Energy Transition Act
Top Myths & Facts
The Energy Transition Act (SB 489) is the most important piece of energy policy being debated by the New Mexico Legislature right now. It will ensure that transitioning to a clean energy economy is fair to communities most affected and PNM ratepayers. Governor Lujan Grisham personally led negotiations to ensure the Energy Transition Act (ETA) will reduce electricity costs, protect utility workers in San Juan County, diversify and strengthen our economy – all while protecting our air, land, water and public health and ensuring New Mexican communities have a seat at the table. That’s why a coalition of 17 environmental, social justice, labor and conservation organizations support the bill.
Many of our supporters like you have reached out to us with questions about this bill – and we appreciate that. It’s an 84-page bill regarding a complex issue that is vital to New Mexico’s clean energy future. We’re so grateful to have members like you who are paying attention to these important matters in such detail. Here we will provide you with the top five myths – and the facts – about the Energy Transition Act.
- Myth: ETA represents a 100% bailout for PNM at the San Juan Generating Station (SJGS) and puts the entire cost on ratepayers.
FACT: SB489 allows PNM to refinance its loan at a lower rate and pay it off, like when you refinance a home mortgage. When repayment is completed, PNM stops earning the profit it makes on the loan – a loss of about $16 million per year. In total, under this bill, PNM will lose nearly $200 million in profits that it would earn if the plant kept operating, or if it was provided full cost recovery – as utilities in many other states, including Colorado, are allowed. This is all laid out beginning on page 4 of the bill.
New Mexico utilities have long relied on coal-fired generation to produce electricity, but with the declining price of renewables and the aging coal infrastructure, New Mexico can now transition away from coal. Some utilities, such as PNM, have substantial coal plant costs approved by the PRC for recovery but still on their books. The bill uses a tool not currently available to the PRC to better protect customers, while requiring the utility to have shared responsibility: a low-cost financing tool to pay off coal plant costs and close the facilities, often referred to as “securitization.”
Securitization is a tool used in many states by clean energy groups to advance coal-plant retirements and renewable development, and assist workers in affected areas. Securitization is like refinancing a mortgage at a lower rate. The lower interest, AAA-rated bonds will reduce the overall cost of closing coal plants by as much as 40%–in large part because the utility no longer earns a return on the now-paid-off plant balance. Under the Energy Transition Act, PNM would forgo about $16 million per year in profit. Because the ETA would have market forces determine ownership of replacement resources, PNM has no assurance that it can restore those lost earnings. In many states, utilities have opposed securitization because of the lost earnings and uncertain ownership opportunities. For New Mexico, securitization is a fair way for utility customers and shareholders to move away from coal.
2. Myth: The Energy Transition Act removes the Public Regulation Commission (PRC) from oversight of PNM’s plans to close the San Juan Generating Station (SJGS) coal-fired power plant.
FACT: The Energy Transition Act clearly states multiple times what is already in law: that any proposal from PNM to utilize securitization to close SJGS must be approved by the PRC and that ratepayers must be protected.
The legislation requires that the PRC have credible evidence that the bonds will qualify for a AAA rating before authorizing the financing. AAA-rated bonds today typically have an interest rate of between 3 and 4 percent.
Every single element that PNM must show to secure any financing agreement must be approved by the PRC. The PRC must also approve every replacement resource that PNM wants to add to replace the power lost when SJGS is closed. Those are also required to be competitively procured. See page 10 in the bill for this language.
Beginning on page 12, you’ll see specifics that a utility ‘must show’ the PRC in order to get abandonment. The PRC has the same audit authority over the order as they would over any other proposal by the utility.
3. Myth: The Energy Transition Act supports PNM’s ability to implement more nuclear energy.
FACT: The Energy Transition Act includes a clean energy standard, also known as a Renewable Portfolio Standard (RPS), that is among the strongest in the country with these benchmarks: 50% clean energy by 2030, 80% by 2040 and 100% carbon-free energy by 2045.
Nuclear energy is considered carbon free – though we know that’s only a technicality. The life cycle of nuclear energy is extremely toxic and dangerous – from uranium mining to ‘where are we putting all this radioactive waste?’
We know that nuclear energy is part of the dirty energy problem and not the solution – so we could not support a bill that encourages more nuclear energy. Only two utilities in the state currently use nuclear energy – PNM and El Paso Electric. They have no plans to add more and the Palo Verde Nuclear Plant (located in Arizona) will close in the 2040s, and maybe sooner. In addition, nuclear energy is expensive and would not qualify as the most cost competitive resource under the cost protection mechanisms in the Energy Transition Act and other laws that regulate utilities in New Mexico.
4. Myth: The Energy Transition Act doesn’t do enough to ensure fairness for ratepayers or affected communities.
FACT: The Energy Transition Act supports an equitable transition to significant investments in clean energy.
