By Alan Webber / Santa Fe Entrepreneur PUBLISHED: Thursday, May 7, 2015 at 12:02 am
In recent weeks, two hearing examiners have independently come to the same conclusion: PNM must re-work its plan for generating power after it closes down part of the San Juan plant and PNM must also re-consider its rate plan as it moves forward.
Those were two significant messages, delivered not only to PNM and the Public Regulation Commission – which is now evaluating the recommendations – but also to all of us in New Mexico: It is our energy future that is at stake.
The message is clear – difficult, but clear.
We need to transition from our old model and begin the hard work of becoming a leader in a sustainable energy future.
A recent article in the New York Times suggests that New Mexico is not alone in this challenge. We currently rank ninth in the nation as the state most dependent on coal for our energy.
Other states are already adopting a different set of energy choices. Hawaii has set as its goal the aim of being the first state in the country to rely solely on renewable energy by 2050. California has already increased its use of renewables and reduced its emissions.
That could be New Mexico – but it will take leadership to make the transition.
Part of the problem is in the way we regulate PNM: PNM makes money when it adds capital assets to its rate base. PNM’s first loyalty is to its investors; it needs to show them that its strategy will keep its stock price high.
It doesn’t help PNM as a publicly traded corporation if we all switch to solar panels on our roofs; it doesn’t reward them financially if we embrace energy conservation as the smartest strategy for New Mexico. If they don’t own the asset, they can’t put it in their rate base – and that’s where their profit comes from.
In other words, we are stuck with an outmoded model that puts PNM’s financial wellbeing in direct conflict with the wellbeing of the ratepayers, our future and the future of the planet.
Worldwide, the energy game has changed – but we’re stuck playing with the old rules. A business model and a formula for calculating PNM’s profit that may have made sense in the past no longer fits today’s reality – and is clearly out of synch with the future.
We need a new deal for energy in New Mexico. We need a new energy compact. We need to bring together the leaders of PNM, our very smart academic energy analysts, our responsible environmental leaders, our elected leaders, the PRC and the best brains across the country to figure out how we execute a critically important transition to a new energy future.
We know that smart grids are going to be part of our energy future. We know that we lose far too much energy in long-distance transmission, and that local energy production not only makes sense – it’s coming soon. We know that conservation is the smartest, least polluting way to create more energy and that we need to offer incentives that reward households for cutting back on energy consumption.
We know that other states are experimenting with rate structures that reward utilities for exploring innovation and testing new incentives.
We all know this is happening – it has to happen. Headlines in newspapers across the country describe electric utilities as going into a “death spiral” as they follow the ill-fated logic of an outmoded business model.
Every other industry in the country is dealing with some form of technological disruption. PNM is no exception. The problem is, we need PNM to find its way to a new, sustainable business model.
The longer we wait, the more painful and the more expensive it will be – for all of us.
Alan Webber was a candidate for governor in the 2014 Democratic primary.