The Energy Transition Act:
- Sets some of the strongest clean energy targets in the country,
- Positions New Mexico as a national leader in addressing climate change,
- Provides millions of economic development dollars to lessen the local impacts of closing the aging coal-fired San Juan Generating Station, and
- Puts New Mexicans first by taking advantage of a financial tool with interest rates so much lower than the amount that is typically embedded in Commission-approved rates that the impact on customer bills is reduced by half.
The Energy Transition Act makes New Mexico a clean energy leader
The Energy Transition Act will ensure that 50% of New Mexico’s electricity is generated from renewable energy resources by 2030. This increases to 80% by 2040, and by 2045 the state’s electricity grid will be 100% carbon-free. These standards are consistent with the most current climate science and will allow us to protect the health of New Mexico families while leveraging our state’s abundant and affordable clean energy resources.
The Energy Transition Act shares the costs and benefits of closing coal plants so that customers save money while utilities forego profits
Coal plants and other energy generation infrastructure cost money to build. When an electric utility, like PNM, decides to build any kind of energy infrastructure, the utility’s investors put forward money to pay for the costs of construction, and then, after approval by regulators, recover their investment over time, through charges on customers’ utility bills. That recovery includes a return, or profit, on their investment. That profit allows utilities to attract the large amounts of investment capital they need to build renewables, transmission and other facilities to serve their customers.
Today, coal plants are uneconomic to run, even when the costs associated with the pollution they cause is not taken into account. In the case of San Juan Generating Station, the plant is so uneconomic that it can be closed, the unrecovered costs paid off, and new resources developed while still saving customers a lot of money. “Securitization,” which the ETA enables, takes these benefits for ratepayers one step further. Securitization is similar to refinancing a home mortgage at a low interest rate. The low interest rate is obtained by securing repayment through legislation. Many utilities oppose securitization because securitization pays off the utility for only those dollars actually spent on the plant and deprives the utility of any continued profit it expected to earn on its investment. Public Service Company of New Mexico (PNM) has accepted securitization as a reasonable way to turn the corner away from fossil fuels and towards clean energy.
PNM’s exit from the San Juan coal plant is scheduled for 2022. At that time, PNM will have unrecovered San Juan plant costs of $280 million. By securitizing these costs, in 2023, PNM will lose $14 million, and over time PNM will lose $200 million, from what it would have earned if the coal plant kept running. For ratepayers, this outcome is the nearly the same as if PNM’s $280 million investment was cut in half. From a ratepayer perspective, after the coal plant closes and is replaced (mostly with renewables), and the costs are securitized, residential bills will be reduced $7 a month, or nearly 10%.
For New Mexico, securitization is a fair way for utility customers and shareholders to share the burden and enjoy the benefits of moving away from coal.
The Energy Transition Act protects consumers and ratepayers
The financial tool enabling the San Juan Generating Station’s closure and limiting how much PNM can recover will lead to direct savings for New Mexico ratepayers. In 2023, the Energy Transition Act will save an average PNM customer more than $80 on their utility bill. What’s more, renewable energy is among the least expensive sources of energy and New Mexico is home to ideal locations for its development. Moving New Mexico away from fossil fuels and toward cleaner and cheaper sources of power will mean additional savings for New Mexicans.
The Energy Transition Act protects New Mexicans’ health
The San Juan Generating Station is a major source of carbon pollution in New Mexico that contributes to climate change. By closing the remaining two units at the plant through the Energy Transition Act, New Mexico will avoid emitting 6 million metric tons of carbon dioxide per year– the same as 1,270,000 passenger vehicles driven for a year.
Closing San Juan will also reduce emissions of other harmful air pollutants including sulfur dioxide, oxides of nitrogen and mercury. This will lead to cleaner air in New Mexico and important improvements in public health, specifically in communities near the San Juan coal plant.
According to a recent study by the EPA, reducing emissions from the electric power sector can lead to tangible public health benefits, such as reducing the number of premature deaths and incidences of respiratory and cardiovascular illnesses.
The Energy Transition Act maintains the authority of NM regulators to protect ratepayers
The New Mexico Constitution requires the Public Regulation Commission to regulate electricity providers and others as the Legislature prescribes. Throughout the PRC’s history, lawmakers have established the policies under which New Mexico utilities are regulated and costs are recovered. The Energy Transition Act follows that tradition.
In addition, over the last 40 years the PRC has made numerous decisions allowing PNM to recover costs from its prudent investments, and disallowing the utility to recover its imprudent investments. For example, in 2016 WRA challenged a $50 million investment by PNM in the San Juan Generating Station, which was not needed and made little sense given the coal plant’s uncertain future. The PRC agreed and denied PNM the ability to recover the costs. Questions around whether PNM’s investments in the San Juan coal plant were prudent or not have been settled, and it’s time for the PRC to move forward and begin implementing the Energy Transition Act.
The Energy Transition Act is perhaps the most important New Mexico climate legislation of our time – one that puts New Mexico on the right path to decarbonize our economy, power our state with homegrown clean energy, and protect our health and well-being. New Mexicans are already experiencing the impacts of climate change, and the Energy Transition Act will help us keep the New Mexico we know and love.