PRC I

[This is the first of two columns on the Public Regulation Commission, with the second to be published next Sunday.]

In our changing world, how is the Public Regulation Commission (PRC) performing as a protector of the public? 

The world is moving toward renewable energy sources. Soon each house, business, and manufacturer will supply most or all of its energy from solar panels. A new California law requires that new buildings include solar panels – and even the home-builders apparently agree. Yeah, a new home will cost a bit more; but minimal or nonexistent utility bills will rapidly repay the investment. 

Lower solar costs and rapid improvements in storage are facilitating a decentralized system. The power grid will become more like a bank, with each of us depositing a bit of excess power much of the time and occasionally borrowing back some. We no longer need nearly so many huge gas-fired plants constantly sending large amounts of energy to our cities.

That decentralization is what utilities fear most. If they can build and own huge systems – gas, coal, nuclear, even solar – they make big profits. By tying profits to capital expenditures, our state's system arguably encourages waste. But if we each generate more of that energy, and utilities create less power (and transfer it from afar) and mostly direct energy traffic through the grid, their profits and our rates are more limited. Utilities have been standing on the brakes of this change, but it's coming. 

It could be here now. 

Meanwhile, El Paso Electric builds more huge plants because that's more profitable than energy-efficiency measures such as time-of-use rates, lowering peak demand, and encouraging distributed rooftop solar. 

The PRC has approved five new EPE gas plants in five years. These deals saddle us with those plants – and their high costs – for 40-50 years. One estimate says those new gas plants could cost us $5 billion over time. 

A friend compares it to investing zillions in mainframe computers just when PCs were taking over the world. Will we spend decades paying for dinosaurs? 

The PRC decides how we invest, after considering complex analyses and arguments. The playing field might seem tilted against us. Utility companies' sole legal duty and desire is to maximize profits. They have highly capable lawyers they pay well, passing on the costs to us. Although many states' PRCs have independent customer advocates, paid to argue for ratepayers' interests, we don't. The PRC hears one side presented by top professionals, and the other side presented by a few dedicated nonlawyer volunteers – assuming they can even negotiate the procedural maze those lawyers know by heart. (Recently some cities and counties have also intervened.) 

Even if commissioners are unbiased and want to be fair, they're hearing a case skewed toward one side. 

Despite that, hearing examiners, who read all the briefs and hear all the witnesses, have recently recommended decisions against utilities. PRC counsel has agreed. But the Commission has repeatedly voted 3-2 to overrule the hearing examiner in favor of utilities. (PRC Chair Sandy Jones has logical explanations for the votes, and notes he's overruled the hearing examiner in ways the utilities didn't like, including overruling one decision that intervenor Merrie Lee Soules's testimony couldn't be considered.) 

Those two cases are on appeal to New Mexico's Supreme Court. 

Since 2008 real median income in New Mexico is down 3.6%. Public Service Company of New Mexico's compensation is up 122%, and its stock price up 301%. 

It's hard not to be concerned.

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[This column appeared in the Las Cruces Sun-News this morning, Sunday, 20 May 2018, and also on the newspaper's website and KRWG's website.  A spoken version will air during the week on KRWG and on KTAL-LP, 101.5 FM.  Next week's column will discuss in more detail the candidates for the PRC, incumbent Sandy Jones and former State Senator Steve Fischmann.]

