PRC should allow PNM to recover all its Palo Verde costs

Nuclear energy has a role along with wind, solar power in making electricity affordable

Reliable electricity is the backbone of society and will make a difference in how we move this state out of a lingering recession. That’s why the Recommended Decision (RD) in the PNM rate case, which could effectively eliminate nuclear-produced electricity as an option for New Mexico’s future, was so stunning. If adopted, it could be the precursor to higher rates and a dilemma for electricity production in our future.

PNM is a regulated monopoly, which means it is the sole provider of electricity in its service territory. The New Mexico Public Regulation Commission is charged with oversight of monopolies to ensure New Mexicans get a fair deal, and it is specifically required, by statute, to balance the interests of consumers, investors and the public.

Unfortunately, the process at the PRC seems to be moving away from one that is fair and balanced. This is evident in the RD for PNM’s rate case and, if not corrected by commissioners, will have a huge bearing on our future.

Last fall, after several years of discussion and planning, the PRC approved a plan for PNM to close two of its four coal plants. That closure will reduce the plant’s usage of coal, water and carbon emissions by 50 percent. In exchange for these environmental gains, PNM had to seek additional generation sources to replace the lost power. To maintain affordable, reliable service that is available 24 hours per day, PNM sought to diversify its energy portfolio to include more natural gas and nuclear energy. Solar and wind will help make up part of the lost generation, but they are unable to provide the round-the-clock service that we’ve all come to rely upon.

The problem with the RD in this case is that the hearing examiner disallowed all cost recovery for leases at Palo Verde Nuclear Generating Station. Electricity generated at Palo Verde is our most reliable, economical, carbon-free source of generation.

What is the true cost of the RD, if the PRC fails to set it aside and do the right thing for New Mexicans?

For starters, PNM would be faced with the unsavory decision of whether or not to sell its interest in Palo Verde to recover its costs.

Second, this bad decision would set precedence where PNM and other utilities in New Mexico would probably not invest in nuclear energy again for fear of not recovering all of the associated costs. In 2023, PNM will have the opportunity to purchase Palo Verde capacity that it is now leasing. PNM has stated it will not purchase any more leased capacity when opportunities arise, if this RD stands.

And what would fill the gap of lost nuclear power? It would have to be another type of base-load generation, such as natural gas, because of reliability issues with solar and wind. Unfortunately, natural gas is also under attack by the “keep it in the ground — 100 percent renewable energy” activists.

Third, if we lose nuclear power, PNM will need to build new generation facilities to provide for its base-load requirements. New generation facilities can be expensive and will drive rates up.

Palo Verde is the top electricity producer in the nation and regularly sets safety records. U.S. Energy Secretary Ernest Moniz said that nuclear energy “remains by far the biggest source of carbon-free electricity.”

Why would there be any desire to rid New Mexico of electricity from this valuable resource?

There are some who would like to see New Mexico’s electricity be provided 100 percent by solar and wind. It’s possible that we could see increased use of these sources if an economical means of storing produced electricity becomes viable. But the fact is solar and wind only produce about 30 percent of the time and will never cover 100 percent of our electrical needs.

NMUSA urges the PRC commissioners to do the right thing for New Mexico by setting aside this decision. Commissioners should allow PNM to recover all costs associated with Palo Verde so that it can continue to produce the 24-hour power we need for our homes and businesses.