PNM customers continue to pay for San Juan coal plant that’s no longer operating

In the two months since the San Juan Generating Station shut down in New Mexico, the region’s customers have been paying the same rate for a facility that’s no longer giving them energy. 

And they could keep doing so for years following a decision by the New Mexico Supreme Court last week.

The Public Service Company of New Mexico’s San Juan plant near Farmington, N.M., completely shut down in late September 2022 as part of the state’s Energy Transition Act. PNM officials said originally they would decrease customers’ rates as a result, but after the company changed its mind, the state ordered PNM to issue credits to make up for money people should’ve saved but didn’t.

But PNM gave out nearly none of those credits. Instead, lawyers turned to the state Supreme Court to waive those state-ordered refunds. On Nov. 1, the Supreme Court said the utility doesn’t have to issue credits for now — at least until the court comes to a conclusion at the end of the appeal process.

How the original plan changed

As part of the intended San Juan plant closure, the state’s Public Regulation Commission approved a plan where PNM, in 2022, would decrease customer rates and also sell bonds to recover investments made in the old coal facility. Customers would pay back bonds in the form of low-interest rates over 25 years, which would still be cheaper than paying for the inoperative generating station.

However, a legal battle ensued in early 2022 when PNM switched its bond plans. The utility said bonds would instead be sold in 2024, and ratepayers would continue the same payments as before the shutdown until then.

“I feel badly for the PNM ratepayers continuing to pay for operating two units at San Juan Generating Station that are no longer operating,” PRC Commissioner Joseph Maestas said at a meeting last week.

PNM spokesperson Ray Sandoval said the utility always planned to issue the bonds when new customer rates go into effect. Although the utility had planned to have new rates ready around the time of the closure, he said, the pandemic delayed the schedule.

Therefore it doesn’t make sense to change rates and issue bonds until the utility’s financial situation can be reviewed as it currently stands, Sandoval said, which is now planned for early December, and would go into effect in 2024. That’s the up-to-date monetary information the PRC should be considering for how much customers should be paying, he added.

“We’ve always believed that the only way to set fair and valuable rates for customers is for the commission and parties to look at everything in a holistic (way) — all of our costs, all of our investments, all of our cost reductions, and then determine what those rates should be for customers,” he said.

But that’s not what the PRC said it agreed to. So the commission ordered PNM to start giving refunds back to customers in the form of rate credits starting in August when the first of two units in the plant were set to close.

The utility’s lawyers appealed to the Supreme Court to get their way instead. The utility also asked the PRC to hold off on making the utility issue credits while the court got to the case, which regulators denied, so PNM went back to the Supreme Court.

While waiting for an answer, Sandoval said the utility gave out $1.2 million in credits — about 1% of the $98 million that the PRC said customers would save altogether annually.

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Then, in September, the court granted a temporary stay. On Nov. 1, the court extended that hold until a final decision comes down on the appeal.

Where things stand now

It isn’t clear how long it will take the Supreme Court to side with either the utility or the PRC. 

Judith Amer is associate general counsel with the PRC. She said the court’s recent action granting the stay could at least point to the court soon assigning a clearer timeline on the appeal. The Supreme Court could end up expediting the process or assign it to the general calendar, which could take more than a year, she said.

The only step moving forward, Amer said, is to appeal the decision granting the stay and hope for a win.

Sandoval said this situation has really been a misunderstanding. He said the utility assumed officials would know bond issuance would be delayed when the rate reviews were delayed.

“If we had to do it over again, I think we would have made sure rather than assuming the parties thought that once we moved the rate case that we would move to bonds,” he said. “I think we would have made that very, very clear from the beginning.”

Mariel Nanasi is the executive director of New Energy Economy, one of the environmental organizations fighting against PNM in court. She said the utility broke its agreement with the PRC when bond issuance dates were switched.

“But then there’s also this ethical and moral and political reason, which is that this was sold to people, all the legislators, that there was going to be huge customer savings,” she added.

There’s no reason the company shouldn’t issue credits following the San Juan plant’s closure, Nanasi said, since customers were supposed to save money in the first place.

“They’re collecting as if it were operating,” she said.