[I mention the 3-2 votes to overrule the hearing examiner.  I'll discuss those more fully in the next post, next Sunday.  Both look bad: in one, involving further investment in a coal plant in Four Corners area, PNM had reached a settlement with certain parties (by giving those categories especially low rates, to the detriment of most ratepayers) and the hearing examiner, after a hearing, recommended rejecting the settlement.  The PRC's lawyer agreed.  The Commission initially voted to follow the recommendation.  Two months later, three commissioners, including Jones, voted to reverse that decision and accept the settlement.  That meant PNM got the higher rates it wanted.  Jones said there was little choice, because the law set a deadline for the decision and there wasn't an adequate record.  An opponent pointed out that the law he cited had changed; and the PNM's own lawyer obviously thought the commission could safely reject the proposed settlement.  I'm no expert, and am still looking into this stuff.
In the other case, again rejecting the advice of a hearing examiner and the PRC's lawyer, the Commission (3-2) approved PNM's plan for meeting its renewable energy requirements.  Critics have made much of the fact that PNM was contracting with Affordable Solar for five solar fields on PNM would own.  The period for bids was only 30 days, and had other problems, so that one expert witness called it "rigged" and the Hearing Examiner agreed it was unfair.  One issue -- on which experts disagreed -- was whether the 30 days was or wasn't enough.  Some argued that for such a complex project, as a turnkey deal, 90 days would have been more appropriate; but others (and Jones, when we talked) said that because of the complexity, and the sophistication of potential bidders, the 60 days' difference wouldn't have mattered because bidders either had a system ready to propose or they didn't.  If they did, 30 days was enough.  If they didn't, the extra 60 days wouldn't help.  Jones says he's an expert on construction.  I'm not.  But, again, obviously the hearing examiner saw it differently.  
Jones's opponent have made much of the fact that Jones gets significant campaign contributions from Affordable Solar and related parties.  It doesn't look good.  Jones points out that Affordable Solar -- which got a $73 million contract -- wasn't directly regulated, as PNM is; that Affordable Solar is a great and New Mexican company; and that the appeal is delaying this and other renewable energy projects.]

Did County Commission Do El Paso Electric a Favor?

El Paso Electric made an interesting announcement recently: its plan to request a rate hike in 2018 in southern New Mexico will be delayed.

It's going ahead as planned in El Paso; but not here.

We owe gratitude to Merrie Lee Soules, Positive Energy Solar, Allen Downs, Rocky Bacchus of One Hour Air-Conditioning, and Steve Fischmann; but also to the City of Las Cruces and the County of Doña Ana. All those folks filed as intervenors in EPE's most recent cases; they questioned and rebutted EPE's “facts” with a clarity the PRC wouldn't have managed without them; and EPE apparently doesn't want to see them again real soon.

So when you pay your electric bill each month, thank these folks that it isn't higher.

Sadly, the County Commission moved to make it a little harder for the County to intervene next time around – and there's always a next time with EPE. A publically-traded corporation exists to make a profit. The current system means EPE gets paid off for capital expenditures. So EPE will do its damndest to built new power plants on very flimsy excuses.

Tuesday the Commission passed a resolution under which each time there's a new rate case, it'll require a vote by the commission to intervene. That sounds innocuous enough, and maybe it won't be a problem; but it's odd. These are 4,000-page cases. I'm doubting the commissioners will wade through that.

The general interpretation of Tuesday's action was that it was meant to pull County Manager Julia Brown's chain. The effect is that if EPE's timing is tricky or it can influence a couple of commissioners, our county commission will fall silent when the utility tries to rip us off.

Commissioner Billy Garrett said the intervenors saved county residents $7.5 million recently. He and Brown pointed out that in complex rate cases things change rapidly, and that Tuesday's change could cause the County to miss important deadlines. I completely agree.

Interestingly, when Garrett proposed an amendment, under which the Commission would have been informed in detail every two weeks and could instruct Brown accordingly, Commissioner John Vasquez (who had proposed the resolution) saw the wisdom in that. Three others didn't. Commissioner Ben Rawson then moved Vasquez's original version, which passed 4-1.

The three new commissioners want to send Brown a message – but their chosen method could end up costing us money. One observer said Rawson might be trying to use the anti-Brown sentiment to help tilt the playing field to ease the utility's course. But Rawson, who voted for the 2015 resolution delegating the matter to Brown, said that when he asked about one matter there was confusion among county management about whether or not the County had intervened. Thus he felt the commission should tighten up control.

It seems sad, coming just days after folks at a Progressive Voters Alliance meeting had congratulated some of the intervenors, including the City and County. I hope the commissioners weren't acting in concert with the utility. I wonder if EPE will spend considerable sums to influence the results of local elections here. Electing commissioners and councillors who'd back off this intervention business could be real profitable.

