"Regulated" Utility Gives Big Bucks to PRC "Regulators"

[this post is a DRAFT pending time to proof it]

PNM, a major utility regulated by the PRC, dropped $440,000 just this month into a PAC heavily supporting Sandy Jones and Linda Lovejoy in this year's two PRC races.   An Albuquerque Journal story over the weekend discusses that and the last-minute rush of oil companies to support Land Commission candidate George Muñoz.  In each case the utilities and oil companies are seeking to kill off the growing popularity of a more progressive candidate (Steve Fischmann here and Janene Yazzie in Navajo country) the big companies feel threatens their outsized profits.

For PNM to contribute $440,000 in two weeks' time is unusual -- unprecedented, so far as I can tell.  The only time this specific entity (PNM Resources) had previously been used this way in New Mexico was to give a much smaller amount to the Republican Campaign Committee in 2010.  Since, PNM has contributed a lot of political money, to prominent Republicans and Democrats who can help it -- but in far smaller amounts, so far as I can tell. 
 
The big bucks would seem to mean PNM really cares about this one.  It stands to make millions of dollars more in the next few years under a Jones-led PRC than a PRC with Fischmann (and Yazzie) on it.  Jones has overruled hearing examiners (and the PRC counsel's advice) to back PNM's wishes in some recent 3-2 votes, two of them now on appeal to the New Mexico Supreme Court.  [Interestingly, the PNM-funded PAC immediately paid big bucks to Republican Susana Martinez's chief political guru to make things happen -- and the things so far have included costly TV ads (allegedly misleading) and a bunch of mailers.)

All this makes for some weird stuff: for example, when a mailer from the PNM-funded PAC says Jones "saves New Mexicans money by successfully advocating for lower utility rates,"  that essentially means a company that likes utility rates to make it a solid profit is paying to tell you to vote for a guy who will lower those rates.  The company that fights hard before the PRC to get a higher percentage of our money is paying for mailers stating that their favored candidate "successfully advocates for lower energy rates to keep prices down and more of your hard-earned money in your pocket."  The utility that fought renewable energy in various ways for years is advertising a PRC candidate as protecting our environment by ensuring use of 20% renewables by 2020.
To put it another way, all this advertising says the candidate is "standing up for consumers."   He makes decisions that raise or lower utility income and lower or raise what we pay.  How does knowing the utility is paying big bucks to re-elect him affect one's reading of those mailers?

The contributing PNM entity's statement stressed the legality of the contributions under current law, and asserted that the contributions also were appropriate:

"PNM Resources' participation is legal, appropriate, and necessary to help ensure a fair election.  Important policy decisions will be made by our next generation of elected officials, and we want to ensure that voters have the information to understand each candidate's position on key public policy issues.  PNM Resources' shareholders are funding the company's participation in New Mexicans for Progress."
Others have questioned the "appropriateness" of such a huge contribution.  New Energy Economy spokesperson Mariel Nanasi called it "shocking," while Yazzi said it was designed to retain regulators who don't regulate.

Mr. Jones is not legal permitted to coordinate activities with the PNM PAC.  We should presume he's not breaking the law.   However, he's close to some top PNM execs.  A PRC source (unidentified for obvious reasons, but someone I spoke to at length) says certain PNM people often visit with Mr. Jones before PRC meetings.  (That doesn't necessarily mean they're discussing anything they shouldn't, of course.)  And Mariel Nanasi reports seeing PNM lobbyists at a Jones fundraiser on February 5th.  And around the time PNM made its last-minute contributions, Jones was complaining of the large influx of money from environmental and consumer-oriented groups favoring his opponent.

And it's interesting to read an internal PNM memo from 2014, when Jones was running for this PRC seat:

That is, in 2014, according to a PNM executive, Mr. Jones responded to news of an endorsement by saying "he could use some help with the campaign."  The exec, uncertain whether that was an actual request "for PNM's help considering the delicate situation regarding helping those that regulate us", passed it upward.  The "delicate situation," I think, is that it's illegal under New Mexico law.  I stress that the PNM exec wrote in the memo that he wasn't sure that saying Jones could use some help with the campaign was an actual request for help, and therefore we shouldn't jump to any conclusion either.  

