Clearing up inaccuracies

By Camilla Feibelman, Rio Grande Chapter Chair

Utility-related cases at the Public Regulation Commission (PRC) are as complex as the need for a transformation to clean, renewable energy is urgent.

New Energy Economy and Retake Our Democracy have misrepresented the Sierra Club’s position and that of the Coalition for Clean and Affordable Energy (CCAE), of which we are a member.  This time would be better spent talking to you about the next key steps we need to take – and that we will be taking – to solve the climate crisis, but we will get to that in future reports.

Before saying anything else, I want to be clear that we make it a policy not to impugn the intentions of what would ostensibly be an allied organization because we believe in trusting the best intentions of others.  But after regular and repeated misrepresentations of the Sierra Club’s work on the issue I’ll describe here, and other issues that I won’t discuss here, we feel we are left with no alternative but to correct the serious misinformation being spread.

First, the Sierra Club is a member of the Coalition for Clean and Affordable Energy (CCAE). However, CCAE doesn’t legally represent Sierra Club at the Public Regulation Commission. When Sierra Club decides to get legally involved in a PRC case, we hire our own attorneys and intervene on behalf of the Sierra Club (Thank you to NEE for correcting this misstatement in their last email). We are never represented by CCAE in proceedings. We are, however, a member of CCAE and participate in discussions with other members. Sometimes coalition members don’t agree on all positions. But the decisions and disagreements are good-faith efforts to do the right thing for people and the environment.

In the case I want to discuss here, the Sierra Club did not take a position for several reasons, not least of which is that we are in the midst of working on state methane-rule stakeholder meetings as well as implementation of the Energy Transition Act and are simply at our max.

That said, CCAE and its lawyers have worked tirelessly to defend New Mexico and our climate to move us into a renewable future, so though we did not intervene with them in this case, we stand by their work and integrity.

Neither Sierra Club nor CCAE supports nuclear energy. The Sierra Club has a clear policy opposing electric generation from nuclear energy, and we strongly advocate for renewable energy.

Here’s a short explanation of the case at hand. The Supreme Court recently ruled on appeals to a PNM rate case that the Public Regulation Commission decided on in 2016. The case included many issues that affected the climate. CCAE and NEE (though not Sierra Club) both intervened. NEE and CCAE were not in conflict on any of the positions they took in the case, which were different but overlapping.

One of the issues in the original case was that PNM repurchased nuclear power that it had been leasing from Palo Verde nuclear plant. It also renewed other leases from Palo Verde. PNM wanted to raise rates for that power and add a charge for paying into a Palo Verde decommissioning fund on the power it had purchased. The commission found that PNM’s purchase of its leases wasn’t prudent, and it significantly slashed the rate PNM wanted to charge. It also disallowed PNM from charging customers for decommissioning on the purchased power.

Both PNM and NEE appealed the commission’s decision – NEE argued that customers shouldn’t be charged at all for the nuclear since the commission had found the purchase and renewal to be imprudent, and PNM appealed on several items, including the nuclear rates and the disallowance of the decommissioning charge.

In its ruling, the Supreme Court affirmed the commission’s decisions on all aspects of the case except for the disallowance of the decommissioning charge. The court reversed that part of the decision for procedural reasons (it said the commission did not allow PNM due process). The court affirmed the commission’s ruling that the nuclear purchase was imprudent and its decision on the nuclear rates.

On remand to the PRC, NEE sought to have the PRC reopen the entire case, rather than just the ruling on the decommissioning issue that the Supreme Court reversed. CCAE’s attorney argued that only the part of the case overruled by the Supreme Court should be reopened, pointing out that under established legal doctrine, parties can’t relitigate issues that have already been decided and affirmed by the Supreme Court. CCAE’s attorney pointed out that if the entire case were reopened, PNM could then relitigate important aspects of the case it lost, including the imprudence finding itself.

The other argument CCAE made, and that other organizations have twisted, was this: Disallowing those 168 MW of Palo Verde nuclear from rates will not affect the operations of the nuclear plant. It would continue to operate, and PNM would just sell that nuclear power to be used by someone else. In addition, if that power is taken out of PNM’s generation portfolio, it could lead to more gas generation and more carbon emissions, because PNM would have to make up the lost nuclear power, and could do so either from increased use of existing gas generators or from new gas plants. All the pain and bad consequences of uranium and nuclear power would remain, but we could get more carbon emissions. CCAE’s concern is that the most likely outcome isn’t a choice between nuclear and natural gas, it’s a choice between nuclear and nuclear-plus-gas.

Whether you agree with CCAE’s opinion or not, those are thoughtful, good-faith arguments, not “boosting nuclear,” as other groups have publicly and misleadingly accused. And, of course, whatever CCAE said at the commission, it was not representing the Sierra Club in its statements.

I asked CCAE for a more detailed memo on their position, which you’ll find below.  I’ll communicate later about other related issues around nuclear energy. In the meantime, please feel free to send me questions, but most importantly, let’s please listen and not blame; let’s analyze together and not cast aspersions. We have enough battles to fight without creating problems where there aren’t any.

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MEMORANDUM

TO: Camilla Feibelman, Sierra Club
FROM: Chuck Noble
SUBJECT: Case No. 15-00261 CCAE Remand Position
DATE: July 24, 2019

This case relates back to the 2015 PNM rate case, 15-00261.  In the original case before the Commission, NEE asked the Commission to disallow the cost of extending PNM’s leases on 114MW of Palo Verde power and its cost of reacquiring 64MW of Palo Verde as an asset.  This Palo Verde capacity has been in PNM’s resource portfolio since 1985 and 1986. Also in this case, CCAE and WRA asked the Commission to disallow approximately $52 million from rates due to an imprudent decision by PNM to install balanced draft technology at the San Juan plant.

