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CVNM’s take on HB 325 at NM Legislature

By February 14, 2018Legislature

When SB 47, PNM’s securitization bill, finally collapsed under its own weight in the Senate Conservation committee on Feb. 3, it took with it a provision that would have required PNM to locate replacement generating facilities with about the same generating capacity as the San Juan Generating Station (SJGS) inside of the school district that SJGS occupies. The reason for this is that when the station shuts down, the school district will lose revenue from the property taxes because they are assessed on the economic value of the land within the district. This provision was seen by some as important not only for the school district, but also because of the economic activity that would be produced by the construction of new energy generating facilities.
In response to SB 47’s failure to pass the Senate Conservation committee, Representative Rod Montoya from San Juan County used a “dummy bill” to bypass the bill filing deadline and file a new piece of legislation. Montoya’s bill, HB 325, would address the requirement that replacement resources from the coal plant be located in the school district. The bill was introduced in the House with a single committee referral to the House Judiciary Committee. Sadly, like SB 47, the bill did several counterproductive things in addition to its stated goal of geographically guiding energy replacement. You can review the environmental coalition letter here (LINK) to learn more about it. In short it made it more complicated and costly to retire coal plants, built in a preference for natural gas as the sole replacement facility and was unclear as to whether closure of the coal plant would even be required in order for the replacement provisions of the bill to take effect.
As the scheduled time for the hearing in House Judiciary grew near, environmental advocates scrambled to communicate concerns to the sponsor and committee members. This resulted in eight different drafts of the bill being circulated in the 24 hours before it was to be heard in committee. As the committee convened, most environmental advocates hadn’t even seen the draft of the bill to be considered. Members of the House Judiciary Committee spent hours over two days of hearings attempting to amend the bill down to the point where it would do only what it was purported to do, but ultimately the bill left the committee on a 10-2 vote serious issues still in place, and only 48 hours left in the session.
The confusion about which version had passed the committee, combined with the overall message about the intention of the bill (to help San Juan County) resulted in the bill passing the floor of the House on the afternoon of the same day that it left committee. Fortunately, legislation requires time as it crosses from the House to the Senate side, and advocates and senators were able to get a handle on the level of complexity and detail of the problems with the bill. It became apparent at that point that fixing the legislation would simply require more time than was left in the legislative session. The bill was ultimately referred to the Senate Conservation committee after it had concluded its final meeting for the session.
The idea behind HB 325 was a noble and worthy one, and with adequate time to analyze and draft better language, the bill may have been viable. The tale of this bill is the same story of far too many in New Mexico: a good idea that simply fell victim to our incredibly short legislative session.
Here is the full text of the letter we shared with the legislature:
The organizations listed below oppose House Bill 325-sub, sponsored by Representative Rod Montoya. HB 325-sub is intended to provide relief to San Juan County in the event that San Juan Generating Station (SJGS) is abandoned – meaning it stops serving PNM customers. The bill requires that replacement resources be located in San Juan County, subject to certain constraints, so that property tax revenues associated with the coal plant can be preserved. Those revenues fund the local school district.
While all of our organizations recognize that adverse, local economic impacts can follow a coal plant closure, and believe it is necessary to provide relief for those impacts, this particular legislation is an over-reach, and misguided for several reasons.

  1. First is that HB 325-sub provides an economic thumb on the scale in favor of keeping SJGS operating. This bill alters commission process by including evidence of property tax revenues, and allows increased costs for new While those economic considerations are important, they should not be used to undermine a conclusion that in 2022 SJGS will be an uneconomic resource whose continued operation will cost New Mexicans millions of dollars.
  2. While the bill calls for San Juan County relief to occur upon “abandonment” (a legal term of art), there is no assurance that SJGS will stop Under this bill, another owner could acquire SJGS, with a lower tax basis, and continue to operate and sell wholesale power from the facility. San Juan County officials are actively pursuing that possibility. What that means is that PNM customers could provide millions in relief for an economic impact that did not occur.
  3. Although the bill calls for environmental impacts of new resources to be minimized, that constraint is weak because it competes with reliability and least cost It is not a replacement for a strong clean energy policy. Other states that require environmental review and impact minimization still see large new gas plants being built. We are concerned that this bill will cause a great deal of new gas-fired generation.
  4. Requiring that every resource needed to replace SJGS be located in San Juan County is overkill, and tips the scale away from Replacing the SJGS capacity with drive over $500 million of investment in the County. Replacing the energy will trigger a similar economic boost. It will be difficult for renewable energy from elsewhere in New Mexico to compete if the constraints of this bill are in place. If the goal of the bill is to restore lost property tax revenues, it should focus on that.
  5. Finally, this bill is a piecemeal approach to a very complex situation surrounding coal plant For example, comprehensive legislation would have the San Juan County locational requirement matched with a strong renewable energy commitment, to offset the propensity for the County to seek fossil-fueled generation.

This bill has been developed within a matter of days, and has been substantially amended numerous times within hours. The bill will govern the development of hundreds of millions of dollars of energy resources in New Mexico, and the implications of the bill should be fully understood before passage. San Juan Generating Station will not be abandoned until 2022. There is time to address these issues in a thoughtful and deliberative manner. There is no need to rush to judgment on HB 325-sub, and we urge our Representatives and Senators to VOTE NO on this bill.
Sierra Club – Rio Grande Chapter
Natural Resources Defense Council
Environment New Mexico
Western Resource Advocates
Conservation Voters New Mexico
Western Environmental Law Center
Union of Concerned Scientists