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Greed Trumps Clean Energy at PNM

At last, the truth is coming out.

PNM is fighting the U.S. Environmental Protection Agency’s plan to clean up the company’s coal-fired San Juan Generating Station not because they want to protect ratepayers and not because they have a better plan.

It’s because they don’t have any money.

In a motion asking the federal 10th Circuit Court of Appeals in Denver to put the brakes on the EPA’s clean up plan, the company, which is New Mexico’s largest utility, stated that it “does not have sufficient internally generated cash flow to pay for the SCR project and will have to raise substantial funding for it in the capital markets.”

In other words, their pockets are empty.  And to pay to clean up the San Juan Generating Station’s air pollution would require fundraising in capital markets.

Now normally, that wouldn’t be a problem for a big utility, especially one that’s a regulated monopoly, like PNM.  Remember, under New Mexico law, the company is guaranteed to recover a reasonable rate of return from its customers, which makes it a “can’t lose” investment.

Except, somehow, investments in PNM are losing.

In testimony submitted to the 10th Circuit, PNM treasurer, Terry Horn, explained not only that “Standard and Poor’s currently rates PNM as below investment grade” but also that “PNM Resource, Inc. common stock trades well below its book value.”

Put another way, the company’s credit is in the pits, meaning the market has no faith that investments in PNM will pay off as expected.  As a result, the cost of acquiring new capital to pay for clean air retrofits promises to be enormous.

As if that wasn’t enough, PNM’s ability to recover the costs of financing the clean air retrofits would be questionable, at best.  Under New Mexico law, the company can only recover costs that are “reasonable and prudent.”  By any measure, it’s difficult to believe that exorbitant finance costs stemming from the company’s poor credit would be considered “reasonable and prudent.”

In the end, PNM’s shareholders will have to absorb the finance costs and possibly more.  It’s no wonder the company is freaked out.

Unfortunately, instead of coming clean with its financial predicament, PNM is resorting to greedy desperation.  Like attacking the EPA’s clean air plan.  And worse, they’re working to pass legislation that would impose a “non-bypassable surcharge” on New Mexico ratepayers, a scheme that would essentially force ratepayers to cover the costs of cleaning up the San Juan Generating Station, regardless of whether those costs are reasonable and prudent.

Worst of all, though, now they’re accusing the concerned public of being liars.

Case in point is a letter that PNM’s Executive Director for Environmental Services, Maureen Gannon, sent to WildEarth Guardians the day before Thanksgiving.

In the letter, PNM accuses WildEarth Guardians of being inaccurate.  What are these inaccuracies, you might ask?  Let’s take a look:

  • PNM claims that WildEarth Guardians is inaccurate in asserting that the “only alternative offered by PNM is to continue operating the plant as is with nominal pollution controls.”  Yet according to the numbers, this statement is not inaccurate.  PNM spurred the State of New Mexico to adopt a plan that would reduce nitrogen oxide emissions by only 17%, whereas the EPA’s plan would reduce emissions by 83% (the baseline nitrogen oxide emission rate for the power plant is 0.28 pounds per million Btus—the EPA’s plan would reduce that rate to 0.05 pounds per million Btus whereas PNM’s pla would reduce that rate to only 0.23 pounds per million Btus).

I suppose “nominal” is in the eyes of the beholder, but a 17% compared to an 83% reduction in harmful emissions seems to speak for itself.

  • PNM further claims that WildEarth Guardians is inaccurate in asserting that “PNM has proposed to force ratepayers to cover the full costs of air pollution controls without determining whether such costs are reasonable and prudent,” which is interesting because, as mentioned, the company has proposed a scheme to foist a a non-bypassable surcharge upon ratepayers to cover the costs of the clean up.
  • Most significantly, PNM also takes issue with modeling showing that the San Juan Generating Station contributes to 33 premature deaths at a cost of more than $250 million annually.  The company is referring to a Clean Air Task Force report that modeled the health risks of coal-fired power plants throughout the country using the same methodologies used by the EPA to estimate the health costs of benefits of major clean air regulations.

PNM may disagree with the methods used by health and environmental regulators to estimate costs and benefits, but that doesn’t mean the modeling is flawed.  And it certainly does not mean there are no health risks from the San Juan Generating Station, as the company asserts.

Sadly, rather than face the truth, it’s just more hot air from PNM.

Despite their claims of inaccuracies, their claims that they are looking out for ratepayers, and their claims that their plan is somehow better than the EPA’s, PNM can’t hide the fact that it cares more about making money than about protecting clean air, public health, and our environment from the coal burning San Juan Generating Station.

WildEarthGuardians_PNMActionNov2011_AnaJune_IMG_5146

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