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Home / Articles / News / Local News /  Energy Dependence
EnergyRates

Energy Dependence

New Mexico’s biggest utility is caught in a renewable quagmire.

July 14, 2010, 12:00 am
Which is more important to you?

 A. Having electricity

 B. Being able to afford electricity

Got your answer?
These were the basic choices (although they were not phrased quite so baldly) given to audience members at a public forum last week.

The meeting was held by Public Service Company of New Mexico—PNM—ostensibly to spark discussion of New Mexico’s energy future, particularly renewable energy.

But when Charlotte Pollard of New Mexico First put the two choices above to attendees, they made it clear they didn’t like the either/or scenario.

“The two are not in conflict,” one woman protested. “Making it into this A, B, C game isn’t enlightening; it’s enraging!”

Raucous laughter followed another man’s tongue-in-cheek response: “I want higher reliability because I want rates to be high!”

In a windowless meeting room at Santa Fe Community College, Pollard, whom PNM hired to facilitate the second of 11 public meetings to discuss the company’s future energy sources, attempted to quell the crowd.

But for many of the approximately 50 people there, Pollard’s question had already hit a nerve. They shouted questions about PNM’s recently proposed rate hike, while approximately 10 PNM employees attempted to corral the conversation.

“The meeting wasn’t about rate hikes,” Santa Fe City Councilor Chris Calvert told SFR after the meeting. “PNM had an agenda, and the people attending didn’t necessarily have that same agenda. I would have to rate the meeting somewhat of a flop because of that.”

Marita Noon, the executive director of the advocacy group Citizens’ Alliance for Responsible Energy, says her contingent—which included approximately 10 people from the Tea Party, Republican Party and Friends of Capitalism—was “well aware that, technically, it wasn’t a forum for the rate increase.” But Noon maintains it was appropriate to bring up the proposed increase—particularly since the meeting handouts pose the question of how much customers are willing to pay.

“The economy is on the precipice of disaster, and people are maxed out—and they are mad,” Noon tells SFR.

They first got mad when PNM proposed a 21.2 percent rate hike this May, Noon says. That came on top of an 18 percent (on average) rate hike in 2009. Rate cases—basically, PNM’s application for reimbursement of its operating costs—usually spend nine months in public hearings, awaiting approval by the Public Regulation Commission.

According to PNM spokeswoman Susan Sponar, the current rate hike proposal—which has been suspended by the PRC until next April—is primarily to cover the cost of maintaining power lines and plants.

“Renewables are not in our current rate [request],” Sponar tells SFR.

Does that mean there could be another rate increase in the future to pay for the costs of complying with renewable energy requirements?

“The answer is yes,” Sponar says.

In 2004, the New Mexico Legislature passed the Renewable Energy Act, which requires a certain percentage of a utility’s power to come from renewable energy sources. By January 2011, utilities are required to have an energy portfolio composed of 10 percent renewable sources.

A separate PRC rule, in turn, requires that certain portions of that 10 percent come from wind, solar and other sources. Each July, utilities are required to present their compliance plans for the upcoming year.

But PNM, New Mexico’s largest utility, is lagging. Its 2010 plan provided for the proper quantity of renewable energy, but it didn’t meet the requirements for solar, PNM spokeswoman Cathy Garber tells SFR.

That led to a lawsuit, which, in turn, produced a revised plan, released this January and still awaiting PRC approval.

Steven Michel, chief counsel of the energy program at Western Resource Advocates and one of the parties in the lawsuit, says he’s pleased that the revised plan has a larger focus on solar energy.

“PNM is inappropriately heavy on wind,” Tom Singer, a senior policy analyst with the Natural Resources Defense Council, agrees. “They are minimally complying with the renewable [requirements], but there’s no movement toward renewables that have any kind of storage capability or dispatchability.” (Generally, solar power is easier to store and transport than wind.)

But Santa Fe lawyer Bruce Throne, who represented an Albuquerque-based solar company in the renewable plan case, questions why it has taken PNM so long to put solar on its plan.

“Why haven’t they done it until now?” Throne says. “They just wanted to satisfy their Renewable Energy Act requirements as cheaply as possible until the you-know-what hit the fan.”

Throne also notes that PNM’s major sources of renewable energy currently come in the form of Renewable Energy Certificates, or RECs.

This means PNM buys up credits—mostly for wind production—from other utilities to satisfy its renewable energy quota.

“They describe themselves as these big champions of renewable energy; however, they own virtually no renewable energy resources,” Throne says.

Garber confirms that of the approximately 207 megawatts of renewable energy PNM generates from all sources, less than one megawatt comes from PNM-owned facilities. Just over two megawatts come from customer-owned solar programs, and the rest are RECs bought from the New Mexico Wind Energy Center.

“The Renewable Energy Act actually allows you to satisfy the requirement even without actually buying renewable energy,” Throne tells SFR. “You can just buy the certificate without the energy.”

Singer says part of the planning process should address whether a utility can fulfill its renewable energy requirements by buying RECs, rather than actually building wind farms and solar arrays.

RECs or not, Garber estimates PNM has spent $265 million on Renewable Energy Act compliance—a quantity that, according to Sponar, PNM customers will likely see on a future rate request.

Public Regulation Commissioner Jason Marks questions that amount.

“I don’t dispute that renewable energy mandates can and will raise costs,” Marks, one of the PRC’s most vocal proponents of renewable energy, tells SFR. But, he adds, “I don’t believe they’ve spent $265 million.”

As for the current rate hike request, Marks notes that the bulk of it is for projected costs—a first in rate cases, which usually reimburse utilities for past expenses.

Bill Althouse, a solar power advocate who has long been active in Santa Fe’s renewable energy community, says he’s concerned that—as a regulated monopoly that can’t be fined for its failure to comply with Renewable Energy Act requirements— PNM has undue influence over New Mexico’s renewable energy future.

“The decisions about our energy future can’t be made by what’s most profitable for PNM stockholders,” Althouse tells SFR. “What’s most profitable to them is most expensive to us—and yet all decisions are made by them.”

Click here to take our quiz on PNM.

 

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