MFN cost recovery plan angers advocacy groups

The PNM building in downtown Albuquerque. (Jim Thompson/Albuquerque Journal)

Copyright © 2022 Albuquerque Journal

A New Mexico utility company plans to delay using bonds to recoup its investments in the San Juan plant could mean $125 million in additional costs for customers, according to a petition filed Monday with regulators. the state.

Environmental group Western Resource Advocates filed the petition, along with the Coalition for Clean Affordable Energy and consumer advocacy group Prosperity Works.

These groups want the Public Regulatory Commission to order an immediate reduction in consumer tariffs after PNM abandoned the coal plant this summer. This would put an immediate end to the monthly cost recovery charges that now appear on customer bills, rather than allow PNM to continue to collect these charges until it issues recovery bonds, which will replace the charges. current ones by a lower monthly supplement on the invoices.

PNM, however, says it intends to “regularize” the cost of the bonds that will be charged to ratepayers after they are issued, recrediting customers via a tariff case for any additional amount they may pay during the delay in sale. obligations.

PNM plans to close San Juan later this year, leaving nearly $300 million in lost or “stranded” investment in the plant.

To preserve the utility’s financial stability, the state’s energy transition law – which requires PNM to replace fossil fuels with 100% carbon-free generation by 2045 – allows PNM to sell “securitization bonds ” to recover its lost investments, which customers repay in their bills over 25 years. This will significantly reduce consumer costs thanks to low interest rates on bonds and because PNM will give up any profit on its investments.

The state’s largest electric utility says customers will save up to $7 a month by funding the plant shutdown with the bonds, plus an additional $3 a month once fuel costs for the mill’s coal supply will be eliminated.

The trap

But by waiting about 18 months to issue the bonds, customers will continue to pay for San Juan even after the plant closes because those monthly fees are already included in base rates, said Steve Michel, attorney at Western Resource Advocates. . This could represent approximately $125 million in additional costs if PNM postpones bond sales until the end of 2023.

In addition, interest rates are expected to start rising again this month, which could reduce anticipated savings if PNM waits to sell the bonds, Michel said.

“PNM’s delay strategy is a pretty callous disregard for the welfare of clients,” Michel told the Journal.

But PNM says customers will be reassured when the bonds are sold and the current San Juan-related monthly fee is replaced with a new monthly bond-based surcharge.

“We will go through a process to ‘adjust’ the cost of San Juan’s recovery to reconcile the difference between what customers have already paid and what is still owed,” said PNM’s vice president for generation. Tom Fallrgren at the Journal. “If the difference means that what is still owed is less than the value originally planned for the bonds, we will return it to customers through a tariff case. There will be no double collection.

Upcoming tariff files

PNM expects to file its next rate case in December, seeking to recover costs for approximately $1.2 billion invested in the network since the conclusion of its last rate case in 2018. It will also seek to recover $1.2 billion it plans to invest by 2024, much of which relates to the costs of transitioning its electrical system from fossil fuels to renewable energy generation.

The company previously planned to file two separate rate cases in 2020 and 2021 to cover these costs, but postponed them to avoid additional charges for customers during the global pandemic, causing many ratepayers to fall behind on their electricity bills.

Had it continued with its original schedule, these rate deals would have been settled before it dropped San Juan this year, allowing PNM to time the bond sale and new surcharge on customer bills to coincide with the new rates in San Juan. electricity approved by the PRC, said PNM spokesman Ray. Sandoval. This is significant, as the savings generated by using bond recovery for its lost investments in San Juan could significantly offset any new power tariffs approved by the PRC to cover additional grid investments since 2018. .

Assess shock anxiety

The problem now is that if PNM issues the bonds this year after dropping San Juan, customers will see their monthly bills drop by about $7 per month, plus an additional $3 for the elimination of coal expenses. But within 15 to 18 months — after its next rate case concludes — customer bills could rise again, Sandoval said.

“By waiting to issue the bonds until the newly approved rates take effect, likely in January 2024, we can avoid a rate rollercoaster, or rate shock, for clients,” Sandoval told the Newspaper.

And to “settle” the additional fees customers will continue to pay for San Juan after it closes – and prior to the issuance of the bonds in January 2024 – PNM will take these additional fees into account in the upcoming rate filing and credit this difference to clients. regardless of new tariffs approved by the PRC, Sandoval said.

Michel, however, wonders if PNM will, or even can, refund overpayments to clients.

“Customers will be overcharged by $125 million,” Michel said. “And to try to go back and reverse that later, without specific approved accounting mechanisms to do so, is illegal and retroactive pricing.”

Additionally, Michel said, customers should immediately benefit from San Juan’s closure savings and not wait for PNM to complete its next rate case.

“As far as rate shock is concerned, it is not PNM’s prerogative to suspend a rate reduction now to condition its customers on a possible rate increase later,” he said.

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