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Two hearing examiners at the New Mexico Public Regulation Commission (NMPRC) are recommending that Public Service Company of New Mexico (PNM) issue customer rate credits concurrent with the retirement of PNM’s coal-fired San Juan Generating Station.

The hearing examiners said PNM is violating New Mexico’s 2019 Energy Transition Act (ETA) and a 2020 financing order that outlined how the utility would recover costs from the San Juan Units 1 and 4 closures, expected June 30 and September 30, respectively.

The ETA was adopted to transition the state from coal-fired generation. It allowed utilities to recover costs of closing their plants using low-interest bonds, which would save customers money compared to the traditional ratemaking methods. Under the financing order, PNM would remove the San Juan costs from customers’ bills when the units closed.

But according to the hearing examiners, PNM has since altered the order of events in the plan, intending to issue the bonds in January or February 2024, at least 18 months after the closure of Unit 1 and 15 months after the closure of Unit 4. That, in turn, would delay removing the units’ costs from customers’ bills until the end of a rate case PNM has said it intends to file in December.

Groups including the Western Resource Advocates (WRA), Coalition for Clean Affordable Energy (CCAE) and Prosperity Works had argued against PNM’s timeline, saying it would allow the utility to “double recover” costs.

For one thing, ratepayers would continue to pay for units that would no longer be in operation, plus the costs of other resources that replace the San Juan units, potentially until 2024. Then, PNM ratepayers would begin to pay off the bonds after their issuance in 2024.

The hearing examiners agreed with that point of view.

“PNM’s new plan constitutes a moral hazard that, without the remediation ordered herein, threatens substantial and potentially irremediable harm to ratepayers,” they concluded in their recommended order dated June 17.

PNM has argued the financing order does not require the rate reduction upon the retirement of the San Juan units, providing it the flexibility to delay issuance of the bonds until the conclusion of its next rate case.

The utility said double recovery would only occur if it continued to collect rates based on the cost of San Juan and also collected charges for the issued low-interest bonds simultaneously.

In a statement issued following the hearing examiners’ recommendation, the utility said it had repeatedly delayed rate reviews partly due to the pandemic and has been carrying the costs of “significant infrastructure investments not included in customer rates.”

“This recommendation is particularly discouraging because it disregards the Energy Transition Act and its inherent balancing of stakeholder interests, retroactively stripping away the built-in protections for utilities to encourage the exit from coal while ignoring the existing safeguards that prevent the utility from overcharging customers,” said Pat Vincent-Collawn, PNM Resources’ Chairman and CEO.

Vincent-Collawn added PNM is being “arbitrarily punished.”

According to the hearing examiners’ report, the average residential customer using less than 1,000 kWh per month should see a rate credit of $1.76 per month after June 30 when Unit 1 is abandoned. They should see a rate credit of $8.19 per month after September 30 when Unit 4 and the San Juan common facilities are abandoned.

The NMPRC is expected to review the case and issue its decision before Unit 1 of the San Juan Generating Station retires on June 30.

The hearing examiners’ order can be read here.

This post appeared first on Power Engineering.