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PNM filing states past investments into power plant were prudent based on available information


Company is seeking to transfer ownership share to NTEC

AZTEC — The Public Service Company of New Mexico argues that, based on the information available at the time, it made the right decision for customers when it chose to invest in upgrades at the Four Corners Power Plant in 2013.

Those investments reduced emissions and allowed for the power plant to continue operating, the company says.

Now, less than a decade later, PNM is seeking to transfer its 13% ownership, or approximately 200 megawatt share, of the power plant to the Navajo Transitional Energy Company.

Upon orders from New Mexico Public Regulation Commission hearing examiners, PNM filed an amended application this week that addressed the prudence of those investments made to keep the power plant operating.

More: PRC orders PNM to file amended application for Four Corners Power Plant ownership transfer

PNM is seeking more than just approval of the transfer of assets. It has also asked for securitization, or low-interest bonds, that will refinance the past investments into the power plant while also providing funding to assist the community and workers.

The PRC previously approved El Paso Electric's application to transfer its 7% ownership in the Four Corners Power Plant to NTEC, but that was before the passage of the Energy Transition Act. That meant El Paso Electric was not able to ask for securitization.

The Energy Transition Act's securitization mechanism has only been used once — when PNM applied to abandon the San Juan Generating Station, meaning it will no longer operate the power plant after 2022. However, the securitization has been challenged at the New Mexico Supreme Court level.

More: PNM files application to transfer 13% ownership in Four Corners Power Plant to NTEC

The amended application filed this week states that transferring its ownership share of the power plant to NTEC will save customers between $30 million and $300 million. PNM officials further argue that the investments made in the plant were prudent and should not have bearing on the current application.

The PRC hearing examiners asked PNM to address the prudence of those investments because that question was left unanswered in a 2016 rate case. The 2016 case postponed the decision on the prudence of investments until the next rate case, which has not yet been filed. However, if securitization is approved, customers will be asked to pay a nonbypassable energy transition charge. That means the customers will be paying for those investments, which some environmental advocacy groups say were imprudent and should be borne by shareholders rather than ratepayers.

More: As San Juan Mine braces for layoffs, assistance is uncertain and carbon capture hopes fade

PNM estimates those energy transition charges could be $1.32 per month for residential customers who use less than 900 kilowatt hours monthly. Meanwhile, residential customers who use more electricity could be charged $3.44 per month.

PNM is seeking $276 million in securitization, which includes refinancing the past investments into the power plant that it still owes money on.

Environmental advocates say PNM should have left the coal-fired power plant in 2013 when it had the opportunity rather than continuing to invest money into upgrades. A 2016 rate case left the question of the prudence of those investments for a future rate case, but that future rate case has not yet happened. That led to the PRC hearing commissioners requesting information about the past prudence of investments into the Four Corners Power Plant.

The investments include $90.1 million for selective catalytic reduction pollution controls and $58.6 million in capital investments to make sure the power plant could continue operating.

More: APS announces plan to switch one power plant unit over to seasonal operations in 2023

PNM Executive Director of Regulatory Policy and Case Management Mark Fenton argues in testimony included in this week's filing that based on the information PNM had in 2013, extending its use of the Four Corners Power Plant and making those investments was prudent because evaluations indicated it would lead to customer savings of between $46 million and $180 million compared to the alternatives that were available at the time.

Additionally, Fenton argues that the prudence of those investments should not have a bearing on the PRC’s decision regarding abandonment and financing.

Meanwhile, PNM Vice President of Generation Thomas Fallgren states in his testimony that PNM began having discussions with the other Four Corners Power Plant owners in 2018 regarding the potential for the utility to exit the power plant early.

Fallgren highlighted that other participants, including the Arizona Public Service Company, have been phasing out coal. He highlighted APS testimony to the Arizona Corporations Commission stating that APS is keeping Four Corners running through 2031 to prevent jeopardizing system reliability as other coal-fired power plants close.

However, APS and the other owners of Four Corners Power Plant plan to switch to seasonal operations at one of the two units at the Four Corners Power Plant.

Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652 or via email at hgrover@daily-times.com.

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