ALBUQUERQUE, N.M. – New Mexico’s new landmark energy law is facing its first legal challenge as a coalition of environmental and consumer advocacy groups filed a petition Monday with the state Supreme Court over concerns that certain provisions are unconstitutional.
The groups contend language within the law signed by Gov. Michelle Lujan Grisham earlier this year erodes the state’s ability to regulate utilities and puts electric customers at risk of having to pay unchecked costs.
Aside from mandating that utilities provide emissions-free electricity by 2045, the law charts a course for the closure of the coal-fired San Juan Generating Station by 2022. It includes a financing mechanism aimed at easing the economic consequences of closing the power plant.
Mariel Nanasi, executive director of New Energy Economy, said Monday the groups support the state’s renewable energy goals but that regulatory oversight by the Public Regulation Commission will be important as New Mexico’s electricity market evolves over the next two decades.
“That constitutional protection cannot be bargained away by legislators, no matter how noble their overall goals,” she said.
The Energy Transition Act resulted from a year of negotiations that included utility executives, unions and environmental advocates. State officials touted it as one of the strongest packages of its kind in the U.S., and it marked a win for Lujan Grisham, a first-year governor who campaigned on boosting the number of wind turbines and solar panels around the state.
However, critics say the law will be a boon for Public Service Co. of New Mexico, which operates the San Juan power plant. The law allows the utility and other owners of San Juan to recover investments in the plant by selling bonds that will be paid off by utility customers.
In addition to paying for decommissioning costs, the bonds will fund severance packages and job training for workers who will be displaced by the closure of the plant and the coal mine that feeds it.
Regulatory and market pressures have pushed many utilities across the U.S. to move away from fossil fuels, including in neighboring Arizona where one of the region’s largest coal-fired plants will shut down before the end of the year.
PNM is no exception. Executives with the New Mexico utility have said that despite the new law, they already were on a path that would increase the percentage of renewable and carbon-free energy sources within their portfolio.
The petition filed Monday centers on the Public Regulation Commission’s role in balancing the interests of utility shareholders and ratepayers.
New Energy Economy and the other groups are asking the court to disregard provisions of the new law that they say would remove the commission’s authority to review the prudence of utility investments and consider how much of the costs should be borne by customers.
The petition states the law gives the utility “unbridled discretion to charge ratepayers whatever amount the utility decides it should receive as compensation when it closes an old plant.”
Sen. Jacob Candelaria, an Albuquerque Democrat who sponsored the energy measure, argued that the commission still has the ability to either approve or disapprove a utility’s proposal for financing closure and decommissioning costs.
He said the law calls for third-party bond counsel to determine whether any resulting bonds would be in the best interest of ratepayers.
It will be up to the Supreme Court whether to take up the petition.
There’s also uncertainty surrounding PNM’s application to close San Juan since the commission is embroiled in a dispute over whether provisions of the new energy law should apply to the proceeding.
That has spurred frustration among some lawmakers and environmentalists who are concerned about potential regulatory delays.
Candelaria said the law was a compromise and that transitioning from coal will have costs for ratepayers, shareholders and workers.
“The Energy Transition Act is trying to answer difficult questions,” he said. “This is about charting a real path forward that isn’t just based on hope and campaign slogans.”