Why NM Legislators Should Be Very Cautious About SB 489
Summary: SB 489 was developed by a coalition of environmental organizations and PNM. PNM claims it has $320M in “stranded assets,” and that responsibility for recovering those stranded assets should fall on ratepayers with no shareholder responsibility. This bill would “securitize” those claimed costs, along with $30M for remediation at the San Juan Generating Station, and $20M for workforce training and economic development to ease the transition from coal. There are other possible securitization costs that PNM could add without PRC oversight. The bill also includes a Renewable Energy Portfolio Standard that would update the current RPS, which is something bill proponents see as an important advance. Funding for remediation, workforce training, and economic development are also very positive additions.
Securitization is a financial tool for reducing the interest on the $370+M, but Retake Our Democracy’s allies New Energy Economy, the Public Regulation Commission (PRC), and grassroots indigenous groups feel left out of the development of the bill and find significant flaws that need to be addressed. Many environmental organizations are fiercely committed to this bill as is and resist efforts to amend it. We stand together on every other climate bill, but this bill needs amendments before we can support it.
History: A similar bill (SB47) was introduced in the 2018 legislative session by Sen. Candelaria, Sen. Neville, and House Rep. Montoya. It was killed in Senate Conservation after vigorous lobbying efforts. It has been reintroduced as a new and improved version, and while enjoying strong support from a very large coalition of environmental organizations as noted, we’d like to see the bill tabled until amendments can be added.
Why Does SB 489 Need Amendments? Without amendments, passage of SB 489 would:
- Require ratepayers to be responsible for 100% of PNMs stranded assets at San Juan (estimated by PNM at $320 million), leaving PNM and its shareholders to pay NOTHING;
- Require ratepayers to be responsible for 100% of securitized remediation costs at San Juan ($30M), leaving shareholders and PNM to pay NOTHING. And the bill is silent on how remediation costs that will likely be far-higher than $30M will be addressed;
- Require ratepayers to be responsible for 100% of the cost of training and economic development ($20M), leaving PNM and shareholders to pay NOTHING;
- Allow inclusion of the abandonment of the Four Corners Plant scheduled to close in 2031, which could increase the cost by at least $700M even if closed “early” in 2022, and, as written, there is no PRC authority to audit this estimated cost (from PNM) or the $320M for San Juan’s retirement;
- Remove legal consumer protections that make it harder to challenge PNM building a gas-powered plant to replace some of the 497 MW of power currently generated from coal. In other words, with the opportunity to replace coal energy with wind and solar, this bill would allow PNM to build a gas plant in San Juan. PNM submitted planning drawings to San Juan County in Oct. and Nov. 2018, of property in San Juan where they are testing the soil for the feasibility of constructing a gas plant;
- Remove the PRC’s authority to “balance the interests of investors and ratepayers” and share liability for stranded assets, an important legal principle, as the PRC has determined previously that PNM would get only 50% of these costs from ratepayers, with 50% borne by shareholders. In fact, when PNM closed two other units at San Juan, costs were shared 50-50 between ratepayers and shareholders;
- Remove PRC’s authority to review and approve the kind of power that will replace coal, directing the PRC that it “shall grant all approvals” for replacement resources selected by the utility;
- Prevent independent power producers, including Pueblos, from competing in the replacement power and creating lower costs for consumers.
What’s more, failure to consult with grassroots indigenous groups resulted in the omission of addressing long-term health impacts from being surrounded by these power plants; providing support for infrastructure needed to support a Just Transition; and incorporating support for traditional economic ways of life, including farming and agriculture, that have been compromised because of contamination and investments in extractive economies that undermined these practices.
Sponsors and supporters initially said the bill would prevent all of the above problems. But after they reviewed amendments that identified specific language in the bill that would allow all of this, their message changed. Supporters have begun to disparage the PRC as unfit to do oversight (an absurd claim given the new composition of the PRC and that they have been in place just over a month). First, they said the bill wouldn’t allow gas. Now they say that while gas would be permitted, it could be prevented. They say that inclusion of Four Corners in this securitization is fine. They say New Energy Economy is obsessed with trying to punish PNM at the expense of larger environmental goals. Why is it wrong for an advocacy organization to advocate on behalf of consumers? How is that a bad thing?
We at Retake Our Democracy feel that conceding the possibility of gas is unacceptable. We feel that asking ratepayers to pay 100% of the cost of PNM’s poor stewardship is unjust. We feel that a good RPS is not worth another expensive bail-out when a new gas plant needs to close, when renewable energy offers a less costly and more environmentally responsible alternative. We feel that the failure of the Alliance supporting this bill to consult with indigenous groups, the PRC, or New Energy Economy is a serious oversight.
Most importantly, we believe these issues are far too complex to be decided by legislators who have no time to review bills in detail and who have no staff to analyze these bills. The PRC was established to make these decisions because they have staff, time, expertise, the ability to audit PNM cost claims, and to hold hearings with testimony offered under oath. In short, they can get at the truth. We are asking legislators to table this bill and allow time for amendments to be added.
There are alternatives. Another bill, SB 492, would securitize the costs of stranded assets while allowing the PRC to determine those costs. HB 275 would provide an RPS that could be strengthened to provide strong goals for renewable development, and there are other ways to fund training, remediation and economic development. We do NOT need to give PNM what could become $1B, and accept a gas plant to achieve a good RPS.