Climate + Energy

Paying PNM to Pollute

It’s bad enough that PNM is fighting efforts to clean up the San Juan Generating Station, now the company wants to force ratepayers in New Mexico to pay for this coal burning power plant to pollute indefinitely.

Last week, WildEarth Guardians learned that Public Service Company of New Mexico, or PNM, is seeking state legislation that would guarantee rate recovery for the utility.  In a presentation entitled “Limiting the Impact of Environmental Upgrades at the San Juan and Four Corners Generating Facilities,” PNM outlined its proposed “securitization” scheme, which is really nothing more than a plan to guarantee the company’s ability to recover costs from ratepayers.  As the presentation notes on page 8, a key component of the scheme is legislation to guarantee cost recovery through a “non-bypassable surcharge on customer bills.”

In simpler terms, the plan would force ratepayers to cover the costs of cleaning up the San Juan Generating Station, no matter how unreasonable or imprudent it may be to pass those costs along to ratepayers.

It’s an incredibly dangerous proposal.  Although certainly PNM has every right to ask ratepayers to cover the costs of cleaning up the San Juan Generating Station, the company isn’t entitled to recover a single cent unless and until the New Mexico Public Regulatory Commission finds that those costs are “reasonable and prudent.”

In this case, PNM is sidestepping the whole “reasonable and prudent” assessment altogether.  Instead, they’re hoping that New Mexico’s Legislature will just give them a blank check.

But what this scheme really exposes is PNM’s shaky financial situation and their ability to deal with the fact that the San Juan Generating Station is more of a liability than ever before.

To be certain, air pollution from the San Juan Generating Station needs to be cleaned up.  Without a doubt, this pollution is imposing a terrible burden on the health and environment of New Mexico and the surrounding region.

What isn’t certain, however, is how the clean up should be paid for.  Despite PNM’s rhetoric about how the EPA’s clean up plan will jack up electricity rates, the reality is the company has no guarantee it will be able to raise rates to cover the costs of the retrofits.  Put another way, PNM is facing the very real prospect that it will have to cover the costs of cleaning up the San Juan Generating Station substantially, if not entirely, from its own pockets.

And with this uncertainty, the company is also facing the prospect of exorbitant financing costs for the retrofits, costs that would be difficult, if not impossible, to foist upon ratepayers.

It doesn’t help that PNM has one of the lowest credit ratings of any U.S. utility, making financing all the more expensive cost recovery all the more difficult.  It’s hard to believe that it would be reasonable and prudent for ratepayers to shoulder the burden of PNM’s poor credit rating.

Financially, PNM is in a pickle with the San Juan Generating Station.  Unfortunately, what they’ve proposed is to shift the burden to the ratepayer through its sneaky “securitization” scheme.

Ultimately, while the San Juan Generating Station may get cleaned up, the liability of the coal-fired power plant will be shouldered by ratepayers for years.  In the end, PNM and its shareholders will get the cash and the people will get the shaft.

That’s a really high price to pay for clean air.

And of course, PNM’s “securitization” scheme is belied by the fact that there is another option:  retiring the San Juan Generating Station altogether.  It’s not an unreasonable consideration.

Given PNM’s shaky financial footing, one seriously has to question whether it makes sense to continue operating this coal-fired power plant, especially given that PNM feels it has to sneak behind the public’s back to pass a “securitization” scheme just to cover the costs of cleanup.

And given the enormous public health and environmental benefits that ratepayers would reap from shutting down the power plant, the options seems more like a no-brainer now than ever before.

If the San Juan Generating Station is such a liability for PNM, then it’s time they start putting their money where their mouth is, instead of expecting ratepayers to do it for them.

In the meantime, PNM’s “securitization” scheme needs to be rejected.  There’s better ways to provide affordable energy and clean air for New Mexico than paying PNM to pollute.


PNM’s San Juan Generating Station.

6 replies »

  1. I’m confused. If PNM has no money, and rate payers shouldn’t pay to clean up the plant, what happens? PNM goes bankrupt and…? No one pays for it and…? It sounds more like your rhetoric is the one with holes.


    • Although this just underscores the absurdity of PNM’s predicament (after all, they are a monopoly and get to recover all “reasonable and prudent” costs from ratepayers, so how is it that they have terrible credit), this really isn’t the choice we’re facing. The fact is, the San Juan Generating Station is a bad investment. So bad in fact, that PNM has to pass legislation to force ratepayers to cover costs that aren’t even “reasonable or prudent” just to keep operating the plant. What’s the solution here? A good investment. That’s all we’re asking, and that’s not too much to expect from the utility. So what is a good investment? How about energy that doesn’t cost us $250 million annually in health impacts? How about a power plant that doesn’t need a costly retrofit? How about energy that’s clean from the start? One would hope such a reasonable request wouldn’t push PNM to bankruptcy, but rather help their bottomline as well as that of New Mexicans.


  2. Point conceded, to a point. I do feel like sustaining our energy future requires advancements and new technologies. I by no means think that coal fired generation is the way we need to continue indefinitely. I live on this planet, too, and I pay rates too.

    I am, however, disappointed with sweeping statements to retire power plants that generate a huge chunk of New Mexico’s electricity needs and saying that what we need in return is a “good investment”. The cost of renewable energy on a utility scale is astonishing, and someone has to pay for it.

    A comprehensive plan to comply with regulations, pay for new and cleaner plants, and provide reliable electricity is a desperate need, and I applaud anyone who is willing to do some research and get involved, as you have done.

    I feel like our next steps are with PNM, the legislature, and the PRC. The last two, after all, work for us as tax payers.

    I apologize for being flip earlier because this is an issue dear to my heart, but I have been actively involved with those agencies mentioned above (attending public meetings, addressing my governmental representation, etc.), and I sincerely hope you are doing the same. Your cause is noble but God is in the details. Your passion must be made practical to be realistic. I would encourage all of your readers to get involved.

    Thank you very much for responding to my reply. I’ve been doing a great deal of energy research in our state and few people are so kind, especially when I’ve forgotten my manners.


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