NM Supreme Court Considers an Interesting Energy Question

New Mexico's Supreme Court heard an important argument Monday on what's fair and lawful with regard to our push toward renewable electricity sources. 

Big utility companies have a legal monopoly on distributing our electricity; but should we let them use that power to gain a monopoly on producing electricity?

PRC Hearing Examiner Carolyn Glick said, “No!” After reviewing much evidence, she said it wasn't even a close call. She found that PNM had rigged a 2017 request for proposals on a 50MW solar generating project so that bidders could only succeed if their bid involved PNM owning the solar fields. Affordable Solar, Inc. won the bid.

Noting that the public interest is always paramount, and the utility's interest secondary, Glick recommended ordering a fairer rebid, with a 90-day deadline, not the 31 days she found unfairly brief. 

NM's PRC overruled Glick, 3-2. Coincidentally, Affordable's registered lobbyist was a campaign consultant to two commissioners. In 2018, Affordable was those commissioners' major campaign contributor, and PNM Resources gave $440,000 to a PAC supporting them. (Their challengers, including Las Crucen Steve Fischmann, won.) 

PNM had a huge financial incentive to ensure it owned the land and generating facility; but such an arrangement would cost consumers a lot more for their juice. The Supreme Court has stated that, “the public interest is to be given paramount consideration; desires of a utility are secondary.” Glick obeyed that mandate. 

PNM seeks to charge us: for the electricity (at a higher rate); 9.5% annual “return on equity” on the solar equipment; plus 9.5% annual “return” on the land. Without PNM land ownership, we'd pay less for the electricity (including the producer's 4-5% profit), plus minimal interconnection and distribution or transmission charges. 

PNM gets 9.5% guaranteed return only because hundreds of millions (coal) or even several billion (nuclear) were beyond what normal investors could handle without a “risk premium.” This project totaled only $72 million. We no longer need hugely expensive centralized plants or such handsome PNM profits. 

Since solar generated on non-utility-owned land is generally cheaper than on utility-owned land, effectively limiting bids to proposals using PNM-controlled land should be suspect. Two bids (disqualified by PNM) proposed producing on non-PNM land, at $34.50 and $29.63/MWh, respectively. Plenty lower than Affordable's $44.63. 

In 2016, on another project, three bids (including Affordable's) using non-PNM land were far cheaper than $44.63, despite declining prices for solar. Four months after overruling Glick to approve Affordable's $44.63 bid, the PRC reportedly approved a 50MW proposal with a $29.98 independent competitor bid.

PNM argues that there was no legal requirement to use a Request for Proposal; but RFP's are standard, transparent, and (theoretically) fair. There is a requirement to show that the proposal is cost-effective and in the public interest, and that alternatives were considered – and RFPs are a good way to do that. Further, PNM chose to use the RFP and claim it was fair, so when it actually wasn't so fair, who cares whether an RFP was required? 

There's sure no public interest in PNM owning the land.

State law mandated that the PRC require PNM to prove, with reliable evidence, that it was proposing the most cost-effective course. PNM didn't. 

PNM and the PRC claim the bidding process was fair. Since the Supreme Court must give the agency's conclusion significant deference, PNM might win.

But New Mexicans would pay way more for electricity than they should, for decades.

                                                -30-

[The above column appeared this morning, Sunday, 12 May 2019, in the Las Cruces Sun-News, as well as on the newspaper's website and KRWG's website, and a spoken version will air during the week on KRWG and on KTAL-LP, 101.5 FM (streamable at www.lccommunityradio.org).]

[I'm no energy expert, but I have read parts of the briefs on both sides, and the Hearing Examiner's Recommended Decision, and the PRC's decision overruling her.  I'll hope to have a current member of the PRC and perhaps someone from a utility on a radio show to discuss these and related issues in the foreseeable future.  This is or should be a time of major change in the industry, not only with a steady increase in renewable energy sources, and probably major further improvements in storage, but at least to some degree decentralization and decreasing reliance on the grid.  I think all that is positive -- and the move to renewables not only economically prudent in the long-term but essential to help avert the worst consequences of climate-change.  (Still, I want to ask someone about where we'd be if, as has happened in the past, something -- asteroid striking Earth, or an unusually large volcanic eruption, say --  seriously cuts down on the sunshine reaching the solar panels for an extended period.  I hope that's both a foolish question and an academic one.)]