In response to community requests New Energy Economy has intervened to protect community and ratepayer interests in the New Mexico Gas Company (NMGC) application to build a Liquified Natural Gas (LNG) storage plant in Rio Rancho. As designed, the LNG Facility would take up approximately 25 acres of a 160-acre parcel located in the outskirts of Rio Rancho. The proposal includes equipment to liquefy natural gas for storage, an LNG storage tank, and the ability to vaporize LNG back into natural gas for use on NMGC’s system when needed. The NM Gas Company is owned by Emera Energy, a $36B Canadian utility holding company headquartered in Halifax, Nova Scotia.
BACKGROUND
In February 2021, New Mexico and the surrounding region experienced a storm of unusual severity and duration, dubbed winter storm Uri. As a result of the extraordinary storm the PRC ordered NMGC to evaluate and assess potential measures to prevent the re-occurrence of the storm related price spikes. The proposed plan to build a Rio Rancho LNG storage facility is NMGC's answer to that request, but it is the wrong solution.
During the storm gas supply failures in Texas, combined with significant increases in demand for natural gas throughout the region, and greedy hedge fund gas owners who took advantage of people's vulnerability, caused natural gas prices to spike to levels never seen before. In this environment, NMGC stated that it ensured continuous gas supply for its customers, but in doing so, was subject to the dynamics of the exceptionally volatile natural gas markets, and asserts that it ultimately incurred over $107 million in Extraordinary Gas Costs over a period of six days – an amount that NMGC normally spends over the entire winter heating season.
The party that NMGC contracts with for gas storage in Texas, Kinder Morgan, was affected by low pressure and equipment failure at its Keystone storage facility, causing them to declare Force Majeure, an unforeseeable and unavoidable catastrophe that interrupts the expected course of events and prevents participants from fulfilling contractual obligations to provide all the gas requested.
While this cut NMGC's supply partially and prevented NMGC from accessing the full amount of gas it was entitled to, NMGC was able to access the majority of gas per its contract and was only reduced on two of the six days. NMGC did not have to curtail service to any of its customers during the 2021 Winter Event. Instead they paid $107.5 million extra in spiking gas prices due to hedge fund owners on Wall St. taking advantage of the storm, which contributed to at least 210 deaths.
OUR ANALYSIS
Our preliminary economic analysis, based upon their application and testimony and our initial research, is that the plant would not meaningfully mitigate against price spikes.
While NMGC claims economic benefits for ratepayers, in fact the $180M or more that could be charged to ratepayers to build the plant will not reduce exposure to price volatility because the capacity of the plant - less than half the contracted capacity from the current storage facility in Texas - could mean that even more gas would have to be purchased on the swing market at high prices.
In fact the real motivation for building the plant is the ability for NMGC to add the $180M with a guaranteed 9.375% return on equity to rates for the next thirty years.
Remedial action at the Keystone plant in Texas also makes a repeat occurrence much less likely.
Not only would the proposed plant not protect against price volatility, it would not increase reliability of the gas system, would increase prices for ratepayers, would expose the Rio Rancho community to the risk of explosions and fires, and most importantly, building new fossil fuel infrastructure makes decisive climate action more difficult. We need to decarbonize! We don't want new fossil fuel investments that will slow the adoption of alternatives and ultimately turn into stranded assets when those alternatives become inevitable.
We don't believe that NMGC's plan is justified. We are learning more through the process of discovery, and plan to share what we learn with the community and hear from those that will be impacted, should the case proceed.
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