PNM Resources : Order Denying PNM Emergency Motion for Stay

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	)
	)

ORDER DENYING PNM's EMERGENCY MOTION FOR STAY OF RATE CREDITS AND MOTION TO STRIKE CERTAIN PORTIONS OF MONROY'S AFFIDAVIT

THIS MATTER comes before the New Mexico Public Regulation Commission (the "NMPRC" or the "Commission") upon the filing on June 29, 2022 by Public Service Company of New Mexico ("PNM") of its Emergency Motion and Supporting Brief for Stay of Rate Credits Under Final Order Pending Appeal and for Shortened Response Time ("Motion for Stay"); wherefore, being duly advised in its premises,

THE COMMISSION FINDS AND CONCLUDES:

1. On June 29, 2022, the Commission issued its Final Order adopting the Recommended Decision requiring PNM to implement rate credits.
2. On June 29, 2022, at the Commission, PNM filed its Emergency Motion for Stay and for Shortened Response Time.
3. On June 30, 2022, the Commission denied PNM's request for shortened response time from the NMPRC Rule of Procedure 13-day response time for motions to 5 days and ordered responses due no later than 13 days from June 29, 2022.
4. Also on June 30, 2022, PNM filed with the New Mexico Supreme Court, in docket SC 39440, an Emergency Motion for Stay of the Final Order adopting the Recommended Decision.
5. Also, on June 30, 2022, PNM filed its Notice of Appeal of the Final Order adopting the Recommended Decision, in docket SC 39440.

1. 1. In its Motion for Stay, PNM requested that the Commission issue an immediate emergency stay of those portions of its June 29, 2022 Final Order requiring PNM to implement rate credits in order to avoid permanent, irreparable harm to PNM in the form of lost revenues that will likely exceed $128.3 million which PNM compares to PNM's total net earnings for 2021 of $155.5 million. PNM asserted that the rate credit will lower net earnings by $73.9 million (net of tax) which represents a 48% reduction based on 2021 earnings and this reduction in PNM's revenues will preclude PNM from the opportunity to earn its authorized return on equity ("ROE") by more than half of its allowed return authorized by the Commission. In addition, PNM asserted that PNM's credit metrics will be adversely impacted.
   2. On July 12, 2022, the Commission received Responses to PNM's Motion for Stay from New Energy Economy ("NEE"); Western Resource Advocates ("WRA"); New Mexico Affordable Reliable Energy Alliance ("NMAREA"); and a Joint Response by the Coalition for Clean Affordable Energy ("CCAE'), Prosperity Works, Sierra Club and NMPRC Utility Division Staff. All of these intervenors request the Commission deny PNM's Motion for Stay.
   3. Based upon the review of PNM's Motion for Stay and all of the above referenced Responses, the Commission finds, as it has previously ruled,1 that in order for the Commission to grant PNM's Emergency Motion to Stay, PNM must satisfy all four Tenneco Oil Co. v. New Mexico Water Quality Control Commission, 1986-NMCA-033, 105 N.M. 708. (Tenneco) factors as follows:
2. a likelihood that the applicant will prevail on the merits; (2) a showing of irreparable harm to the applicant unless the stay is granted; (3) evidence that no substantial harm will result to other interested persons; and (4) a showing that no harm will ensue to the public interest.
3. 1. The Commission finds that PNM's Emergency Motion for Stay does not any of the four factors as follows.

1 NMPRC Case No. 18-00109-UT, Order granting partial stay, November 16, 2019, p. 6,

1. PNM is Not Likely to Prevail on the Merits of its Appeal: The Commission finds that it It is not likely that PNM will prevail on the merits of the appeal. Contrary to PNM's arguments, the Energy Transition Act2 (the "ETA") does not permit PNM to issue the bonds at any time PNM chooses, no matter how long after abandonment. Further, contrary to PNM's arguments, a rate credit does not violate established principles of ratemaking. All these arguments PNM raises in its Motion to Stay, that the ETA allows PNM to issue bonds whenever it pleases and that a rate credit violates established ratemaking principles, were previously raised before the Commission, disputed by all the parties, and rejected by the Commission when it adopted the RD in the Final Order. PNM has continually argued that the rate credits are precluded because the Financing Order is irrevocable and that the ETA provides "that the commission shall not 'reduce, impair, postpone or terminate' the rights of the utility." (Emphasis added.) PNM mischaracterizes this section of the ETA which is far more limited PNM says. In fact, this section s does not apply to limit the Commission authority until after the bonds have been issued, which has not yet occurred and specifically provides that "the commission shall not reduce, impair, postpone or terminate the energy transition charges approved in the financing order, the energy transition property or the collection or recovery of energy transition revenues." Further, contrary to PNM's argument, the Commission has authority to ensure that rates are just and reasonable in all actions under the PUA, not just in a general rate case, under section 62- 8-7(D)of the Public Utility Act3 In conclusion, the Commission finds that PNM is not likely will not prevail of the merits of its appeal because the ETA, the Financing Order and PNM's own representations all support the conclusion that PNM's rates were to be reduced upon abandonment - which is when bonds were to be issued, which is also when customer rate credits were to be provided, and San Juan costs locked in for future recovery.
2. PNM Has Not Shown That It Will Be Irreparably Harmed Without a Stay Pending Appeal. PNM argues on page 12 of its Motion for Stay that it will suffer a loss of $128.3

