PNM Bonding a reasonable approach

This year’s thirty-day budgetary session will deal with the long-debated issue of how utilities shutter aging facilities.

Multiple constituencies ranging from the workforce in Northwestern NM to Albuquerque rate-payers stand to be effected. For decades environmentalists have pushed for a shift away from coal. Now, thanks in part to the fracking revolution, market forces are moving that direction as well.

However, negotiations over how to manage that transition have stalled at the Public Regulation Commission and PNM is petitioning the Legislature to provide a vehicle for responsible and timely closure of certain energy plants. As New Mexico’s primary policymaking body, the Legislature should be involved in this process. That involvement will also allow for PNM to issue bonds at the best possible rate. Without the Legislature’s consideration AAA bond ratings may not be available. The rate-payer deserves the opportunity for PNM to attain a AAA rating because it directly hits their wallets.

Bipartisan pieces of Legislation sponsored by Sen. Jacob Candelaria (D-Bernalillo) and Sen. Steven Neville (R-San Juan) as well as Rep. Bobby Gonzales (D-Taos) along with Rep. Rod Montoya (R- Farmington) have been introduced in the form of the Energy Redevelopment Bond Act (SB 47. and HB 80 respectively)

Opponents to SB 47 and HB 80 champion a false narrative that these bills burden taxpayers with a bailout and that the legislation removes regulatory authority of the PRC. Both of these arguments contradict the language of the bill.

Comparisons to tax-payer “bailouts” are misguided because they conflate tax-payer bailouts of (mainly) banks with a private financing tool aimed at mitigating costs to PNM customers. Note: any bonding process/application still must be approved by the PRC.

From a fiscal, taxpayer, and rate-payer perspective the Rio Grande Foundation is comfortable with the bonding approach outlined in this legislation. Unfortunately, a potential amendment to the legislation would increase New Mexico’s “Renewable Portfolio Mandate” (RPS) to 50% from 20% where it will be in 2020. The Rio Grande Foundation opposes raising New Mexico’s RPS due to the potential cost to rate-payers.

Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

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4 Replies to “PNM Bonding a reasonable approach”

  1. The enviros may not understand that the reason public utilities can afford to invest billions in power plants is that they can recover their capital costs through depreciation. State regulatory commissions are legally obligated to enable utilities to stay solvent while holding rates down. So they set up depreciation schedules that allow the utility to recover the cost of each power plant in its rates over a service life measured in decades. This implicit guarantee of cost recovery enables utilities to attract investors and raise capital. It’s one of the reasons why New Mexico has reliable electricity and Puerto Rico does not.

    A political decision to scrap a power plant that is not yet paid for upsets this process. The bipartisan legislation recognizes this and will help the state meet its legal obligation to keep PNM solvent. Opponents have no responsibility to either PNM or its ratepayers and can afford to be predatory.

  2. The enviros either do not understand or care to understand good business practices. They are on a one track agenda to destory capitalism.
    Perhaps PNM should turn off the power to NM for a few days to give the folks a taste of what the enviros really want

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