S&P Global quoted AEE's JR Tolbert in its coverage of the approaches environmentalists and utility companies are pursuing to close remaining coal plants and how to recover costs. Read excerpts below and the entire S&P Global story here.
In July 2018, an energy lobbyist emailed three New Mexico state lawmakers to urge them not to give utility companies a free pass to recoup their investments in abandoned coal-fired power plants. Environmentalists were drafting a bill to shield utility shareholders from the cost of closing coal plants in the state, and Bruce Throne, a lawyer and, at the time, a lobbyist for power producer Southwest Generation Operating Company LLC, warned that ratepayers could pay a steep price if regulators were stripped of their authority to "balance the interests of [utility] customers and investors." Unswayed, lawmakers cleared the way for utilities to recover their coal investments by selling bonds that are paid off by ratepayers, a process known as securitization.
The fight in New Mexico over how to finance coal-plant retirements highlights one of the biggest obstacles to quickly eliminating the fuel from the U.S. power system. Over the past two years, utilities have accelerated their shift away from coal in order to take advantage of cleaner and cheaper alternatives. However, given the potential financial benefits, analysts at CreditSights questioned why utilities are not moving faster. Of the 50 largest U.S. coal plants by generation, only about a dozen are scheduled for retirement, some a decade or more in the future, according to CreditSights. Often, millions of dollars in unrecovered investments are standing in the way...
Now, environmental groups are pushing policy makers for tools like securitization to help ease utilities' concerns about the cost of shuttering coal generators early. The initiative is raising thorny questions about who should foot the bill and creating awkward alliances between environmentalists and utilities accused of blocking efforts to fight climate change...
Before PNM Resources Inc. closed two generating units at the San Juan coal plant in northwest New Mexico in 2017, the state's Public Regulation Commission said the company could recover from ratepayers half of the units' estimated value, which PNM put at $255 million. Company shareholders were hit with more than $100 million in after-tax write-offs for unrecovered investments. When PNM later proposed retiring what is left of the plant, the company made it known that it expected to recover all of its remaining investment...
Colorado passed a law similar to New Mexico's in May. Proponents hope more states will follow. "The policies that would allow utilities to move beyond coal and to transition to clean energy aren't fully in place right now," said J.R. Tolbert, a managing director at Advanced Energy Economy, which advocates for "secure, clean, affordable energy..."
But utilities and regulators in many states are unsure how to manage the financial impact of shutting plants down early...
Read the entire S&P Global article here.