant regardless of prudence, but the Commission and the NM Supreme Court disagreed, ordering that the question of prudence and potential consequences be decided now.
New Energy Economy is demanding that ratepayers be held harmless for any investments made in the plant after 2016, that PNM be denied repayment of all future costs on those FCPP investments, and that any future FCPP capital expenses & profit be removed from rates.
PNM'S DECISION TO REPURCHASE AND EXTEND LEASES FROM THE PALO VERDE NUCLEAR GENERATING STATION WAS ALREADY DETERMINED IMPRUDENT BUT WE ARE STILL BEING CHARGED
In 2019 the NM Supreme Court upheld the Public Regulation Commission's decision that PNM's decision to repurchase and extend leases from the Palo Verde Nuclear Generating Station (PVNGS) was imprudent, again because of a failure to conduct a cost and alternatives analysis. The Court held that ratepayers must be held harmless for the imprudent actions of utility management. PNM is now continuing to charge ratepayers for shares in one of those leases, even after they were sold to a third party.
New Energy Economy is arguing that because PNM has continued to collect those costs from customers over the past year, the full amount associated with the cost of those leases that have been sold to a third party - $95 million - plus the return that is being collected on those leases should be returned to customers as a rate credit over the same period of time.
We argue further that because PNM imprudently purchased and extended those nuclear leases, a determination should be made that customers were subjected to increased risk for decommissioning costs and therefore, PNM shareholders should bear the burden of funding the nuclear decommissioning trusts, not PNM customers.
PNM HAS REDUCED ITS BUSINESS RISK AND SHOULD NOT BE ALLOWED TO CHARGE CUSTOMERS A HIGHER RETURN ON EQUITY
PNM has filed for an increased Return on Equity (ROE), from 9.575% to 10.25%. Recent analyses find that in general utilities have been successful in maintaining these higher-than-needed rates of return, even as they have found ways to reduce their risks, resulting in excess wealth transfer from ratepayers to shareholders.
Utilities have been successful in maintaining or increasing their ROE even while significantly reducing risk through the use of numerous “rate riders.” These are rate provisions which permit automatic changes in retail prices outside of a rate review process. Typical examples include fuel clauses and purchased power clauses that automatically adjust rates according to a utilities costs.
Translation - PNM does not deserve an increased guarantee of return on its investments because, in fact, the utility faces less business risk than other industries.
For the test year being used in this case, PNM expects that almost a third - 31% - of its total revenues will come from “rider revenue.” Because these rate riders materially reduce the risks of its operations, we recommend that PNM's Return on Equity be set at no more than 8.9%.
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