Meanwhile, the Commission also looks poised to let Bowlin's sell fireworks. I hope Vasquez and Isabelle Solis recuse themselves from that vote. They might mean well, but collecting $2,500 in campaign money from Bowlin's, then voting for a dumb measure that would benefit Bowlin's, wouldn't look real good. 

During a local election in a rural county, $2500 is a lot of money. I hope EPE won't be asking what it buys.

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[The above column appeared in the Las Cruces Sun-News this morning, Sunday, 2 April, 2017, and also on the newspaper's website and KRWG's website.  KRWG also broadcasts a slightly shortened spoken version twice on Wednesday.]


[With regard to EPE's situation and rate-hike requests, see also Steve Fischmann's recent column
published in the Sun-News several days ago.  Some of the intervenors prepared a summary of issues with El Paso Electric.   This is the summary from February.  As that summary notes,

"EPE is a sophisticated, publicly traded corporation valued at nearly two billion dollars.  It has enormous resources at its disposal and a shareholder expectation that corporate managers will maximize profits. This is what EPE is doing, relentlessly and without shame, in every position it takes throughout the regulatory process."

Maximizing profits is, of course, exactly what a corporation's job is.  So EPE's highly-paid lawyers and press people are doing their job, full-time, to spin stories their way and camouflage or ignore facts that don't fit their version of events.  That's what they are supposed to do.   Meanwhile the PRC is not necessarily a group that will investigate fully and discover the well-hidden holes in EPE's reasoning.  The PRC does have staff; but it's important than when a $2 billion corporation is spending time and resources to make things look one way, we ought to have at least someone to examine the corporation's version of events and point out errors that could save customers money.  We'd sure like the County to continue participating in that effort.]

[With regard to Commissioners Soils and Vasquez and the fireworks issue, I do not mean to cast aspersions.  I'm not accusing them of anything.  I do not contend that they are legally required to recuse themselves.  On the other hand, it doesn't seem unreasonable to ask public servants to go above and beyond the minimum legal requirements with regard to ethics.  I understand we'll never consistently get that level of ethical conduct from folks running for higher office; but we could try to ask it of local office-holders.]

[NOTE: Allen Downs has pointed out that while my column "focuses on County intervention in rate cases, but the point we interveners tried to make at the County Commission meeting is that it is important for the County to be involved in the cases that precede a rate case. It is during these other cases (renewable energy, Energy efficiency, IRP, CCN) where the decisions to spend money are made.  By the time a rate case rolls around most of the spending decisions have been made and the issue being decided is which expenses can be charged to rate payers and which rate group will pay what share of the increase (in the last rate case it was also determined that rate payers should NOT pay some of the expenses EPE was asking for, thus reducing the overall increase amount)."  In other words, the issue is much wider than merely rate cases; and (in my view) the fact that there are a variety of other varieties of cases, some of which may superficially appear insignificant, heightens the importance of allowing for the more flexible procedure in which the County can intervene without a formal commission vote.  County manager must report at each meeting of any intervention-related developments.  Commission retains control, of course.  If the commission disagrees with an intervention, it can vote to withdraw the intervention, limit it to particular aspects of the case, or simply not to file any substantive papers after the notice of intervention.  Much safer.]

Utilities, Regulators, and Us

Thinking about El Paso Electric, it helps to step back and contemplate the situation of electrical utilities generally.

These utilities are granted a monopoly on a valuable commodity, they're regulated by the states. Most function under somewhat backward laws that enable them to profit only by buying or building things, which often pressures them to solve problems in otherwise unnecessarily inefficient and (for us) expensive ways.

Facing environmental concerns and new alternative forms of energy, the utility companies will soon enter their death spiral. [Industry term, not mine.] Costs of solar panels have declined 75% decline in just the past six years. Most states have “net metering” laws letting solar-powered households sell excess electricity back to the grid at retail prices. Arguably, utilities are selling saddles and surreys just when horseless carriages are getting reliable.

