Protect ratepayers from costs they need not pay

In May, the New Mexico Supreme Court ruled that the Public Service Company of New Mexico’s 2015 purchase of 178 megawatts of nuclear energy from Palo Verde Nuclear Generating Station in Arizona (PNM owns 10.2 percent of the station’s capacity) had not been proven cost-effective and did not benefit New Mexico consumers (“State Supreme Court overturns utility rate hike,” May 17).

The high court upheld a Public Regulation Commission ruling finding PNM “imprudent” because the utility had conducted no financial analysis and had failed to consider alternative and cheaper and safer sources of power before investing in Palo Verde. It stated “the goal of the consideration of alternatives, is, of course, to reasonably protect ratepayers from wasteful expenditure. The failure to reasonably consider alternatives was a fundamental flaw in PNM’s decision-making process.” Put another way, if there’s no comparison shopping, there’s no way to determine if a purchase is the best one possible.

Why is this significant? First, the decision puts PNM on notice that the utility can no longer play fast and loose with its energy procurement process. The court cited the necessity of “prudence,” which in this case means PNM must abandon its “no-bid contract” approach to energy production and consider all options available. This is something the utility has consistently failed to do.

Second, the decision has the potential to save citizens a lot of money. The court acknowledged the possibility of a “full disallowance,” i.e. invalidation, of the amount of the investment because it found the nuclear investment was “unreasonable” and “imprudent.” What this means is if PNM purchases energy resources “prudently,” ratepayers subsidize those costs. On the other hand, if the utility acts irresponsibly, customers should be held harmless.

New Energy Economy, an industry watchdog group and proponent of clean energy, estimated in testimony to the court that PNM’s $163 million Palo Verde nuclear plant stake could cost ratepayers more than $2 billion over the “lifetime” of the resource. A typical nuclear plant is operational for 30 to 40 years: Palo Verde has been online for 33 years. Decommissioning can cost hundreds of millions of dollars, and ratepayers could be on the hook for those expenses, but the longer the plant runs, the more nuclear waste that we do know how to get rid of is generated.

The case has now been remanded back to the PRC. PNM can argue its Palo Verde investments are cost-effective to the consumer, but given that solar and wind power cost a quarter the price of nuclear, it seems unlikely PNM will be able to prove its out-of-state investment is a better choice. Alternatively, the PRC can exclude nuclear power and its costs from customer rates until PNM can prove nuclear-generated energy is cost-effective.

Such a total disallowance is the preferred course. After all, why pay for expensive, hazardous technology when solar and wind power are safer, cheaper, produced in-state and create instate jobs? Why reward PNM for its bad decisions? Over the years, the company has consistently advocated for traditional energy over alternatives, in part because 90 percent of its investments are in coal, gas and nuclear facilities increasingly expensive to maintain.

This decision to protect consumers from corporate malfeasance will impact PNM’s continued use of coal in the Four Corners Power Plant and the planned 2022 closure of the San Juan Generating Station. But the New Mexico Supreme Court has set an important precedent by ruling the company should consider energy alternatives to protect ratepayers from costs they need not pay.

The only fair remedy for PNM’s “imprudence” is a full disallowance of all nuclear energy costs. Please call the PRC (1-888-427-5772) and let the commissioners know.