Supreme Court hears oral arguments from PNM and opponents who claim the utility company rigged a bid
In March, Gov. Michelle Lujan Grisham signed the Energy Transition Act, which requires that New Mexico increase its renewable portfolio standard (RPS) to 50% by 2030 and 80% by 2040.
Previously, RPS requirements put public utilities on track to produce at least 20% of their energy through renewable sources by 2020.
But as the state transitions away from coal towards cleaner sources of energy, the question is: Who should have the authority to produce, operate and own the energy resources that will enable this renewable energy transition?
This is essentially the question at the heart of the appeal brought before the Supreme Court on Monday by New Energy Economy. If nonprofit Executive Director Mariel Nanasi wins the appeal, this case could lay the groundwork to break PNM's monopoly over the production of the solar energy needed to meet the RPS requirement.
"All of PNM's utility-scale solar resources are either PNM-owned or will be owned by a PNM affiliate," the Public Regulation Commission's hearing examiner, Caroline Glick, wrote in a 2017 recommendation to deny a new solar project proposed in PNM's renewable energy portfolio procurement plan for 2018. Her recommendation, which was based on arguments presented by outside parties including New Energy Economy, states PNM failed to engage in a fair and competitive bidding process to procure 50 megawatts of solar facilities to meet the 2020 standard.
In 2017, Glick wrote that PNM effectively excluded independent power producers from the bidding process by using eligibility requirements that significantly disadvantaged the producers.
Affordable Solar, the company that won the bid, was one of several power producers who proposed to construct the project on PNM-owned land and transfer ownership of facilities to PNM upon completion in what is known as a turnkey proposal.
PNM's request for proposals allowed projects intending to transfer ownership of facilities to PNM to use PNM-owned sites, but did not allow producers the opportunity to buy or lease these same sites. The utility also required interested parties to submit estimates of connecting projects to the PNM grid and seek interconnection agreements with the utility before the end of the 31-day bidding window.
PNM had already calculated interconnection information and agreements for its own sites before the bidding process began. An expert witness for New Energy Economy testified in 2017 it would have been nearly impossible for an independent producer to gather needed information in such a short period of time, adding that PNM has cut the bidding period from 90 days to 30 since 2012.
Ultimately, Glick concluded PNM did not meet its legal requirement to prove the company chose the most cost-effective option for ratepayers because its process limited fair competition and excluded independent producers.
Yet the commission rejected recommendations made by Glick and other PRC staff and approved PNM's Affordable Solar Project in a 3-2 vote on November 15, 2017.
That's why Nanasi appealed the decision. It's taken until now for oral arguments before the state's highest court, in which Nanasi reiterated the claim that PNM "rigged the bidding process" and pointed out that past bids by independent power producers have been significantly cheaper than bids by PNM affiliates, in part because the utility charges ratepayers an extra fee to make up a return on their investments in land and infrastructure—something independent producers do not do. "Ultimately this is all about protecting the public from higher rates," said Nanasi.
The attorney representing PNM, Richard Alvidrez, told justices the utility's bidding process was fair, and the Affordable Solar Project was indeed the most affordable option. When asked by Senior Justice Barbara Vigil if independent power producers threatened PNM's share in the energy market, he said they do not, and that "with regard to renewable developments having a say, this is going to facilitate PNM's goal of transitioning more rapidly to renewable energy," and further argued PNM will benefit by having as many options as possible on the table "because the Energy Transition Act has increased renewable portfolio standards so significantly."
In reference to the Affordable Solar project, the PNM attorney remarked that "this is a PNM project from start to finish," prompting questions from several justices about how to determine the fairness of the bidding process.
One facet of the issue that did not come up Monday in court is that two of the Public Regulation Commissioners who voted to approve the Affordable Solar bid, Linda Lovejoy and Sandy Jones, later received over half of their campaign funds for 2018 from Affordable Solar and related individuals, as reported by The Santa Fe New Mexican in May 2018. Mark Fleisher, a lobbyist for Affordable Solar, worked as a campaign consultant for both Lovejoy and Jones in 2014. Both commissioners lost the race.
The former commissioners deny that ties to Affordable Solar influenced their vote, and Fleisher has refuted the claims as well in statements to the New Mexican in which he said the company makes campaign donations to many politicians who have a strong stance on solar.
The Supreme Court’s decision in the appeal could come at any point over the next few months, and if it overturns the PRC’s decision, the case goes back to be reheard by the PRC. The court also heard oral arguments Monday from by the New Mexico Industrial Energy Consumers. The organization of large industry consumers appealed the case based on the contention that PNM had not accurately calculated costs of renewables in its 2018 plan.