Even if you doubt that all the poisons we're putting in our atmosphere and water will really hurt anything, why would you want to stick with gas-fired electricity plants in any numbers once solar is a lot cheaper – not only cleaner, safer, and more natural?

Currently, utilities vary widely in their reactions to our changing circumstances. Many, of course, choose to attack solar power as an enemy and try to delay progress through TV ads, backward laws, and immense investments in electing friendly faces to the regulatory commissions. Arizona's power companies tend to exemplify this approach.

By contrast, Vermont's Green Mountain Power listens to its customers and recognizes that they want to do what's environmentally sound if it won't cost them a bunch more money. GMP now offers “energy makeovers” (more insulation, new ways of heating home and water, L.E.D. light bulbs, and a small solar array) that are financed through the homeowners' rapidly falling utility bills. Vermonters are radically reducing their energy footprint not necessarily because they're worried about climate change, but to save money.

We need to recognize that times change and technologies develop. There was a time the public gave railroads everything they wanted, because the country needed railroads. Decades later, that wouldn't have made sense. Similarly, decades ago we needed utilities to build a dependable electrical system, and the best technology was gas-fired plants. Now we need (and can develop) systems that are more energy efficient and more economic.

In New York, a reform effort sparked by Hurricane Sandy led to the appointment of an energy czar who developed a program of incentives called Reforming the Energy Vision (REV). Where Con Ed had initially planned to build a billion-dollar substation to meet growing electrical demand in Brooklyn, the utility instead will encourage installation of solar panels and new storage batteries, and will pay customers to limit usage during peak hours. That'll save many millions of dollars. Although REV is an unproven work-in-progress, New York is at least asking the right questions.

There are two keys: technology and regulatory vision. As technology improvements help us move from “Can we get the homeowner to invest some money to help the environment” to “Can we educate the homeowner on how to save money and help the environment,” we also need our regulators to deal fairly but firmly with electric utilities. In part, that means developing programs that eliminate the strong financial incentive for utilities to trick us into approving an expensive new gas-fired generating plant we'll be stuck paying for over the next half-century. The rules should encourage and reward best practices by both the utility and the homeowner or business.

Unfortunately, New Mexico's current governor ain't likely to be in the market for sensible and creative ways to get constituents the best possible value from their electric utilities.
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[This column appeared in the Las Cruces Sun-News this morning, Sunday, 5 July and will appear later today on KRWG-TV's website.]

[Two or three points stand out: that the electric utilities are on the wrong side of history; that too many of the utilities feel that they're in a battle to the death against renewable energy sources; but that much of the blame for our current situation lies with legislators and regulators, who've too often proved lazy, corrupt, and/or unimaginative and who've supported or allowed a system that encourages utilities to make wrong decisions.
I discussed that last point adequately in the column above and two weeks ago.  (Page down through the posts on the eagle and the Pope or click here to see the column from two weeks ago.) 
But the wrong-side-of-history issue is worth contemplating.  Reminiscent of the owner of a town's biggest livery stable manipulating the vote against putting in a paved highway that would encourage cars, expediting the obsolescence of the horse.
There isn't any perfect analogy.  Railways could use their political power (and their bought-and-paid-for senators and representatives) to slow down any governmental encouragement of horseless carriages; but trains and cars didn't have to use the same track.  In most fields, monopolies are forbidden.  Utilities appear uniquely positioned to hamper our society's freedom of movement toward a better future.  At minimum they can and will charge us tolls in the millions or billions of dollars.  Saddle-makers who foresaw the future couldn't sabotage development of the automobile nearly so well, nor could chautauquas prevent the spread of radios, mass magazines throttle development of television sets,  or the local iceman commit us to a 50-year contract for ice just as magazines began advertising refrigerators (or ice-boxes).  Nor could typewriter manufacturers or slide-rule makers stop the spread of computers.
But utilities, given a sleepy public and substandard regulators, could do a lot to make us pay through the nose for what we don't need, and keep doing so long after it's clear to everyone we don't need it.
And: a sleepy or indifferent public largely guarantees substandard regulators, because the utilities always keep their eyes on the ball.]