In the original case, the Hearing Examiner recommended that the Palo Verde reacquisition and lease extensions be found imprudent and that the cost of the Palo Verde 64.1 MW reacquisition and lease payments be excluded from rates, but did not recommend taking these assets out of PNM’s generation portfolio.  CRD p. 108-109.  She also recommended that the balanced draft costs be found imprudent and removed from rates.

Regarding Palo Verde, the Commission decided to provide a different remedy for PNM’s imprudence:  it adjusted the value of Palo Verde to $1306/kW for the 64.1MW and 50% of the original lease cost for the 114MW, stating that this would protect ratepayers from the imprudent decision.  The Commission also decided that PNM should not be allowed to request decommissioning costs related to this portion of Palo Verde for the time it was not included in rates.  It also approved the finding of imprudence for balanced draft costs, and excluded those costs from rates.

PNM appealed the finding of Palo Verde imprudence, the valuation used and the decommissioning cost disallowance to the Supreme Court.  It also appealed the finding of imprudence related to balanced draft and the $58 million exclusion from rates.  NEE appealed the Palo Verde valuation, arguing that it should be $0, and not be allowed to serve customers.

The Supreme Court recently rejected PNM’s argument that the reacquisition of the 64.1MW was prudent, and rejected NEE’s arguments that the Commission should have valued Palo Verde at $0 and removed it from rates.  It affirmed the Commission’s ratemaking treatment of the Palo Verde leases. It also affirmed the Commission’s disallowance of the balanced draft costs for imprudence. It reversed only on the issue of decommissioning costs – it stated that the disallowance of the future decommissioning costs violated PNM’s due process rights because it hadn’t had an opportunity to be heard on the subject.  Here is a link to the Supreme Court opinion:  https://nmonesource.com/.  The Court’s opinion regarding Palo Verde begins on p. 27.

On remand from the Supreme Court, NEE is seeking to reopen the case and relitigate the issue of what cost should be applied to 178 MW of PNM’s Palo Verde Capacity, and is arguing once again that it should be $0 and removed from the generation portfolio.  [July 1 filing, p. 19]

Here is why this should not be done.

1. Opening the remand up to relitigate the issue of the valuation of Palo Verde will set a bad precedent.  If NEE can relitigate that issue, PNM likewise could relitigate the issues it lost on appeal, such as whether Palo Verde reacquisition and lease extension was prudent, and whether it was prudent to install the balanced draft unit.  This would mean no issue that is appealed to the Supreme Court is ever final, because it could be relitigated on remand.  Under the Law of the Case Doctrine, a court, and I believe this Commission, cannot go back and relitigate a decision that it has already made and which has already been affirmed by the Supreme Court.  “The doctrine of law of the case… ‘relates to litigation of the same issue recurring within the same suit.’ ‘Under the law of the case doctrine, a decision on an issue of law made at one stage of a case becomes a binding precedent in successive stages of the same litigation.’; see also United States v. Alexander, 106 F.3d 874, 876 (9th Cir.1997) (“Under the ‘law of the case’ doctrine, ‘a court is generally precluded from reconsidering an issue that has already been decided by the same court, or a higher court in the identical case.’ ” Alba v. Hayden, 148 N.M. 465, 237 P.3d 767, 2010 NMCA 37, ¶7 (internal citations omitted).

That is exactly what NEE is asking to do – to relitigate an issue in the same case that has already been decided and affirmed by the Court.  NEE lost on appeal – the Court specifically rejected NEE’s and the Water Authority’s arguments that the appropriate remedy for imprudence was setting the value of Palo Verde at $0.   It also found that the Commission’s decision as to the value of Palo Verde was reasonable and lawful.

If a party is allowed to relitigate issues it lost on appeal, that opens the door for PNM to do the same.  For example, the Supreme Court affirmed the Commission’s disallowance of Balanced Draft, which reduced PNM’s rate base by $52 million.  Can PNM now ask the Commission to relitigate this issue? Can it come back and ask to provide more evidence that it didn’t provide before, to try to get a new decision?  The answer is no, because of the law of the case doctrine. PNM had its opportunity to litigate the issue, and it lost, and that was affirmed by the Supreme Court. It can’t come back for a do-over.  As another example, PNM can’t come back and relitigate the issue of whether its Palo Verde lease decision was imprudent, because of the Law of the Case Doctrine.

2. Disallowing the 168MW of Palo Verde from rates will not affect the operations of Palo Verde.  It will continue to operate just as it has, for as long as the owners decide to.  If the 178MW are taken out of PNMs rates and generation portfolio, they will just be used by someone else.

Removing 178 MW from PNM’s cost recovery is a false issue – it will not cause Palo Verde to shut down or change its operating characteristics.  Palo Verde is almost 4000 MW of capacity and has 8 owners and is operated by Arizona Public Service Company. It will operate at maximum capacity regardless of the outcome of this case.  This case will not have an effect on that. It will not affect nuclear fuel use or storage, or any other environmental effects from nuclear generation at Palo Verde.

In fact, removing this portion of Palo Verde from rates could have an adverse effect on carbon emissions and climate change.  If PNM has to replace the generation from Palo Verde, there is no certainty that it could be replaced entirely by renewables – and there is a good possibility that PNM would seek to increase its generation from existing gas plants or even add gas generation.  In fact, PNM’s 2017 IRP, shows that is exactly what could happen. That IRP, in Table 129 shows what happens if 114MW of Palo Verde is not used as a resource beginning in 2023 – and it shows replacement by gas generation. See also, PNM 2017 IRP, p. 108.

CCAE doesn’t support nuclear generation.  But because removing 178MW of Palo Verde from PNM’s portfolio would not change the operations of the plant, and could also result in increased gas generation, removing it would have no benefits and could actually increase carbon emissions.