SEC: Disclosure resolutions can be voted on by shareholders

The U.S. Securities and Exchange Commission has found shareholders for the Public Service Company of New Mexico have a right to vote on two resolutions that would require the company to present a plan to deal with climate change and to disclose all assets, including coal-fired generating capacity, that might become stranded in a shift to more reliance on renewable energy. PNM had argued it shouldn’t have to make such disclosures.

If successful, one resolution would require PNM to disclose all electricitygenerating assets that could become stranded, posing a potential financial liability to the company. A second reso-

lution asks PNM to present a plan for how the utility will comply with the Paris Climate Accord, a pledge by nations, including the U.S., and others to keep Earth from warming more than 2 degrees Celsius over the next two decades.

The proposed resolutions state that 93 percent of PNM’s power generation comes from nonrenewable sources, including 50 percent from coal. Scientists have said burning of coal and other fossil fuels is helping to cause climate change.

The resolutions are the latest inquiries into the financial soundness of PNM’s energy investments. Renewable energy advocates, in cases before the state Public Regulation Commission and the New Mexico Supreme Court, have questioned the implications of PNM’s significant reliance on fossil fuels.

“Utilities continuing … the old business model of being involved in coal-generated power plants creates a very big potential of having huge stranded assets,” said Sam Hitt, a member of Shareholders for a Responsible Future, a group of a dozen dissenting PNM shareholders.

“The cost of solar and wind is dropping dramatically, and it just makes sense for a business model to pursue renewables in an aggressive way,” Hitt said.

PNM challenged the proposed resolutions in a 21-page letter to the SEC on Jan. 12, saying the level of desired disclosure constituted an impracticable and unjustified intrusion into the company’s business operations. The SEC disagreed in a letter last week to PNM.

PNM declined additional comment Wednesday.

The resolutions were first proposed in November by Shareholders for a Responsible Future, which was formed three years ago in part with the intent of promoting renewable energy from a business perspective.

“If their [PNM’s] business model is based on the huge potential for generating losses in terms of these outdated coal-fired power plants, then that information needs to be disclosed to the shareholders,” Hitt said.

He said a number of banks and insurance agencies have said they will no longer finance coal companies as a result of potentially steep financial repercussions and climate change.

In a letter to PNM dated Nov. 28, Hitt and his wife, Wendy, requested “a comprehensive assessment identifying all PNM power-generating assets that might become stranded, in what time frame, and quantifying low, medium, and high financial risk associated with each respective asset.”

According to the resolution enclosed in the letter, PNM has said its compliance with the federal Clean Air Act by closing part of its San Juan Generating Station in Farmington resulted in $250 million in stranded assets, a burden that fell to shareholders and ratepayers. Coal-powered assets likely would create future stranded liabilities, according to the resolution.

A second resolution was filed by the Max and Anna Levinson Foundation, a PNM shareholder and advocate for renewable energy. It would compel the company to create a document that details how PNM would take into account “the risks and opportunities presented by global efforts to keep global temperatures within acceptable boundaries” in keeping with the Paris Climate Accord.

Hitt said climate-related resolutions proposed by the Shareholders for a Responsible Future were allowed to be heard at last year’s PNM stockholder meeting, and the group believed the utility’s leadership was receptive to its suggestions.

But in January, Jane Whitt Sellers, a Virginia-based attorney hired by PNM, sent a letter to the SEC requesting approval to omit the new proposed resolutions from the 2017 shareholders meeting in May. The letter states that the disclosures sought by the resolutions are vague and constitute an unjustified intrusion and an attempt to “micromanage” PNM’s daily business operations.

The disclosures that would be required under the two resolutions are “too complex and impracticable to subject to direct shareholder oversight,” the letter states.

It also says the resolutions appear to “encourage PNM to close [or drastically curtail] its coal-burning operations,” as well as interfere “in the Company’s investment decisions and the [Public Regulation Commission’s] role in approving the relevant mix of generation assets to provide electricity to New Mexico retail customers.”

Further, the company’s attorney cited the political climate under the Trump administration as being too opaque for PNM to determine what regulatory requirements it would be held to under federal or state law.