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New Mexico: Raising Rates for Bad Energy in a Poor State

New Mexico has enjoyed some of the lowest energy prices in the country—which is good as it is a poor state. However, the major supplier of electricity to the state, PNM, has just asked for a 21.2% rate increase on top of the 24% they’ve received over the last few years. Welcome to the new world of government-forced renewable energy–and one reason why Senator Harry Reid (D-Nev.) recently said he didn’t have the votes for a federal renewable portfolio standard (RPS).

The anticipated rate shock gets worse for New Mexicans: a nearly 50% rate hike in five years. While PNM claims New Mexico still has some of the lowest rates in the country, the citizens are not taking the preventable increase lying down. David King, chairman of the New Mexico Public Regulation Commission (PRC), for example, calls the rate increase a “hot potato” saying that he’s received “a flood of calls from ratepayers.”

Public Outcry

During the month of July, PNM has been holding Public Forums through out their service area regarding their Integrated Resource Plan (IRP). The flyer promoting the event invited the “public” to join in on the discussion on topics such as “To what degree are consumers willing to pay more for a different combination of power sources?” The news about the proposed rate increase came out at the same time as the forums were scheduled. While PNM had a set program they’d planned to deliver, the attendees had little interest in the PNM’s dog-and-pony show.

I attended the forum in Santa Fe—the second they held in the state. The anger in the room was palpable. The woman leading the meeting for PNM admirably accepted being pelted with questions about the rate increase.

One questioner asked, “To what is this rate increase going?”

“Environmental improvements,” was the answer.

The questioner asked about  the $330 million PNM spent as a result of a lawsuit filed against them by the Sierra Club. There was acknowledgment that this was accurate. The questioner continued, “I understand that PNM did not fight the lawsuit?” Again, affirmed. “He commented, “You could have hired the best lawyers in the country for $330 million.”

So, the Sierra Club is one contributor to the increase. The current rate increases do not include much of the additional costs for renewables–but they are coming. The Santa Fe Reporter asked about the rate increase, “Does that mean there could be another rate increase in the future to pay for the costs of complying with renewable energy requirements?” The PNM representative, replied, “The answer is ‘yes.’”

Finally, a marketing executive from PNM had to come and quiet the crowd. He told us that they need to “get through the program.” Clearly the program was more important than customer feedback.

Once the PowerPoint presentation was over, another PNM representative attempted to guide us through an “exercise.” There were audible moans at the implication that we were now going to play a “game.”

We had to choose whether we’d prefer option #1, “Maintain reliable energy access and keep the lights on,” or option #2, “Minimize customer rates for energy.” The distributed solar group was angry that their choice was not even presented on the five point/30 minute exercise. Those who were there to express their frustration over the rate increase didn’t like the exercise—which some called “insulting.” One woman stood up in disgust and exclaimed, “this is ridiculous.” With that she stomped out.

The meeting went downhill from there and the exercise was abandoned. The man who earlier attempted to calm the crowd, called me out specifically, “Marita, this is the wrong place for you and your group. You need to be at the PRC [New Mexico Public Regulation Commision] Hearing.”

I assured him we’d be there too (it is scheduled for December when anger over the rate request will presumably have died down). People dribbled out of the meeting room while the facilitator let people vent their frustrations–but the damage had been done. Instead of building coalitions or making allies, PNM antagonized most of the “public” who had attended the forum.

I received similar reports from CARE (Citizens’ Alliance for Responsible Energy) friends from both the Albuquerque and Los Lunas forums—though after the raucous time in Santa Fe, they did seem to stick to the agenda more tightly.

Time to Undo New Mexico’s RPS?

PNM was the focus of the public’s wrath. But the fault goes to New Mexico’s Public Regulation Commission and other elected representatives who voted for renewable portfolio standards and other measures that increase energy costs.

In 2009 and the New Mexico State Legislature unanimously passed a bill that upped the percentage of electricity generated by renewables by 2011 from the current mandate of 6% to 10%, then to 15% by 2015, and 20% by 2020—and renewables cost more.

On my current PNM bill I am paying between $0.07 and $0.10 a kwh. Yet, if I have solar panels on my roof and produce more solar than I can use, PNM will pay me $.13–.15. So if PNM is paying more for solar power than they are charging me for electricity—they are in trouble. (For the worse-than-bad economics of solar, see David Bergeron’s MasterResource post on Arizona’s solar program.)

The PRC is also considering a plan from PNM that would add 80 megawatts of solar to their system to help them meet state-mandated renewable energy standards—for which PNM says they will “defer the costs associated with the renewable resources as regulatory assets on its balance sheet.” So, according to PNM that rate hike will an additional increase!

New Mexico’s Bad Energy Actors

What’s the national lesson—especially for our lawmakers? Renewable energy mandates mean higher costs and rates without any meaningful environmental improvement. And as the truth gets out, ratepayers do not like it. It is as if they have been mislead and lied to by those in authority.

