SETTLEMENT AGREEMENT WITH NEW MEXICO GAS COMPANY TO SAVE RATEPAYERS $21.4M AND KEEP HYDROGEN OUT



On February 3rd New Energy Economy intervened in 21-00267-UT, the New Mexico Gas Company’s application for a rate increase. Our primary concerns in the proposed rate case were:

  1. High rate increases that would unfairly impact low-income ratepayers who already spend a disproportionate amount of their income to heat their homes, and

  2. $2.9M in charges to ratepayers for research into blending hydrogen with methane gas for distribution to New Mexico Gas Company (NMGC) customers, a proposal that could increase climate warming emissions, result in increased capital expenditures and endanger New Mexican families, and

  3. Charges to ratepayers for the purchase of Compressed Natural Gas (CNG) vehicles and development of two CNG fueling stations, a proposal that would increase climate warming emissions and result in increased costs to ratepayers compared to the cost of an electric fleet and electric charging infrastructure.

We joined more than a half dozen intervenors in good faith negotiations with NMGC and today reached a stipulated settlement agreement that has been signed by all parties. We commend NMGC for its willingness to listen to our concerns and compromise for the benefit of ratepayers and the environment.

NMGC’s request for a rate increase of $40.7 million would have produced an estimated increase in the average residential customer’s total bill of approximately 9.1%, and a base customer charge increase from $12.00 (currently) to $14.25. After weeks of settlement negotiations we arrived at a compromise that is fair, just and reasonable for ratepayers: a rate increase of $19.3 million that will result in an estimated increase in the average residential customer’s total bill of approximately 4.3%, a base customer charge increase only to $12.40, and includes a memorandum of understanding to pursue legislation that allows the establishment of a low-income rate class during the next legislative session.

Our agreement also prevents environmental harms and potential future costs to ratepayers from investments in hydrogen and CNG. IPCC findings confirm that necessary deep decarbonization will require electrification for all heating and cooling by 2050 in order to prevent warming above 1.5ºC and prevent catastrophic and irreversible changes to our climate. This transition will necessitate a transition away from the use of methane gas for heating and cooking, a formidable challenge that will require a fundamental change in NMGC’s business model. Their initial plan to reduce greenhouse gas emissions through hydrogen blending and investments in CNG vehicles and charging infrastructure was misguided, however, because:

  • Hydrogen production from methane gas results in more climate warming emissions than simply burning the gas directly for heat. This is a result of leakages of methane (from mining and pipes) and emissions of methane (from venting) along the gas value chain.[1] A recent satellite-based measurement study found that 9.4% of gross methane gas production in New Mexico’s Permian Basin leaked straight to the air.[2]

  • Ratepayers would bear added costs and risks due to technological challenges inherent in hydrogen gas transport and storage. Because hydrogen is a much smaller molecule than methane, hydrogen is likely to leak at a rate up to seven times the 2.5% leak rate of methane from existing distribution pipe, a leak rate of up to over 17%.[3] In addition, the presence of hydrogen changes some properties of methane gas and can be expected to lead to increased costs for retrofit, maintenance, repair and replacement of infrastructure to ensure the integrity of pipeline operations and combustion equipment, as well as potential dangers to the health and safety of customers from increased risks of flashback (flames moving upstream into the supply system) from combustion devices, including customer appliances, causing explosions and potential injury or death.

  • NMGC’s investment in CNG vehicles and a CNG fueling station provide a convenient horizontal expansion of the market for their core product, methane gas, but will result in increased costs and increased greenhouse gas emissions compared to investments in electric vehicles and charging stations. A comparison of the fuel efficiency and emissions of vehicles by the Department of Energy in 2015 concludes that CNG vehicles traveled about half the miles of an EV on 1M btu natural gas or electricity produced from 1M btu, while producing nearly double the CO2 emissions equivalent per mile.[4]

Investments in false climate solutions like hydrogen and CNG represent lost opportunities for effective and meaningful solutions to climate, pollution, and energy security problems. Overall, investing in clean, renewable energy, storage, and appliances in New Mexico will result in a 68.2% lower annual energy cost (from $17.2 down to $5.5 billion per year), which is due to reducing energy requirements by about 59.6% and the cost per unit energy by about 14.4%. Electrification is also estimated to reduce annual social costs (energy plus health plus climate costs) by about 90% (from $55 down to $5.5 billion per year) due to saving about 280 lives per year from air pollution and eliminating about 61 million tonnes-CO2-equivalent per year in climate-affecting emissions beyond the energy cost savings.[5] A 100% clean, renewable solar, wind and battery energy system without blackouts and brownouts is possible TODAY with existing technology.[6] New Mexico utility executives must be held accountable to make every decision moving forward with that goal in mind.

The climate crisis necessitates rapid and transformative change that centers the protection of people over profit, but too often compromise with corporate industry means sacrifice of and by low-income and vulnerable communities who bear the brunt of economic and environmental injustice. We joined with more than a half dozen intervenors to save ratepayers $21.4M and protect them from the added insult of being forced to fund false solutions like dirty hydrogen and Compressed Natural Gas that are fueling the fires displacing so many right now.

[1] Howarth RW, Jacobson MZ. “How green is blue hydrogen?” Energy Sci Eng. 2021;00:1–12. https://doi.org/10.1002/ese3.956 [2] “Quantifying Regional Methane Emissions in the New Mexico Permian Basin with a Comprehensive Aerial Survey,” Environmental Science & Technology, 2022, 56, 4317−4323, https://pubs.acs.org/doi/10.1021/acs.est.1c06458 [3] “Blending Hydrogen into Natural Gas Pipeline Networks: A Review of Key Issues,” 2013, National Renewable Energy Laboratory, https://www.nrel.gov/docs/fy13osti/51995.pdf [4] “Using Natural Gas for Vehicles: Comparing Three Technologies, December 2015, US Department of Energy, https://www.nrel.gov/docs/fy16osti/64267.pdf [5] “Zero Air Pollution and Zero Carbon From All Energy Without Blackouts at Low Cost in New Mexico,” December 2021, https://web.stanford.edu/group/efmh/jacobson/Articles/I/21-USStates-PDFs/21-WWS-NewMexico.pdf [6] Jacobson, M.Z., A.-K. von Krauland, S.J. Coughlin, F.C. Palmer, and M.M. Smith (2021), Zero air pollution and zero carbon from all energy at low cost and without blackouts in variable weather throughout the U.S. with 100% wind-water-solar (WWS) and storage, Renewable Energy, 184, 430-444, 2022, doi:10.1016/j.renene.2021.11.067,https://web.stanford.edu/group/efmh/jacobson/Articles/I/WWS-USA.html

  • Black Facebook Icon
  • Black Instagram Icon
  • Twitter