By Mona Blaber and Karl Braithwaite
From the Spring 2022 newsletter
San Juan coal closure will lower expenses, but utility wants to delay the rate reduction
PNM is planning to keep charging customers for San Juan Generating Station long after the polluting coal plant has stopped providing power to our homes.
In 2020, New Mexico’s Public Regulation Commission approved a plan for PNM to switch from the coal-fired San Juan Generating Station to cheaper renewable energy and battery storage and pay off the costly coal plant’s remaining debt with low-interest bonds. Combined, those changes are expected to lower the average customer bill by an estimated $7 a month. But PNM doesn’t want us to see those savings for at least a year and a half. The utility has announced it will delay the bond sales — and the resulting rate reductions — until after it imposes an unrelated rate increase in late 2023 or 2024, so it can continue collecting profits on San Juan and camouflage the impact of its rate hike.
Ever since San Juan costs first went into our rates after the plant was built in the 1970s, a portion of our bills has gone toward paying for past capital investments in the plant. We also pay PNM a 10% rate of return on those costs — a bit like paying an interest rate to a bank on a loan. That “rate of return” collected from customers on power-plant investments is a big source of profit for utilities like PNM.
Because PNM and customers still owe millions on San Juan but the plant has become too costly to continue operating, the Energy Transition Act enabled PNM to sell low-interest bonds to pay off San Juan’s debt when it closes. When the bonds are sold and the debt paid off, PNM will no longer collect its 10% rate of return from customers. Customers will pay off the bonds but at about a 3% interest rate to bondholders rather than a 10% rate to PNM — that’s where a chunk of our savings will come from and why PNM benefits from a delayed bond issue but customers don’t.
In addition to saving customers money by reducing the interest rate, the bonds will also fund $40 million to coal workers and the communities that have been most impacted by the coal plant.
If PNM issues the bonds when it exits San Juan this fall, customer rates go down and money flows to the community and workers. But if PNM waits two years to issue the bonds, customers have to wait to see their savings. PNM claims it will pre-fund the $40 million for the community and workers as soon as the plant closes in October.
But we have to take their word for it. PNM has claimed publicly that it will pay customers back for 18-24 months of paying for power we’re not receiving and for the $100 million or so in profits it will rake in, but its PRC filing suggests it will do no such thing. And rising interest rates mean the delay could also force customers into paying a higher rate on the bond payback.
The PRC should at the very least force PNM to issue a credit to customers starting the month San Juan closes. It’s time to realize the savings that renewable energy will bring us.