PNM Resources : Final Order Adopting Recommended Decision with Additions

BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION
IN THE MATTER OF PUBLIC SERVICE	)
COMPANY OF NEW MEXICO'S	)
ABANDONMENT OF SAN JUAN	)	Case No. 19-00018-UT
GENERATING STATION UNITS 1 AND 4	)
	)

FINAL ORDER ADOPTING RECOMMENDED DECISION WITH ADDITIONS

THIS MATTER comes before the New Mexico Public Regulation Commission (the "NMPRC" or the "Commission") upon ("RD") issued by the hearing examiners Anthony F. Medeiros and Ashley Schannauer on June 18, 2022(the "RD") which made a decision on the February 28, 2022, Joint Motion for Order to Show Cause and Enforce Financing Order and Supporting Brief ("Joint Motion") filed by Western Resource Advocates (WRA), Coalition for Clean Affordable Energy (CCAE) and Prosperity Works (collectively "Joint Movants"). The Joint Motion requests that the Commission order Public Service Company of New Mexico (PNM or "Company") to show cause why its rates should not be reduced at the time the San Juan Generating Station ("San Juan" or SJGS) is abandoned and to otherwise enforce the April 1, 2020 Final Order on Request for Issuance of a Financing Order (hereinafter, collectively with the February 21, 2020 Recommended Decision on Financing Order, the "Financing Order") in this case; wherefore, being duly advised in the premises;

THE COMMISSION FINDS AND CONCLUDES:

1. The Joint Motion asserted that, under the Energy Transition Act (ETA) and the Financing Order issued pursuant to the ETA, PNM is authorized to issue low-cost bonds to recover

PNM's undepreciated investments in San Juan Units 1 and 4 (collectively "Units"). The Joint Movants allege that the Financing Order requires PNM to issue the bonds at the time PNM

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abandons Units 1 and 4, that the Financing Order requires PNM to reduce its rates to remove the costs of the Units upon the issuance of the bonds, and that PNM is unlawfully delaying the issuance of the bonds to avoid reducing its rates until after the Commission rules on a rate case that PNM intends to file in December 2022. The Joint Movants argue that PNM's plan will withhold a roughly ten percent rate decrease (i.e., an annual savings to ratepayers of $94 million) that its customers are entitled to receive when the Units close in July and October of this year. The Joint Movants state that PNM's plan will enable PNM to collect all of its San Juan costs in rates, even though the plant is no longer serving PNM customers and PNM is no longer incurring costs to operate the plant. The delay will also allow the Company to:

1. recover its stranded San Juan investment at its full cost of capital, which includes a shareholder profit, for an additional 18 months;
2. recover for an additional 18 months non-existent O&M and other San Juan expenses, such as wages and benefits for employees that no longer work at the plant;
3. deprive communities impacted by San Juan's closure of $28.2 million in transition funding for 18 months after the closure date;
4. double-recoverits undepreciated San Juan plant balance through the ETA bond issuance starting in 2024;
5. also recover from customers during the 18-month delay the costs of San Juan

replacement power, which are automatically charged to customers through PNM's fuel and purchased power cost adjustment clause ("fuel clause"); and

1. jeopardize the Company's ability to secure a low-cost bond issuance, given that interest rates are expected to rapidly rise over the next couple years - having a long-term negative impact on PNM customers for the next 20-25 years.

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1. 2. The Joint Motion requested that the Commission to take the following actions:

2. issue an order to PNM to show cause why it should not provide the rate credit to its customers (totaling $94 million/year), to commence on the anticipated abandonment dates of San Juan Units 1 and 4;
3. order PNM to provide the rate credits described in the Financing Order to its customers, reflecting the removal of all costs of San Juan Units 1 and 4 when those units stop serving PNM customers;
4. require PNM to report to the Commission on the status and progress in obtaining any Securities and Exchange Commission (SEC) and rating agency approvals necessary to issue the bonds authorized by the Financing Order; and
5. require PNM to explain the prudence of delaying its bond issuance beyond the San Juan abandonment dates, and what actions, such as hedging interest rates, PNM will take

to protect its customers from interest rate increases incurred as a result of PNM's intended bond issuance delay.

3. On March 4, 2022, the Commission issued an Order requiring PNM to file a response to the Joint Motion in accordance with 1.2.2.12(C) NMAC and that replies would be

timely if filed within ten days of the filing of PNM's response.