In any case, it's interesting that Jones "really liked Ron [Darnell, a PNM Senior VP] and that Ron has helped him better understand the utility business."  Some of that help in understanding the utility business might have included this letter:

What that seems to say is that Mr. Jones had been asking how our homeowners' solar panels are affecting PNM's bottom-line.  The utility tells him that the impact was just $352,855 (in lost fixed costs recovery) in 2010, but has risen under rules helping develop renewables, and will reach nearly six and a half million dollars by 2016.  I can't imagine PNM thought that impact was a really great thing -- but here it is in 2018 advertising a candidate based on the fact that he's pushing renewables along.

Interesting.  Kind of sad, from my point of view. 

 

PRC II - Why I'll Vote for Steve Fischmann

Let's step back from the exaggerations and insults of political campaigns and imagine we're on the selection committee to pick between finalists for a job. Say, Sandy Jones and Steve Fischmann for Public Regulation Commissioner.

Both are smart and capable. Fischmann had a business career with Levi Strauss, then was a responsive and thoughtful state senator here. I met Jones years ago. He was congenial and clearly a problem-solver; and he's now had extensive experience as a PRC commissioner.

Whom I'd choose is related to the PRC's current situation (see last column) -- and not because I want to blame Chairman Jones for everything. Many problems preceded him, some are budget related, and others systemic. 

In my inexpert view, the key issues facing the PRC are: equalizing the conflict between huge utilities (and subcontractors) and ratepayers (and the public interest); moving rapidly toward greater use of renewables and a more distributed system; improving PRC morale; and increasing public trust in the Commission. 

On those, Fischmann seems the better choice. 

Fischmann advocates for the public (opposing usurious loan sharks), the environment, and PRC ratepayers. Jones has done some good things at the PRC but appears uncomfortably close to those he regulates. 

Jones criticizes Fischmann for contributions from intervenors, and also says Fischmann's campaign and independent PAC's collaborate illegally. Fischmann criticizes Jones for getting much of his campaign funding from folks who stand to benefit from PRC decisions, such as Affordable Solar. (The Secretary of State is referring these complaints to the AG. We may hear nothing before June 5.)

I'm not convinced either has broken the law; but given the tilted playing field that favors utilities, I'm less comfortable with Mr. Jones's contributors. Jones's campaign consultant in 2014 was a lobbyist for Affordable Solar. Jones recently voted to overturn a hearing examiner's conclusion that PNM and Affordable, without fair bidding, reached a deal that cost ratepayers too much. 

Jones says he favors solar. He's done some things to help make that happen, but also been instrumental in approving nonrenewable power plants that may not have been as necessary or sensible as the utilities convinced a PRC majority they were. Jones recognizes we're headed toward solar; but if I'm right that we're on the cusp of real change – a lot more renewables and decentralization, soon – I think Fischmann has the vision to help us get there. (Environmental groups, some from outside the state, concerned about climate change are contributing heavily to PAC's that support Fischmann. Jones says he's being significantly outspent. Ironically, he may well be.)

A National Regulatory Research Institute evaluation and some interviews indicate that morale is a serious problem. Part of that is funding (the Legislature's responsibility); but part of it is what the report calls perceived “lack of respect for staff by commissioners and others” and what another source says are too many decisions overruling hearing examiners in favor of utilities. And although I like Jones, I've heard very negative views from the (admittedly small sample of) people who've communicated with me. They may be malcontents; but his response to the NRRI evaluation is excessively defensive. I wish he'd let the Commission discuss the evaluation with the evaluator. 

It seems a time for change. Both men are effective. Fischmann recognizes the urgency of doing all we reasonably can do to diminish our collective energy footprint – and give ratepayers a fairer shake. And that's the job!