Elected officials, such as New Mexico’s Ben Ray Lujan and Maritn Hienrich clearly haven’t gotten the word about their constituents attitudes and anger. They each just voted for the CLEAR Act (HR 3534) in the House Natural Resources Committee, which will raise energy costs and increase reliance on foreign energy sources.

On the Senate side, Senator Bingaman has been quietly working behind the scenes to make energy still more expensive. He has a bill that has already passed the Natural Resources Committee markup that would increase renewable electricity and is now writing a power-plant-only carbon cap bill. His legislation aims to limit emissions from the electric power sector.

Wake up and learn a lesson from New Mexico. We are not happy with a 50% increase in energy costs and you won’t be either! Do not let our congressmen and senators raise your energy bills!

There is never a good time to intentionally raise the cost of energy—a resource central to all economic activity—but now, with an economy in critical condition, is the worst possible time. And for what purpose? To reduce global temperatures in 2100 by an amount too small to measure? Renewable energy is not green. Even if the climate needed to be “saved” (a questionable point), it cannot be saved with unreliable power sources that may well require more energy to construct than they will ever produce.

Let’s go ahead and say it: Any Senator, any Congressman, any state legislator, who votes to raise energy costs doesn’t deserve our vote.

Marita Noon is the Executive Director at CARE (Citizens’ Alliance for Responsible Energy), the New Mexico nonprofit organization advocating for citizens’ right to energy that is abundant, available, and affordable. CARE works on energy issues state, region, and nation wide. Find out more at www.responsiblenergy.org.

11 comments

1 Jon Boone { 07.29.10 at 10:09 am }

Marita Noon’s description of the cavalier way PNM official’s are attempting to ram rate increases down the throats of New Mexico’s consumers is mirrored in similar proceedings across the country. People should just be furious by the cynicism evident from these officials, their nonsensical, corrupt justifications, their bureaucratic contempt for the public, and the failure to do their jobs properly.

On the other hand, they’re able to do so because organizations like CARE continue to pander to the sloganeering that outfits like PNM use to justify their flirtation with the renewables bait and switch schemes. Here’s what CARE says about wind on its website:

“Wind is not the only answer to our energy needs, but provides one part of a balanced energy portfolio, with the potential to contribute up to 20% of our nation’s electricity needs in the next few decades.

“Some question whether wind power, being a variable resource (meaning it generates electricity when the wind is blowing, and not on demand) is up to the task. Based on a growing body of analytical and operational experience, the answer is a resounding “yes”. The wind industry and the Utility Wind Integration Group (UWIG) are working together in several regions of the country to help utilities and system operators integrate larger amounts of wind power into electric system operations with only modest adjustments in operating protocols. For more information on this, go to the UWIG Web site at uwig.org.

“Most people who live around wind farms know the wind blows just about all the time. A typical wind turbine produces power up to 90% of the time, generating electricity in proportion to how strong the wind blows. Wind farms on average will operate at 35-40% of the wind farm’s peak capacity over the course of a year, although specific sites in the region may prove to be even better.”[http://www.responsiblenergy.org/renewables/wind.asp]

With only a few word changes, this could be lifted directly from the American Wind Energy Association’s boilerplate. It is a cascade of half truths and lies, for which CARE should be hanging its head in shame.

Ms. Noon and CARE have much to answer for on this. Although her article here is right on target, she should be hardly throwing any stones at PNM, given the retarded renewables rhetoric gushing from her own organization. Including wind in any “balanced” energy portfolio” insures large amounts of dysfunction in ways that will increase consumer costs while providing a lower quality of service.

2 Ed Reid { 07.29.10 at 11:57 am }

Jon,

Utilities are creatures of their regulators. They are also required to abide by state law, including a state RPS.

The utility is required to achieve very high levels of reliability (99.9%+), even in the face of mandates to “rely on the unreliable”, in the forms of solar and wind.

The utility must receive approval from its regulator before investing in new facilities or improvements, to assure that the investments in those facilities will be included in its rate base.

The utility is assured the opportunity to earn a reasonable return on its investment in the facilities required to provide reliable service to its customers, plus recovery of its reasonable fuel and labor costs, all of which are subject to review by the state utility commission.

Utilities in many states are required to “net meter” power for residential customers with on-site generation, thus forcing them to forgo both cost recovery and return on investment for power they provided as required which was then netted out of the customers’ bills, frequently at times when the power is not necessary and least valuable. Some states are considering applying feed-in tariffs to on-site generated power fed into the grid, requiring utilities to pay more for that power than their all-in costs of delivering that power from their own facilities.

Regulators and legislators have a tendency to view utilities as adjunct social service agencies. They require the utilities to do things which increase their costs, then pillory the utilities in the media for requesting rate increases to allow them to recover the costs.

BOHICA

3 Jon Boone { 07.29.10 at 12:49 pm }

I know all this, Ed. But thanks, since many others may not. Nonetheless, there is a revolving door aspect about contemporary utility executives, regulators, and legislators/political executives (and their policy wonks) that makes this situation not as clear (or clean) as you imply. Of course, the sanctimony–what I’ve called the pecksniffian sanctimony–of legislators/executives–you allude to, where political mandates necessarily raise costs that are then politically denounced–is outrageous.