4. PNM filed a Verified Response to the Joint Motion on March 14, 2022. PNM argues that the Financing Order requires the removal from rates of the costs of San Juan Units 1 and 4 at the time PNM issues the bonds and starts charging customers for the costs of bonds. PNM argues that the Financing Order does not require the rate reduction upon the abandonment of the units and that the Financing Order provides PNM the flexibility to delay the issuance of the

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bonds to the conclusion of PNM's next rate case. PNM states that it intends to file the rate case in December 2022.

5. Replies to PNM's Response were timely filed by the Joint Movants, Bernalillo

County ("County"), and New Mexico Affordable Reliable Energy Alliance (NM AREA) (filing a joint reply). The Office of the New Mexico Attorney General ("Attorney General" or OAG), New Energy Economy (NEE), and the Utility Division Staff (Staff) of the Commission filed motions to file replies out of time.

1. On March 30, 2022, the Commission issued an Order Appointing Hearing Examiners on Joint Motion for Order to Show Cause and Enforce Financing Order.
2. The Commission's March 30 Order directed the hearing examiners expedite a Commission decision in this matter.
3. On May 19, 2022, the Hearing Examiners presided over a public comment hearing via the Zoom videoconferencing platform.
4. The evidentiary hearing in this matter was held on May 23-26, 2022 via the Zoom videoconferencing platform.
5. Pursuant to the Briefing Order issued by the Hearing Examiners on May 26, 2022,

the following parties filed Briefs in Chief ("Br.") on June 3, 2022: Bernalillo County and the Attorney General (filing jointly); CCAE, NEE, Prosperity Works, and Sierra Club (also filing jointly and referred to hereinafter as "CCAE et al."); PNM; NM AREA; WRA; and Staff. Response Briefs ("Resp.") were filed on June 9, 2022 by PNM, CCAE et al., and WRA.

11. The Hearing Examiners recommended that the Commission find and conclude as

follows:

1. PNM provides retail electric utility service to members of the public within the State of New Mexico and, therefore, PNM is a public utility subject to the jurisdiction of the

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Commission under the Public Utility Act. As a public utility, PNM is required to furnish adequate, efficient and reasonable service at just and reasonable rates in conformity with NMSA 1978, §§ 62-8-1 and 62- 8-2.

1. The Commission has jurisdiction over the parties and the subject matter of this case.
2. Reasonable, proper, and adequate notice of this matter has been given.
3. The Financing Order provides for the removal of the San Juan energy transition costs through the issuance of securitized bonds upon or shortly after the abandonment of San Juan Units 1 and 4.
4. Under its new plan, PNM states that the Company intends to issue the energy transition bonds in January or February 2024, at least 18 months after the abandonment of Unit 1 and 15 months after the abandonment of Unit 4.
5. PNM's new plan severs the fundamental linkage in the Energy Transition Act between a qualifying generating facility's abandonment and the securitization of energy transition costs and imposition of ETCs.
6. The Financing Order does not contemplate or establish any remedy to address the de- linkage of the abandonment from the energy transition bond issuance and imposition of ETCs that PNM is now planning.
7. The materially changed circumstances revealed in the Commission's investigation in this proceeding require the Commission, acting pursuant to its supervisory authority over the rates and service of jurisdictional utilities, to issue an Order that addresses the de-linked scenario and establishes a remedial mechanism that ensures the rates charged to PNM customers are fair, just, and reasonable and protects customers from the double recovery and other potential harms resulting from the de-linkage PNM conceived and opted to execute without this Commission's prior authorization.
8. PNM's new plan constitutes a moral hazard that, without the remediation ordered herein, threatens substantial and potentially irremediable harm to ratepayers.
9. PNM should be directed to transfer the Section 16 payments due and owing to the Indian Affairs Fund, the Economic Development Assistance Fund, and the Displaced Workers Assistance Fund within thirty days of the abandonment of San Juan Unit 1.
10. It is in the best interests of ratepayers and the public interest for the Commission to evaluate the prudence of any unreasonable delay in financing San Juan costs beyond the dates of abandonment. The Commission's evaluation should examine, at a minimum, any increased interest rate that PNM's bonds incur as a result of the delay, whether PNM shareholders should be responsible for such added costs, whether PNM's delay beyond the dates of abandonment is outside the authority provided the Company in the Financing Order, and whether such delay impaired or might impair the marketability of any energy transition bonds PNM has issued or eventually issues. PNM therefore should include in its next base rate case application filing an explanation and defense of the prudence of delaying its bond issuance beyond the San

Juan abandonment dates and what actions PNM may take or has taken to protect customers from interest rate increases incurred as a result of PNM's intended bond issuance delay and to ensure the continued marketability of any energy transition bonds issued by the Company.

12.

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