We now face a once-in-a-generation opportunity to transform New Mexico’s electric power grid and our economy.
If we fail to push forward decisively, we will be locked into the past model of PNM monopoly ownership for another 30 years and will lose the opportunity to bring substantially lower costs for ratepayers, stifle innovation and hamper transformation of New Mexico’s electric industry.
On May 6th, New Energy Economy will argue before the New Mexico Supreme Court that PNM’s efforts to corner the market on renewable energy are illegal, deliberately stifle competition, undermine the public interest, and needlessly drive up costs for consumers.
CLICK HERE to RSVP on Facebook event, or email and let us know you will join us in person at the New Mexico Supreme Court.
What: New Mexico Supreme Court Hearing on PNM Solar Bid Rigging
When: Monday, May 6 at 1:00PM
Where: 237 Don Gaspar Ave, Santa Fe.
In addition to the limited seating inside the Court chambers, we have reserved an overflow room that will have a live video feed of the hearing
In advance of the hearing, please read this piece in Utility Dive - Use it or lose it: The once-in-a-generation opportunity to change the US electric grid. It does a great job of explaining the financial conundrum we face and the opportunity we have to bring greater financial sufficiency and security for the people if there were multiple other owners of energy resources, not just the monopoly utility, in our case, PNM.
In order to meet the legal requirement that the Public Regulation Commission (PRC) must only approve of resources which are “the most cost effective among feasible options” we will argue that the PRC could not know what the options were because PNM rigged its renewable energy procurement process to only meaningfully consider resources PNM owns. Their process disqualified outright the competition by independent power producers. PNM created certain terms for independent power producers (that were impossible to meet) and other terms for companies that would build the solar and sell the assets to PNM. Essentially: No level playing field. Competition squashed.
Why did PNM rig the bid, so that it can own all the solar? The simple answer is that when an energy resource costs ratepayers more, then PNM makes more money for its shareholders. Here’s how PNM makes more money by charging us for:
The solar generated electricity; and
Earn profit of 9.575% “return on equity” on an annual basis on the solar equipment (asset); and,
In a novel new theory, earn profit of 9.575% “return on equity” annually on the land (a separate asset) that the solar was located on.
When an independent power producer owns the solar asset they sell the electricity to PNM through a contract, known as a power purchase agreement or PPA. Ratepayers pay only for the solar generated electricity contract price plus a small distribution cost.
The cost difference between all PNM’s solar costs (in this case) and the cost of the same amount of solar produced by an independent power producer is that ratepayers are paying as much as 49% MORE with PNM.
A recent study by Retail Energy Supply Association revealed that, from 2008 – 2018, competitive retail electricity markets created a 25.7% favorable difference (lower cost to customers) than those in vertically integrated, or the regulated utility market we have here in New Mexico with little or no choice.
The bottom line is that the end result must be the best deal for New Mexico ratepayers. The Hearing Examiner said “it was not a difficult call” to see through PNM’s unfair and anti-competitive process. She recommended that PNM re-issue the Request for Proposals (RFP) and treat all bidders alike.
However, 2018 Public Regulation Commissioners (Jones, Lovejoy, and Lyons) voted 3-2 to reject the Hearing Examiner’s recommended decision and ignored the opinion of their own legal counsel that PNM should reissue a new request for proposals that would allow for fair competition and ensure New Mexico ratepayers were getting the best deal. In doing so, Commissioners failed to uphold the law that less costly alternatives must be considered.
In order to stimulate a vibrant renewable energy market and create an equal opportunity for independent power producers to build and own renewables that reduce costs for consumers, we challenged PNM’s self-dealing. This is the heart of our appeal. It sets a dangerous precedent to burden ratepayers with excessive costs; it also slows New Mexico’s urgent transition toward renewable energy and the transformation of our economy.
It is important to understand that the old Commission (with Jones and Lovejoy) also approved an El Paso Electric (EPE) case that rigged their RFP - mimicking PNM’s unfair process by only allowing bids for EPE owned projects on EPE owned land. Affordable Solar was selected as the lowest cost bidder. In one of their very first decisions, the new Commission overturned the El Paso Electric Case, No. 18-00099-UT, coming to the opposite conclusion on the same issue, in finding that suppressing competition with an unfair RFP process would not result in rates that were just, reasonable, fair, or in the public interest.
