Monday, November 13th, 2017 at 12:02am
Electricity is easy to take for granted.
As we use electricity every day to power our phones and appliances, we probably don’t often think about the physical facilities that generate the power from various sources, much less about how they are paid for and built.
Now’s a good time to start paying closer attention, especially to plans being made by Public Service Company of New Mexico (PNM).
As it prepares to retire its old coal power plants, PNM plans to get more power from new solar facilities. This is an important and positive local economic opportunity, with more to come in the years ahead.
When it comes to ownership and control of these solar facilities, it’s important to make sure we don’t blindly build them in a way that makes that energy more expensive than it should be – the old-fashioned way.
For a long time in New Mexico we’ve used a utility ownership model in which power companies like PNM not only own the transmission and distribution of electricity but also the power plants. PNM is a regulated monopoly; in this model, at the expense of the consumers, the power company is assured it will recoup its capital expenditures through electricity bills for costs plus a profit.
The problem is, when a company is always paid for costs plus profit in whatever it owns, it has little incentive to lower its costs. Inefficient utility expenditures ultimately impact ratepayers, who are held captive on costs no matter how a project turns out. Residents and businesses end up shouldering most of the investment risk.
Now as PNM plans to procure more power from renewable sources, we have an opportunity to avoid perpetuating this cycle that makes utility projects more expensive. Instead of the costs-plus-profit model, independent third-party power producers could compete to build wind and solar projects, providing power to the utility through lease agreements. That kind of arrangement would support local economies and lower expenses, protecting consumers from risk and monopoly control of public power.
A hearing examiner for the PRC got it right when she recommended recently that the commission require that PNM re-do its bidding process for 50 megawatts of new solar, because the company had unfairly “stacked the deck” against independent power producers in favor of projects that PNM would own. Calling PNM’s process “unfair and uncompetitive,” the hearing examiner sent us a needed wake-up call to seize the present opportunity and build a more open energy market with renewables.
New Mexico isn’t alone in tackling the question of utility ownership of energy production. Utility commission proceedings in a number of states this year are examining methods and models for handling assets and costs in the power sector. Meanwhile, the ongoing crisis with Puerto Rico’s over-centralized utility points to the urgent need to allow more locally owned and maintained community power systems.
In Colorado, Xcel Energy recently announced an agreement to own not more than half of the 1,700 megawatts of new solar and wind energy it will be procuring this year. The company said it expects the competitive bidding process will lower electricity costs for customers.
These investment decisions on energy generation facilities have long-term repercussions because of how long they will operate – usually several decades. Therefore, it’s vital to get the process right up front.
At a time when it can be hard to find Republicans and Democrats working together, we hope that our bipartisan, and nonpartisan, elevation of the need for a more open energy market will help signal its importance for all New Mexicans.