                                                -30-

[The above column appeared Sunday, 27 May 2018, in the Las Cruces Sun-News, as well as 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 (and streaming on www.lccommunityradio.org.)]

[Bottom line: I'll vote for Steve Fischmann, for the reasons stated in these two columns.  Also, here's something called the Energy and Policy Institute's take on this.] 

[I'm hoping to discuss some of the issues -- the PNM deal that's on appeal and the EPE proposal discussed below -- on my Wednesday morning radio show, "Speak Up, Las Cruces!" (on KTAL-LP) during at least part of the 9-10 a.m. hour with Mariel Nanasi, head of intervenor / watchdog New Energy Economy and a representative of Affordable Solar.  They'll both be telephone guests, which could make the traffic management a little complex, but I look forward to the discussion.  The 8-9 hour we'll discuss the various primary races.  Walt Rubel and I, and one or two others, and (I hope) phone calls from you, too.  (575) 526-KTAL (-5825)]

[Most recently, EPE has submitted a bid similar to the PNM bid that's on appeal.  New Energy Economy has intervened in protest.  Like the PNM deal -- in which PNM wanted the deal done on land it owned, so it could own the facility, and make a bigger profit by taking a percentage of the asset's value -- EPE would pay Affordable Solar a bunch of money to build the plant on its land.  A reasonable alternative would be to let independent power producers bid on supplying solar power through a Power Purchase Agreement (PPA).  The Affordable Solar route is better for the utility; but the alternative would likely mean much lower rates for us.

What's the difference for you and me?  We can't know exactly; but EPE’s Affordable Solar 2 MW project would involve higher rates than the last Commission-approved solar project: In March 2018 the PRC approved Facebook’s  (non-utility owned) solar at $29.98 MWh.  Now, according to the "Notice of Proceeding and Hearing" filed by PRC Hearing Commissioner Ashley C. Schannauer this past Friday, the EPE’s Affordable Solar project is at $78.41/MWh.  Thus, it appears that rates estimated for the EPE’s Affordable Solar project will be 162% higher than the Facebook solar."  (How much "economies of scale" are a factor we don't know -- but we could if the bidding permitted PPA's.)  NEE says that five years ago, in EPE's First Solar project, an independent power producer sold generation to to EPE through a PPA at 57.90.MWh.  EPE didn't own the solar generation.  During the last five years, prices for solar have dropped considerably.  Yet the EPE’s Affordable Solar project (which it's now asking the PRC to approve) proposes rates 35% higher than EPE’s non utility owned First Solar Project five years ago. 

New Energy Economy calls this ridiculous and points out and lists three reasons for the "dramatic difference":  "1) the more the Investor Owned Utility charges the more profit it makes 2) [EPE and PNM pay their CEO's and senior management the highest] executive salaries in the State and these salaries are included in the price of generation costs, and 3) the IOUs are guaranteed a nearly 10% annual profit on all their assets, including generation assets."

NEE says "EPE's request for proposal (RFP) procurement process was rigged and anti-competitive against Independent Power Producers and their Power Purchase Agreements (PPA). Utilities should have to compete fairly against Independent Power Producers and their PPAs (contracts). If utilities can compete against these prices on an apples to apples comparison and win - more power to them. But they are not allowed to expand their monopoly and keep the Independent Power Producers out of the market place - that's anti-competitive and harms ratepayers because then ratepayers are not getting the lowest price available."  The nonprofit also points out that without competitive bidding from IPPs, we can't even know what the different options and costs would be.

 

"Independent Power Producers are satisfied with executive salaries in the $100,000 - $250,000 range not $4 or 5 million per year and they are satisfied with a 3-5% profit, not 10%. They are more often agile and trying to get the best price and reduce waste but for the utilities there is plenty of waste because there is an incentive to waste."]

The "Notice of Proceeding and Hearing" filed by EPE May 25, 2018, states in Paragraph 9 that "EPE estimates the levelized cost of the contract over the life of the project to be $78.31 per MWh."  (p. 4)