4 Ed Reid { 07.29.10 at 1:12 pm }

Jon,

I acknowledge that my 36 year experience in the utility industry might not have been universally representative. However, during my career, I worked with many people, from many utilities, at all levels in the organizations. I did not experience anyone attempting to ” ram rate increases down the throats” of consumers. I did experience lots of people trying to achieve rates which would permit full cost recovery plus allowable rate of return on rate base under normal economic and weather conditions. I experienced regulators and courts “piercing the corporate veil”. I also experienced federal and state legislators and executive branch agencies “picking winners” among the utilities.

Much of the conflict between utilities, regulators and consumers’ advocates is the result of rate structures which force utilities to recover a significant portion of their fixed costs through the variable portions of their rates. These rate structures result in under-recovery of costs during economic recessions and periods of mild weather; and, over recovery during periods of economic growth and extreme weather.

5 Jon Boone { 07.29.10 at 1:34 pm }

Well, Ed. I’m glad you had such a positive experience over all that time. I’ve only looked at this from the outside, mainly as an intervenor in several Maryland Public Service Commission wind hearings. What I encountered was appalling, at many levels. The PSC hearing examiner, who insisted upon an “expedited review,” became an executive with a wind LLC as soon as he left the commission. Three of the five remaining commissioners were at one time hired wonks on the staff of the former Speaker of the Maryland General Assembly, who, as soon as he left the legislature, became a prominent wind lobbyist. He recently used his influence to help his wind LLC colleagues secure passage of state legislation that exempted wind projects from any meaningful PSC review, something well known to PSC members, who rolled over nicely.

Meanwhile, in nearby WV and PA, utilities and regulators have teamed up to push through massive new utility lines, in large part to carry wind to market–all the while acknowledging this is “necessary” for “environmental improvements.”

What Marita Noon describes here is the same kind of procedural goonishness that I’ve seen in my area, where the usual suspects in the renewables lobby are appointed to “commissions” to study future options, taking public testimony in cherry picked times and places, and controlling the agenda tightly, to prevent skunks from spoiling their picnic.

6 Ed Reid { 07.29.10 at 1:39 pm }

Jon,

That type of incestuous “revolving door” rarely involves utility employees, who are typically viewed as the “enemy”. :-)

7 Jon Boone { 07.29.10 at 2:33 pm }

I’ll be merciful, Ed, and not burden you and others with recent tales of the wind mess, Constellation Energy, Florida Power and Light, Maryland’s governor and former governor and Public Service Commission, officials with the Maryland Energy Administration, the Maryland legislature–not to mention the gashouse gang from the PJM. Cheers!

8 Charles { 07.29.10 at 6:26 pm }

Marita has picked out one of the fundamental flaws of the solar feed-in tariff, which is that it passes the cost of electricity from those who have the solar equipment, onto those who don’t.

In most cases those who install the solar equipment capable of turning it into electricity and fed back into grid, are usually the better off in the community. Often they can use the feed-in tariff to offset 100% of their electricity costs, and you can often see flyers and brochures advertising this fact.

This means that those who don’t have the access to this offset will be paying not only their own electricity costs, but also the higher priced electricity coming from these small individual generators.

Consequently, it becomes the case of a society where the well off pass their energy costs onto the poorer members of that community. In terms of public policy it has to be one of the most stupid ideas ever.

9 nofreewind { 07.29.10 at 7:45 pm }

>Wind farms on average will operate at 35-40% of the wind farm’s peak capacity over the course of a year

Why are the number always wrong? Number don’t lie, but wind promoters?? Oh Well.
Let’s look at some number.
EIA data shows US Wind produced 34,449,000 MWHours of electricity in 2007. Divide by 8760 hours in a year to yield about 4,000 MW of power. But EIA gives net 2007 summer capacity of 16,500 MW’s of wind, so real output is only 25% of possible capacity, not 35%, The wind association only “exaggerated” and added another 40% of output to the 25% REAL OUTPUT.
http://www.eia.doe.gov/cneaf/solar.renewables/page/trends/table1_11.pdf
http://www.eia.doe.gov/cneaf/solar.renewables/page/trends/table1_12.pdf

10 nofreewind { 07.29.10 at 7:52 pm }

Solar? Ha. I have a solar proposal for a industrial plant and the federal and state tax credits are completely appalling. The tax credits the owner of this 60 million dollar business that produces about 6 million in profit for the owner would only benefit him, certainly not the taxpayer of my state and nation. There are more tax credits than electricity produced. Wind and Solar have to be one of the most well-conceived scams in human history.

11 MarkB { 07.31.10 at 2:13 pm }

The Massachusetts AG ‘wrests’ a 10% cut out of a 100% price increase for Cape Wind electricity:

http://www.boston.com/news/local/massachusetts/articles/2010/07/31/ag_wrests_price_cut_from_cape_wind/

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