Should ratepayers bail out PNM?

Imprudent investment in aging coal plant should fall on PNM’s shoulders

If you’re a PNM customer, a lot of your electricity comes from an aging coal-fired power plant in northwest New Mexico: the Four Corners Power Plant. Last December, PNM submitted a rate increase request with the Public Regulation Commission that included a request to receive both “cost recovery” for plant improvements and profit to continue to use Four Corners through the year 2031.

PNM committed to spending $148 million of your ratepayer money on extending the life of Four Corners for another 13 years, when other less expensive options were possible. In fact, a recent cost analysis confirmed an alternative scenario using a new natural gas plant and renewable energy, solar and wind, would have been a much less expensive option.

Under state statute, if an electric utility makes an infrastructure investment and wants both cost recovery and the ability to make a profit from the investment from ratepayers, it must prove that the investment is “fair, just and reasonable and in the public interest.” With its Four Corners decision, PNM did not meet this “burden of proof” demonstrating cost-effectiveness for ratepayers. PRC’s Hearing Examiners, acting as quasi-judges, concluded PNM’s decision was “imprudent” — pretty much the same as saying “not justified.” PNM relied on an outdated and flawed financial analysis when it committed to spending hundreds of millions of dollars at Four Corners.

In requesting cost recovery for extending the use of Four Corners, PNM wants you, the ratepayer, to “eat” the imprudent costs rather than PNM’s stockholders. What seems fair is if PNM made an imprudent investment, all costs associated with that investment should be rejected in the rate case. PNM executives and stockholders should get stuck with the costs of the unreasonable investments they made. Why should we ratepayers bailout PNM for its bad decisions?

Even though the hearing examiners determined ratepayers should be held harmless from PNM’s unsound business decision, a host of parties involved in the rate case support a settlement with PNM that imposes nearly all of the Four Corners imprudent costs on ratepayers. Those parties include: the state attorney general — the “consumer advocate” under state law — along with PRC staff, Western Resources Advocates and the Coalition for Clean Affordable Energy. Their support for the settlement is troubling given the overwhelming evidence that PNM continued its investment in a dirty coal plant when it had the opportunity to end its use of Four Corners to save ratepayers money while protecting our environment.

When faced with this same option, El Paso Electric ended its involvement in Four Corners, saved its customers more than $100 million and increased its use of solar power. WRA and CCAE argued they knew PNM’s investment was “imprudent,” and yet the settlement they support only reduces PNM’s rate increase request by $21 million. The alternative power generation scenario, using a natural gas plant and renewables, would have saved over $400 million! The attorney general and the clean energy groups like WRA and CCAE are supposed to be representing us ratepayers and safeguarding the environment — not settling for relative peanuts from PNM and sticking the rest on ratepayers.

There was a time, a decade or two ago, that coalfired electric power was the cheapest game in town — assuming you ignored its substantial public health and environmental costs. But that’s no longer true. Much cleaner natural gas power plants combined with a generous mix of solar and wind power can out-compete coal head-to-head. The time has come to replace our outdated reliance on coal power, a 100-year-old technology that is a leading cause of catastrophic global climate disruption, with the clean, cost-effective options available to us in the 21st century. We not only owe it to our precious environment, but we also owe it to the hardworking customers of our state’s electric utilities. Craig O’Hare is a PNM customer, 30-year Sierra Club member and was Gov. Bill Richardson’s special assistant for renewable energy from 2003 through 2010.