1. Energy Transition Act, NMSA 1978 §§ 62-18-1 et seq.
2. NMSA 1978 §§ 62-1-1 to 62-6-28 and §§ 62-8-1 to 62-13-16

million, or 48 percent of its after-tax earnings, if the rate credits are not stayed. The Commission finds that PNM is contradicted by the facts--rather than losing 48%, it will receive a windfall if the rate credit is stayed and not provided. In fact, the amount of the rate credit is derived from PNM's own calculations, and exactly represents the costs PNM will no longer incur as the San Juan generators are abandoned. In other words, the amount of the rate credit is exactly offset by the reduction in PNM's cost-of-service upon abandonment. For this reason, the Commission finds that PNM will not lose any money and, by providing the rate credits, PNM will only be prevented from receiving extra earnings by receiving earning on SJGS when it is closed upon abandonment. As stated in WRA's Response, the facts were established by WRA's expert, Dr. Larry Blank, who testified, the revenue requirement associated with SJGS, $98 million per year, includes a PNM's rate of return on the remaining capital investment, depreciation, operation and maintenance, taxes, and other amounts. According to WRA and Dr. Blank, when SJGS closes, stops operating, and is out of service, which is upon abandoment, the total amount of $98 million per year will be part of PNM's return on investment, because there are no more expenses.4 The Commission finds that issuing rate credits and preventing PNM shareholders from enjoying a windfall, which is, by definition, not causing irreparable harm to PNM. Moreover, even if PNM incurred any harm, such harm, would be quickly reparable by PNM who has an adequate remedy at law5 to be compensated for its approximately $283 million in stranded investment at San Juan by issuing the bonds under the ETA by issuing the bonds. It is undisputed that PNM supported passage of the ETA and defended the Commission's Financing Order on appeal.6 Contrary to PNM's claim at pages 10-15 that it will be irreparably harmed by imposition of the rate credit because PNM has invested over a billion dollars

1. See Blank Response Testimony (WRA Exh. SC-1) at 7:7-16. "At an undepreciated book value of $283 million, the $98 million represents over a 34% before-tax annual rate of return. This is an incredibly attractive return for investors at a great expense to customers. A 34% before-tax rate of return is well beyond what PNM investors would realize by reinvesting this money within PNM. This also creates a strong incentive for PNM to pursue the strategy of not issuing the bonds coupled with the Company's presumption that a rate credit will not be required. However, this incentive does not justify an attempt to deny customers reasonable rates."
2. State ex rel. State Highway and Transp. Dept. of N.M. v. City of Sunland Park, 2000-NMCA-0044,129 N.M. 151
3. See Blank Response Testimony (WRA Exh. SC-1) at 29:2-3.

to serve customers and has not filed a rate case to recoup the costs associated with those investments. Again, this harm can be remedied by PNM who may file a rate case to adjust its rates. It is undisputed that PNM shareholders have earned a healthy return on equity exceeding 9 percent. Plus, any statement by PNM that it plans to invest $0.9 billion in 2022-2023 does not amount to evidence that it will be irreparably financially harmed by implementation of the rate credits because these are merely forecasted capital expenditures that PNM may plan to spend but have not yet been incurred.

12. Substantial Harm Will Be Suffered by PNM's Customers as a Result of the Requested Stay. As the Recommended Decision stated, adopted by the Final Order, PNM's change in plans to delay issuing the bonds until 15 to 18 months after abandonment results substantial harm to PNM's customers because: i) PNM is continuing to charge customers the costs of owning and operating San Juan after it closes; ii) at the same time, PNM is continuing to charge customers for replacement power needed because San Juan has closed; iii) PNM plans to then to later charge customers again for San Juan costs preserved for recovery by the ETA; and iv) continues to divert to its shareholders cost savings intended for customers. Clearly, this result is contrary to the public interest, contrary to the ETA and, unless remedied, contrary to the PUA because it results in rates that are not fair, not just, and not reasonable. The evidence in the record supports this conclusion. See, WRA's Response, citing to Dr. Larry Blank's testimony: "The Company's new scheme to delay the issuance is obviously and purposely designed to enrich shareholders while depriving customers of the benefits of the ETA to which they are entitled." As Dr. Blank further testified, PNM's strategy should not be rewarded and, unless customers receive the benefit of that reduced revenue requirement, PNM's rates would not be reasonable.7 The Commission finds that PNM's customers will suffer substantial harm if PNM's requested stay is granted because: a) PNM would be able to collect the replacement power costs that are incurred by the closure of San Juan; and b) a stay of the rate credit would deprive customers of the corresponding cost reductions associated with that closure.

7 See Blank Response Testimony (WRA Exh. SC-1) at 7:7-16.