PNM should come clean on renewable energy costs
Senator Joseph Cervantes is sponsoring legislation in the 2017 NM legislative session to promote greater efficiency and openness in how we New Mexicans have our energy needs met. In a nutshell, Senate bill 360 requires investor-owner utilities (IOUs) like Public Service Company of New Mexico to obtain competitive market bids through a request for proposal process when they seek to add new generation capacity, and mandates the bidding process is analyzed and overseen by an independent party. This new process is designed to be transparent, fair and indeed comprehensible to both the public and regulators alike.
Sounds like a no-brainer, right? Competitive bidding is a staple of the American economy. State law already requires utilities like PNM to select the least-cost solutions to energy problems with a clear preference for more environmentally friendly solutions, so there is already some comparison shopping in the process. A number of states, including Arizona, Colorado and Oklahoma, have enacted similar laws, and the proposed legislation is in line with industry standards. Overall, the proposed process exemplifies what we want when we talk about good governance: it’s open, unbiased and mindful of the public good.
But PNM opposes it.
Currently, the utility’s bidding process is essentially hidden and secretive: the company uses black box software that is difficult and expensive for outsiders to analyze. However, when statewide environmental and consumer advocacy organizations vetted the process, they found over $1 billion in “errors” and omissions in PNM’s coal and nuclear plans as well as inflated wind and solar costs.
A transparent and competitive bidding process will make sure such “errors” and omissions are far fewer and less likely. It will also reveal quite clearly that solar and wind are cheaper, cleaner and more efficient sources of energy than coal and nuclear power, the latter of which unfortunately currently make up 60 percent and 20 percent, respectively, of PNM’s portfolio.
PNM’s opposition to Sen. Cervantes’ good bill and its proposed RFP process shows the company is still fighting to protect the status quo and its legacy investments, but both are increasingly costly to we the people of New Mexico. Fixing and replacing outdated dirty energy technology combined with mine reclamation costs are proving more and more expensive: decommissioning a nuclear plant like Palo Verde could cost $3 billion. Who pays for that? Us. Yet still the utility doubles down, resisting opportunities to diversify and move forward. And it doesn’t help that the New Mexico Public Regulation Commission keeps inconsistently applying any standards for comparative analysis.
Inevitably, a major percentage of these costs are passed directly on to consumers. From 2008 to 2014 our average residential rates rose more than 50 percent, yet during the same period New Mexico’s real median household income declined by 6.4 percent. PNM can hardly plead poverty to justify rate increases: from 2008 to 2014, the utility’s ongoing earnings increased by 461 percent. Yes, you read that correctly: a 461 percent increase! The current residential rate impact from the September 2016 hike is 9.5 percent, and PNM has another rate increase pending.
