New energy law applies to San Juan plant closure
NM Supreme Court settles question of how PRC handles case
SANTA FE — The New Mexico Supreme Court ruled Wednesday that a landmark energy law that sets the state on a path toward more renewable energy must be applied as regulators consider plans by the state’s largest electric utility to close a major coal-fired power plant.
The court made its decision after hearing from attorneys representing the Public Regulation Commission, Gov. Michelle Lujan Grisham, state lawmakers and Public Service Company of New Mexico.
Grisham and lawmakers had petitioned the court in December to force the commission to take into account the Energy Transition Act as part of the proceedings over shuttering the San Juan Generating Station near Farmington.
PNM submitted its application for closing the power plant in July 2019. The filing covered the closure as well as proposals for replacing the lost capacity when the plant ends operations.
Regulators opted to consider a portion of PNM’s application as part of an ongoing case that involved abandoning the plant, raising questions as to whether the new energy law would be applied to the decision-making process since it took effect after that case began.
Justice Barbara Vigil said the utility’s application was filed after the law took effect, and therefore the commission needs to consider the provisions of the law as the case proceeds. She had initially voiced
concerns about whether a ruling by the court would usurp the commission’s procedures, since much of the fight has centered on the separation of powers and the authority held by various branches of government.
Vigil and other justices said the question of whether the energy law should apply to the San Juan case should have been answered soon after the utility filed its application rather than having the proceeding continue under what some have described as a cloud of uncertainty.
“I have yet to hear a legitimate justification for not taking on that issue early on for the benefit of everyone — the ratepayers, PNM, all the other parties,” she said.
The governor and other critics have accused the independently elected commission of using procedural maneuvers to undermine the law and the Legislature’s role in setting energy policy. But Michael Smith, an attorney for the commission, argued Wednesday that the question about the law’s applicability was pending before a hearing examiner, and not allowing testimony and evidence to be presented before issuing a decision would have compromised due process. Democratic lawmakers, the utility and some environmental groups praised the court’s decision.
“This is a great day for the rule of law in New Mexico,” said Sen. Jacob Candelaria, who helped shepherd the energy bill through the Legislature. “The laws we pass are hard. It takes years of negotiation and years of people weighing in. The Legislature passed the Energy Transition Act, the governor signed it, and finally today after over a year of political game playing by the PRC, that’s done.”
Gov. Michelle Lujan Grisham said she is grateful for the court’s “quick and impartial” action.
“Today’s unambiguous ruling by the Supreme Court underscores what we have said all along: the Energy Transition Act is the law of the land,” the governor said in a statement.
Aside from mandating more renewable energy, the measure includes a financing mechanism that supporters say is necessary for the plant’s closure in 2022.
The law allows PNM and other owners of San Juan to recover investments in the coal-fired plant by selling bonds that will be paid off by utility customers. The bonds would raise roughly $360 million to fund decommissioning costs, severance packages for displaced workers and job training programs.
Advocates for utility customers say the repayment plan spelled out under the law is skewed to the advantage of utility stockholders and will end up raising electric rates and costing jobs. They say the commission has a responsibility to balance the interests of both shareholders and customers.
“The ETA is the enemy of the poor,” said Mariel Nanasi, executive director of New Energy Economy. “The PRC was diligently working to uphold the New Mexico Constitution and the due process rights of the public, but that was cut short by the Supreme Court order.”
But PNM and energy law supporters say using bonds to recover utility investments in the power plant will save ratepayers money, because PNM will forgo any profit on its investments, something it would not do if the law’s financing clauses are not applied to the plant shutdown.
It’s expected the commission will take months to issue a decision on abandoning the power plant and the financing of the closure. It’s likely that decision will be appealed, resulting in more legal wrangling that potentially could end up back in court.