An equitable transition means that the communities that have worked to provide our electricity for decades by working at the coal plant and coal mine, are not left behind in this conversation about their jobs going away, and they are leading these conversations.
CVNM and our allies that support the ETA have been at the table negotiating on the bill for over a year – and we’ve pushed to ensure these communities have been at the table. The low-interest bonds of the ETA will also be used to finance crucial economic relief for communities impacted by the coal plant closure. In the case of PNM’s San Juan Generating Station, securitization will provide over $40 million to assist plant employees, mineworkers and others with severance pay and job training–that’s more than double last year’s bill under a hostile gubernatorial administration. In addition, with public input from community stakeholders, the fund will assist the Four Corners’ economy to transition away from its dependence on fossil fuel extraction. Finally, the bill directs hundreds of millions of dollars of replacement power, including renewables, to be developed in San Juan County, where infrastructure already exists. The development will restore the tax base for the community and its schools after SJGS closes, and will provide substantial economic stability for many years to come.
Securitization ensures a fair way for utility customers and shareholders to move away from coal.
5. Myth: The Energy Transition Act is the same as the “securitization” bill proposed in the 2018 session.
FACT: The Energy Transition Act:
- includes one of the strongest statewide clean energy standards in the country,
- provides $40 million to help San Juan County communities and coal mine workers thrive and transition when the San Juan Generating Station closes–more than double last year’s bill,
- aims to help the broader Four Corners region plan for greater economic diversity,
- includes workforce training for traditionally disenfranchised communities and apprenticeships in labor union jobs,
- protects ratepayers by providing a low-cost way for PNM to retire the coal plant, and
- ensures replacement power is open to a competitive bidding process.
PNM’s securitization bill in 2018 only looked out for their own bottom line – not the best interests of ratepayers or Farmington families. That’s why in 2018, CVNM and our allies opposed the bill and were successful in defeating it in its first committee hearing. Senate Conservation Committee members asked many good questions about ensuring a competitive bidding process for replacement power, Public Regulation Commission oversight and ratepayer protections. With our allies, we agreed with those concerns, took them seriously, brought stakeholders to the table during the interim and built a powerful bill and coalition that will take New Mexico leaps and bounds into the future. In short, claims that the Energy Transition Act is the same as PNM’s securitization bill in 2018 are false.
6. Myth: The City of Farmington’s possible purchase agreement for a new part owner in the San Juan Generating Station means the Energy Transition Act won’t close the San Juan Generating Station.
FACT: One of the main reasons leading environmental organizations, labor unions, community groups, Speaker Brian Egolf, and Governor Michelle Lujan Grisham support the ETA is because it ensures the retirement of the San Juan Generating Station, while also providing $40 million to safeguard miners and their families, and assist in the region’s planning for economic diversity and prosperity.
The Energy Transition Act sets an emission performance standard of 845 lbs/MWh for the plant after 2022. This is important, because the State Legislature cannot require a coal plant to close, any more than it can require a restaurant to close. What a legislature can do is assure that, if a coal plant (or restaurant) threatens human health, it must clean up to continue operating. That’s exactly what the Energy Transition Act does. By requiring the plant to reduce its post-2022 CO2 emission rate from 2300 lbs/MWh to 845 lbs/MWh, it sets an emission rate that no coal plant in the United States has been able to economically achieve. That is the best–and legal–way to achieve closure.
Whether there’s a new buyer or not, coal is still uneconomic, coming in at twice the price of wind and a third more than solar. There’s simply no market remaining for coal-powered electricity.
The proposed buyer, ACME Equities out of New York, looks like a classic case of a private equity firm trying to buy a distressed asset at a low price in order to then flip it for a profit. The first thing these firms do is to cut jobs to the bone in order to cut operating costs.
ACME Equities barely has any capital and no experience in coal. It is useful to compare it to two recent coal plant purchases: With the Navajo Generating Station, Middle River Power, a subsidiary of Avenue Capital, entered the picture with both a strong power generation portfolio and billions of dollars in assets. In Ohio, Elliot Management bought First Energy’s distressed coal plants, and they had a huge fund – $34 billion in management. ACME has neither assets (only about $30 million), nor experience.
At CVNM, it’s our job to work within the political process to address the climate crisis – and we consider protecting the communities most affected by climate change and our energy transition a key part of that work.
We now know that we have a single decade to avoid the worst impacts of the climate crisis. The Energy Transition Act will move New Mexico forward on climate change by leaps and bounds – while also ensuring a community-driven transition plan for the Four Corners area, direct assistance to mine workers and their families, and assurance that ratepayers benefit from the savings of transitioning to a clean energy economy, while guaranteeing that the PRC’s ability to hold PNM accountable remains intact.
It sounds like a win-win because it is. We urge you to support this vital legislation, and to ask your legislators to do the same.
Take Action: Citizen Co-Sponsor the Energy Transition Act to support an equitable transition to New Mexico’s clean energy economy.»
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