We successfully argued that El Paso Electric’s proposal illegally quashed competition for building a community solar project and would’ve resulted in higher rates for New Mexico households.
A possible explanation for why the old Commission overturned the Hearing Examiner’s well-reasoned recommendation to reject PNM’s rigged bidding process: Two Public Regulation Commissioners (Jones and Lovejoy) were unduly influenced by parties who stood to gain from approval of the solar bid that would raise customer rates. This was widely reported on by the media. In both 2014 and 2018, when Commissioners Lovejoy and Jones ran for election, their campaign consultant was Mark Fleisher. Mark Fleisher was also simultaneously the lobbyist for Affordable Solar, the company that would install the solar for PNM and receive $60M of the $72M that PNM would receive from ratepayers.
When Commissioner Jones ran for re-election in 2018, just months after he overruled Hearing Examiner Glick’s decision, he received $13,000 from Affordable Solar - more than half of his $20,700 in campaign contributions. Similarly, Commissioner Lovejoy received $4500 of the $6000 re-election campaign contributions from Affordable Solar during the same time frame.
Further, PNM created a PAC in the 2018 election that supported Commissioners Lovejoy and Jones, their preferred regulators, and opposed their challengers. Despite PNM’s attempt to buy their regulators, voters were disgusted by PNM’s corruption and elected pro-consumer candidates Becenti-Aguillar and Fischmann.
Utilities have options when it comes to electricity procurement: 1) they can build, own, and operate electricity projects themselves and earn a 9.575% return on those assets (generating the highest profits for shareholders) or 2) they can purchase electricity that is produced by independent power producers (less profit for Shareholders, but often better prices for consumers). Unsurprisingly, the big utilities prefer option one.
PNM has enjoyed dominance over New Mexico’s electricity market since their founding. Through all these decades PNM has had time to orchestrate our energy future to their corporate benefit. Now that San Juan Generating Station is finally closing PNM must secure replacement power.
When PNM puts out a request for proposals, they build in provisions that the solar (or wind, or gas, or geothermal) facility must be located on their land, but only companies that bid to build the project and turn over ownership to PNM when it is complete are allowed. Independent Power Producers, who might propose to own the solar projects and sell the electricity to PNM at a lower cost for consumers, are not given due consideration or opportunity to compete in the bid.
PNM recently issued a RFP for energy storage and only requested bids for PNM-owned storage - this is unreasonably exclusionary and anticompetitive. It is imperative that we speak up against these practices. (PNM’s latest excuse is that unless they own the storage they can’t control “dispatchability” which they argue will impact reliability. This is nothing but fear mongering - "the lights will go dark if we don’t get our way." PNM already controls dispatchability with their independently-owned gas plant contracts so, if they can do it with gas, they can do it with independently-owned storage.)
Finally, another way PNM has manipulated the bidding process, noted by the Hearing Examiner, is by steadily reducing the amount of time allowed for proposals to be submitted - narrowing the response time to only 30 days in this bid.
All of the above factors combine to ensure PNM is “selecting” (drum roll) itself as the energy producing owner. Consumers, none the wiser, would be stuck with higher bills if New Energy Economy didn’t challenge their shenanigans.
New Energy Economy will argue that the RFP must ensure that all capable parties can bid and that the bidding process is fair in its design and implementation. This is so that the utility’s selection is based on the merits of the bid and not on what is best for the utility’s profits. This is the only way to guarantee that the ratepayers of New Mexico will be receiving the most cost-effective solar energy resource, which is fundamental to the regulation of utilities.
The end result must be the best deal for New Mexico ratepayers. New Energy Economy works to stimulate a vibrant renewable energy market and create an equal opportunity for independent power producers to build and own renewables and reduce costs for consumers.
If we were to let PNM’s self-dealing go unchallenged, it would set a dangerous precedent that burdens ratepayers with excessive costs, and slows New Mexico’s urgent transition toward renewable energy.