PNM’s Rate Hike is Bad for New Mexicans

For Immediate Release: May 17, 2016

Contact: Camilla Feibelman, 505-715-8388, camilla.feibelman@sierraclub.org

Albuquerque, NM – New Mexicans from around the state gathered at PNM’s Albuquerque headquarters and at the PNM shareholder meeting in Lewistown, Texas, Tuesday to protest a 15.8% PNM rate increase that asks consumers to foot the bill for unnecessary capital investments and more coal and nuclear.

In Lewistown, over a dozen people rallied at the shareholder meeting with signs reading “Texans in Solidarity with New Mexicans”, calling on PNM to move from a dependance on fossil fuels to renewable energy.  Inside the meeting three New Mexico-based shareholders presented resolutions that would build sustainability into PNM operations (see more details below).  Though the resolutions were voted down, it will be several days before PNM announces if the resolutions earned the 3% of the vote that will allow them to be heard next year.  Meanwhile, the New Mexico shareholder activists, have accepted a lunch meeting with PNM CEO, Pat Vincent-Collawn.

In New Mexico, protesters raised concerns about the details of PNM Rate case currently before the New Mexico Public Regulation Commission (PRC). The requests in the electric monopoly’s application to the PRC for a $123 million rate hike amount to a customer rate increase of 15.8%. At the April hearing on the proposal, many intervenors representing consumer, business and environmental interests opposed fees and rate changes that would require ratepayers to foot the bill for unjustified costs and purchases and penalize energy-efficient and low-income customers.

The Recent History of PNM’s Rate Hike Impacts:
Since early 2008, the cost of electricity per kWh provided by PNM to its retail customers has increased by more than 50%, while New Mexico real median household incomes have declined by 6.4% since 2008. PNM’s ongoing earnings have increased by 461% from 2008 to 2014. The top five PNM executives make more than $9 million a year while the people who have suffered, the Navajo people living in the toxic shadow of PNM’s coal plants, live on approximately $7,200 per year. There is a more than a 1,000% difference in real lived economic experiences between these people.

A $580 Million Take-Or-Pay Coal Contract, in this rate case
We’ve been focused on PNM’s San Juan coal plant, but PNM also has an interest in nearby Four Corners Power Plant, located on Navajo Nation. In December 2013, PNM signed a $580 million coal contract but only told the PRC about it in December 2015. PNM has not explained, supported or justified the addition of the $580 million in ratepayer obligation contained in the Four Corners Power Plant coal contract. The coal contract is a take-or-pay contract, meaning if PNM takes the coal, we have to pay, and if PNM doesn’t take the coal, we have to pay. The new coal contract will increase costs in 2016 by 40%; in 2017 by 53%; and through the 15-year life of the contract by 128.5%. The dollar increase due to the new fuel contract over the 15-year period (2016-2031) is $269,768,000. The total projected amount of the coal fuel cost between 2016 and 2031 at Four Corners is $579,590,000. It is not prudent or reasonable to be reinvesting in coal for such a long time, and it is irresponsible in the extreme to have not conducted financial analyses before signing the take-or-pay coal contract.[1]

“Despite the PNM executives trying to save it, coal’s future as an energy source is declining rapidly due to major hurdles: market forces, human rights, health, and moral arguments,” said Anna Rondon, Indigenous Life Ways. “Why subject our children to a dying and dirty economy of coal and nuclear?”

Protesters with the Sierra Club, 350NM, Environment NM, NM Interfaith Power and Light, Tewa Women United, New Energy Economy, Food and Water Watch, 4 Corners Idle No More, Southwest Indigenous Uranium Forum, Indigenous Lifeways, Red Nation, Diné Relief Initiative, Earth Care, Juntos, CVNM, CVNMEdFund and Osceola Energy and many others joined to point out that further investment in coal is dangerous to a vibrant economy.

PNM’s Seeks to Lock in Expensive Nuclear Power for Decades
In this rate case,  PNM seeks to add the acquisition of 64 MW of Palo Verde 2 nuclear power from  Arizona in the rate case, which would not create one job in New Mexico.

PNM has not provided any economic modeling or other financial analyses that demonstrates that nuclear power is cost-effective, explains Tom Solomon, co-coordinator of 350.org New Mexico. “Why do our rates keep going up? Because PNM relies on expensive nuclear technology, and it is costing New Mexican families and businesses. Solar and wind cost less than nuclear and coal; everybody’s installing it, and why shouldn’t we be taking advantage of carbon-free, family-supporting solar jobs at 4 cents a kilowatt hour or less?”

PNM sought to acquire this nuclear asset, according to PNM’s Board briefing of 12/3/13: “Purchasing the other three Unit 2 leases will increase rate base, allowing shareholders to earn a return on the assets.”

“PNM omits any discussion of risk that ratepayers would realize by the acquisition of the Palo Verde 2 nuclear power, including cost and liability risk, decommissioning risk and spent-fuel disposal costs, and the most expensive and dangerous source of energy locked in for decades, said Mariel Nanasi, Executive Director, New Energy Economy.

Raising customer fees on those who can least afford it
In this rate case, PNM proposes to increase the residential fixed customer fee from $5.00/month ($60.00/year) to $13.14/month ($157.68/year), an increase of 163%.

