In the airless fourth floor hearing room where the body charged with regulating public utilities operating in New Mexico meets to conduct its public business, special rules apply: the Sun revolves around the Earth, which is flat by the way, and utility companies being in the electricity generation business is a really good idea.
In recent weeks, the state’s largest utility, Public Service Co. of New Mexico (PNM), was before the New Mexico Public Regulatory Commission (PRC) seeking approval of its its Renewable Energy Act Plan for 2018. At special issue was the utility’s proposal for a turnkey contract with an Albuquerque-based solar provider, a company already in the constellation of solar providers in PNM’s renewable energy universe.
In the proposed deal, Affordable Solar would build out five 10 megawatt generating facilities for completion in 2019, and transfer ownership back to PNM. Under current law, owning the facilities outright, as opposed to purchasing output from independent providers, guarantees PNM a 10% profit on the value of the solar farms, including the value of the land they’re built on, which it can include in its rate base calculation. Growing the asset base upon which rates are determined is a surefire way that investor-based for-profit utilities like PNM, whose shares are traded on the New York Stock Exchange, can grow future profits and remain attractive in the capital markets.
Opponents to the deal, who notably include the PRC staff and Hearing Examiner, say that PNM ran roughshod over the procurement process, effectively shutting out independent power producers in order to achieve a predetermined result, and that if the deal is allowed to go forward ratepayers will be disadvantaged to the benefit of PNM’s shareholders.