Opinion Post from Farmington Daily Times. Paul J. Gessing, Rio Grande Foundation Published 5:33 a.m. MT Feb. 5, 2019 | Updated 12:51 p.m. MT Feb. 5, 2019.
Environmental groups, Governor Lujan-Grisham, and even Public Service Company of New Mexico want us to believe that their plans to rapidly increase renewable energy are cost-competitive.
New Mexicans voted for change in 2018 and, as a result, there are legislative initiatives to raise the State’s “renewable portfolio standard,” or RPS, from 20 percent to 80 percent. Unfortunately, what voters haven’t been told is that this extreme expansion of the RPS will dramatically increase our electric bills.
In order to make way for rapid expansion of the RPS and bolster shareholder profits, PNM has decided to shut-down the coal-fired San Juan Generating Station near Farmington more than 30 years early. For the last 50 years, PNM has credited this plant at the PRC as the reason why PNM has been able to provide New Mexicans with low-cost power for the last 50 years. The plant was also just retrofitted, at a cost of $635 million, to remove more pollutants from its emissions and is now one of the cleanest plants in the country. PNM even admits that closing SJGS will increase our electric bills.
Despite price declines in wind and solar, we believe the replacement of a coal-fired power plant with a combination of wind, solar, and gas (supplemented by battery backup with unproven effectiveness at large scale) will not be cheap. A 2016 study produced by the Foundation estimated that from 2011 to 2020, New Mexico’s RPS would cost rate payers an astonishing $2.3 billion above and beyond what they would otherwise pay for electricity.
We stand by this report and note that other sources indicate New Mexico’s electricity prices rose about 30% since the RPS took effect in 2005. This increase is attributable to the RPS because it occurred at a time when the prices of traditional electricity generation sources, like coal and natural gas, have declined.
The cost of switching to “cheaper” sources of renewable electricity shouldn’t be borne by ratepayers or taxpayers. One would hope that Governor Lujan-Grisham, the Legislature, and PRC share this view. After all, they represent average New Mexicans and ratepayers, not just utilities and environmental groups.
One other thing that needs to be considered is the economic viability of the Four Corners area of our State. We at the Rio Grande Foundation embrace free-market economics and have no qualms about market corrections and corresponding impacts. But closure of SJGS is different. PNM is shielded from market corrections because it has a monopoly over its customers and a guaranteed rate-of-return. In exchange, PNM is bound to provide customers with reliable low-cost electricity and to conduct its business in a manner that is not detrimental to the public interest.
Here, not only does PNM admit our bills will increase, but PNM’s actions are also detrimental to our state’s budget.
If the market truly is pushing PNM towards other electricity sources, policymakers, taxpayers, and ratepayers should welcome that transition, but they shouldn’t be forced to foot the bill in case their assertions prove to be wrong.
For the good of New Mexico’s economy and ratepayers, any effort to provide PNM a financial bailout for its move out of San Juan Generating Station should also include basic protections for New Mexico ratepayers. The best protection is a hard cap on electricity rates during the rapid RPS expansion.
Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.
Listen to Germaine Chappelle’s discussion on the Rio Grande Foundation’s Tipping Point New Mexico Podcast. Germaine addresses a variety of issues with hosts Paul Gessing and Dowd Musca. Hear about the issues related PNM’s plan for San Juan Generating Station including “stranded costs”, the cost of adding “renewables”, how electric rates will be impacted, and how the plan will hurt the Four Corners region.
Podcast: Play in new window | Download
This appeared as a guest column in the Albuquerque Journal | By Nate Duckett / Mayor, City of Farmington, and Kim Carpenter / County Executive Officer, San Juan County, Saturday, October 6th, 2018
We are responding to PNM executive Ron Darnell’s “for the children”-themed op-ed (Sept. 14 Journal). We believe PNM is using this angle to misguide the public on a number of issues surrounding its decision to close the San Juan Generating Station 30 years early.
As fathers and community leaders we care deeply for our youth and are gravely concerned about the impact PNM’s closure of the San Juan Generating Station will have on the well-being, education and future opportunities of our state’s children. Our state already struggles with one of the highest rates of childhood poverty in the country. We take it personally that PNM is willing to so cavalierly turn a blind eye to the real impact its plans will have on our children.
PNM has already publicly stated its plan to close the San Juan Generating Station will increase electric rates. Skyrocketing electric rates in California have already been created by actions like those proposed by PNM. Increased electric rates disproportionately impact those on fixed or low incomes.
PNM’s plans, as advanced by Darnell, will cost all of us, especially our children, in the state of New Mexico plenty in the form of fewer jobs, higher electric rates, reduced tax revenues for schools and diminished ability of parents to support their families. Furthermore, this closure will no doubt lead to further migration of our working class to states that have more robust job opportunities and diversified economies.
PNM has admitted publicly there will be statewide and regional impacts caused by its decision to close the San Juan Generating Station. PNM has also admitted in a proceeding before the Public Regulation Commission that delaying the closure will decrease costs to customers and mitigate impacts. If PNM cares so much about our state’s children, please ask yourself why it isn’t interested in working to create a more workable and prudent transition plan that mitigates these impacts?
In 2015, PNM initiated its plan to close two units of the San Juan Generating Station. PNM asserted that in order to keep the remaining two units open decades longer, extremely expensive pollution control equipment was needed. In reliance on PNM’s stated commitment to continue operations, over $37 million in bonds benefitting schools in our area were issued.
In 2017, after installing this equipment and using assumptions that have been aggressively challenged and largely discredited, the company stated its intention to close the remaining two units of San Juan Generating Station.
Why the sudden change in strategy by PNM? We believe this decision is profit-driven:
• Even though PNM has volunteered to close the plant prematurely, it wants customers to pay PNM shareholders for shutting down a completely viable resource.
• PNM also wants customers to pay for brand-new replacement generation resources, which guarantees dramatic increased profit to PNM and its shareholders.
• PNM wants the state Legislature to expand the amount of renewable energy it uses to 50 percent. This creates a legislative mandate to overbuild resources, which further increases profit to PNM and its shareholders at the expense of ratepayers.
PNM is advocating that the California approach be adopted by New Mexico public officials. Under California’s approach, electric rates have skyrocketed and utility profits have soared. If New Mexico goes along with PNM’s plan, rates in New Mexico will also skyrocket.
Higher electric bills hurt poor families the most. However, higher electric rates do support increased executive bonuses and dividends to mostly wealthy, out-of-state shareholders.
Does New Mexico really want to go along with PNM’s plan to increase electric rates? We need economic growth and to diversify our economy.
With PNM’s plan, higher electric rates will give businesses fleeing California’s disastrous business climate another reason to keep driving straight through New Mexico on Interstate 40 to Texas. Meanwhile, huge numbers of New Mexicans will be forced to pay unnecessarily higher electric bills, impacting government, business, families and yes, our children.