A few environmental and other interests have sued New Mexico regulators and the Public Service Co. of New Mexico to keep the utility from issuing securitized bonds in order to close the San Juan coal-fired power plant in 2022.
New Energy Economy Inc., Citizens for Fair Rates and the Environment, and Physicians for Social Responsibility-New Mexico were among the groups that filed a petition against the New Mexico Public Regulation Commission, or PRC, and the PNM Resources Inc. subsidiary on Aug. 26 saying a new law that allows the financing exposes ratepayers to hundreds of millions of dollars in costs without regulatory oversight.
The petitioners are challenging as unconstitutional sections of the Energy Transition Act, which the state passed March 22. They contend the law restricts the commission's ability to regulate the utility by requiring the PRC to establish a mechanism for securitization of utility debt in a way that avoids scrutiny.
The groups argue that the law is unconstitutional in that it violates the right to due process guaranteed in the U.S. Constitution as well as a variety of provisions of the New Mexico Constitution and New Mexico law.
New Energy Economy Executive Director Mariel Nanasi said the petitioners support the overall aims of the new law, including the renewable energy standard, and only seek to remedy specific constitutional and procedural problems they believe harm ratepayers and jeopardize the regulatory process.
"New Mexicans have only one shield against monopoly predation and that's review and regulation by the PRC," Nanasi said in a press release announcing the court petition. "That constitutional protection cannot be bargained away by legislators, no matter how noble their overall goals."
In testimony submitted to the PRC on Aug. 6 and filed as an exhibit to the Supreme Court petition, expert witness Steven Fetter, a former chairman of the Michigan Public Service Commission, took issue with the Energy Transition Act requiring state regulators to approve recovery of 100% of the costs of abandoning the San Juan plant without regulatory review. Fetter said the new law represents a significant departure from other securitization laws because it undermines the PRC's fundamental purpose of protecting ratepayers from wasteful expenditures.
The Energy Transition Act, also known as Senate Bill 489, was the result of extensive negotiations among PNM, major environmental and clean energy groups, legislators and Gov. Michelle Lujan Grisham. The governor has been pressuring the PRC to be more responsive in implementing the law, including more than $360 million in securitization financing for closure of the San Juan plant.
Some environmental groups, such as the Sierra Club, view securitization and accelerated depreciation as useful financial tools that encourage utilities to close polluting plants and more quickly transition to clean energy. Securitization obligates ratepayers by guaranteeing they will pay for bonds utilities can acquire at comparatively low interest rates because of a low risk of default.