“We want locally produced, cost-effective clean energy that bring jobs to our communities and is a showcase of energy democracy aligned with our values,” said Javier Benavidez, executive director of Southwest Organizing Project.

PNM Can Run, But PNM Can’t Hide
Three shareholder resolutions are being presented by PNM Shareholders for a Responsible Future; they are attached. PNM has been entertaining shareholder annual meetings at its corporate headquarters for decades, but in a rare attempt to circumvent shareholder activism, it is holding its official business in Lewisville, Texas. Three entities and their friends are raising business and management issues: 1) setting sustainability goals in three arenas: greenhouse-gas reduction, governance, and worker health and safety; 2) setting goals for reduction of carbon-emissions pollution; and 3) tying CEO pay to sustainability goals.

The shareholder resolutions will be heard in Texas.

Particular issues troubling the protesters about PNM’s coal and nuclear power reinvestments are:

• Utility investments without justified quantifiable analysis or unquantifiable benefits are not in the public interest;
• Coal and nuclear are not competitive and have enormous associated financial risks and liabilities;
• Solar and wind investments are changing energy markets and the economics of societies, and New Mexicans overwhelmingly want to be a part of this job-creating democratic shift;
• PNM’s plan shifts enormous risks to consumers while boosting PNM’s profits;
• Other utility owners at Four Corners coal plant have abandoned coal interests:

El Paso Electric Company (EPE), another electric utility serving New Mexico, is currently an owner at Four Corners coal plant and has decided to abandon its 108 MW of shares “to avoid future increased costs, risks and liability of coal-fired generation.” EPE performed financial analyses that showed a “net benefit to customers of abandonment to be in the range of $110 million to $170 million.” EPE specifically noted that “a driving factor favoring abandonment and sale is the avoidance of continuing and future environmental restrictions and increased [fuel and pollution control] costs, avoidance of environmental and other litigation, and avoidance of cost increases due to continued plant operation including cost increases and liability for additional decommissioning and final mine reclamation costs”;

Southern California Edison has also left the beleaguered coal plant; and

In 2015, APS and the other Four Corners participants, including PNM, settled a lawsuit that required pollution controls, a civil penalty of $1.5 million and the requirement to spend $6.2 million for certain environmental-mitigation projects to benefit the Navajo Nation.

• Palo Verde nuclear power is expensive, risky, and creates zero jobs in New Mexico:

PNM did not know the price of the nuclear interests before it committed to purchase it;

PNM is seeking to add Palo Verde 2 nuclear power at 8.1 cents/kWh in 2016, which is the highest cost among energy alternatives, and the cost per kilowatt-hour will continue to rise due to ongoing capital expenditure costs[2] and operations and maintenance costs at the 27-year-old facility;

To produce the same amount of energy as the proposed 64MW acquisition (501 GWh), 172 MW of solar is required. This 172 MW will contribute 104 MW to peak attainment, is cheaper, healthier, and would create many jobs locally

At PNM’s planned level of nuclear-power production for 2016-33, PNM’s 64 MW of PV2 will consume about 7 billion gallons of water for the time period;

• This is a huge opportunity to get off old, expensive technology and move to cleaner, cheaper energy sources, creating jobs for New Mexicans.
• PNM’s plan prevents investments in solar and wind energy.

There are other concerns that also came before the PRC hearing examiner, including PNM’s request for a higher return on equity, whether there should be compensation and profit for unnecessary capital assets (“balanced draft” pollution controls that are of questionable environmental benefit and were not required by federal or state regulators and that former PRC Commissioner Douglas Howe testified were not prudent or reasonable), the issue of “time of use” rates that alarmed consumer advocates who pointed out that there was no scenario in which the average residential ratepayer would benefit economically, and other cost-recovery requests by PNM.

“The Four Corners coal plant consumes 5 billion gallons of water annually. The Palo Verde plant’s three nuclear reactors each require 20,000 gallons of water per minute[3], said Eleanor Bravo, Executive Director of Food & Water Watch. “March 2016 was the driest month in New Mexico in the last 100 years, and 43% of the state is locked in moderate drought. To be wasting water on outmoded forms of dirty energy is unreasonable.”

“In the last three years, PNM has lost its wholesale retail customers: City of Gallup (38 MWs), Navopache (55 MWs) and the the City of Aztec (7 MWs), due to high costs of electricity and the availability of locally produced, cost-effective clean energy,” said Camilla Feibelman, director of the Rio Grande Chapter of the Sierra Club. “People want a change, and those who are demanding to break free of fossil-fuel dependence are seeing community rewards.”

“PNM’s rate hikes are not fair, just, and reasonable,” said Sanders Moore, Environment New Mexico director. “It is the job of the PRC to protect ratepayers from excessive purchases at exorbitant prices, especially since both coal and nuclear power plants have already left a devastating environmental and health legacy impacting all New Mexicans.”

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[1] El Paso Electric and Southern California Edison chose to leave the Four Corners Power plant because of rising costs of coal, pollution controls and the exorbitant risk from regulatory environmental compliance and exposure to litigation costs.

[2] “In the case of total Palo Verde, actual ongoing capital expenditures were more than $3 Billion for 1993-2013.” PNM’s sworn Testimony, 13-00390-UT

[3] Palo Verde nuclear plant’s use of wastewater defies drought – Arizona Daily Star

Featured image from Affordable Solar Energy.