Is it PNM’s turn for a bailout?


If you pay enough attention to what’s been going on as of late, you’d figure that PNM is about to be swimming in money. Not money from profits based on their energy production (in fact, PNM posted losing quarters all of last year), but in “help” from state and federal sources.

First off, PNM has been given free rein when it comes to rate increases.  Last year the state Public Regulation Commission approved PNM for a 4.4% ($24 million) rate increase. That was big, but not quite the $82 million PNM originally wanted. PNM also requested a fuel clause, which would have given them the ability to adjust their rates to adjust to fuel costs. Many spoke out against this rate clause, saying it was simply a thinly-veiled rate hike designed to help PNM make up some of the $58 million that they didn’t get in the rate increase. It was determined that there wasn’t a need for the fuel clause and PNM’s request was rejected.

Now there’s word of another rate increase at the beginning of this year. PNM recently announced they will impose a 9.7% or $77 million rate increase starting in July. According to PNM’s CEO Jeff Sterba, the increase “is the latest step in our ongoing efforts to ensure adequate recovery of PNM’s costs and restoring shareholder value.”

Funny, I thought the reason PNM sold their gas holdings and got a credit line increase (increased to $300 million) last spring from the PRC was to improve PNM’s profits (and thus decrease how much they pass on to consumers) and help improve PNM’s credit rating.

One has to wonder whether last year’s profit losses, the large costs paid out to upgrade PNM’s San Juan Generating Plant, and the recent $7 million fine for emissions from the San Juan plant have anything to do with PNM’s recent request for a rate increase.

But now PNM is taking it to the federal level.

Recently, Sterba testified in front of Congress on behalf of the Edison Electric Institute (EEI), a trade association of US electric shareholders. In his testimony, Sterba asked Congress to give 40% allowances to from funds raised via the Waxman-Markey bill. That’s the long-awaited bill that would cap carbon emissions and charge polluters for their excess emissions.

Now, with recent amendments to the Waxman-Markey bill – all ushered in with the help lobbying efforts from groups like Sterba’s EEI – the amount of allowance giveaways has increased to 85%, to be given away every year until 2030. Essentially, that means electricity producers who have to pay for their excess emissions will be potentially getting 85% of the money they paid back.

I see two huge problems with this.

  • By giving away 85% allowances to giant energy companies like PNM, we are only giving them more money to use however they want.  There’s no guarantee that they will use these huge allowances to offset costs to their customers. As consumers, we will all be affected, with the poorest among us bearing the brunt.
  • Giving away almost all of the carbon permits removes any financial motivation for energy companies to become more efficient and clean in their energy production and to move to cleaner, more sustainable sources of energy from renewables. Why would you want to decrease your emissions when you are essentially getting paid not to for the next 20 years?

There is a better way to use these federal funds. PNM is already getting lots of help from the state of NM. Why not give these funds raised from the Waxman-Markey bill directly back to the public in the form of a dividend?

If we want to offset the costs to consumers, the most direct way to do this is by giving the public the money from pollution offsets – not by handing it right back to polluting companies who have no impetus to either reduce their emissions or reduce the rate they charge their customers.


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