Public Regulation Commission, explain decisions
In a state ravaged by poverty, keeping a lid on the cost of power is critical to struggling households and our ability to attract business and create jobs. Yet, New Mexico’s electric utilities continue a barrage of rate increase demands to pay for new investments — often in dying technologies. This in a state showing little or no growth.
As the state agency responsible for regulating electric utilities, the Public Regulation Commission appears impotent against the assault. They have lots to explain as we look back on 2017 and ready ourselves for the future.
Plant investment
The PRC recently approved Public Service Company of New Mexico’s new solar generating facility at a whopping $45 per megawatthour despite the fact that lower bids were outstanding. Meanwhile, Austin Energy just signed a solar generation deal for about $25 per MWh and Xcel Energy Colorado just received 75 solar generation bids under $29.50 per MWh.
The PRC did not investigate why PNM’s project is so expensive and appeared unaware that costs are substantially lower elsewhere. PRC, please explain! Two new El Paso Electric gas-fired power plants that are needed for only 50 peak demand hours per year had their first full year of operation with PRC approval at a cost of $170 million. The required energy could have been purchased on the spot market in 2017 for about $600 thousand.
The PRC did not require El Paso Electric to compare the cost of purchasing guaranteed open market energy deliveries to the cost of building and operating the new plants.
PRC, please explain!
Power transmission, distribution
PNM and El Paso Electric each spend about $100 million annually on new power lines and substations. Utilities across the country have proven that big savings can be achieved by investing in energy efficiency, battery storage and peak demand shaving instead.
The PRC does not require engineering studies to justify the need for new power lines and substations or to show that they are the most cost-effective way to meet power system needs. Utilities simply notify the PRC of the projects and get an average 10 percent annual return on the investments in their next rate increase filing. With an investment life of 40 or more years, they have one powerful incentive to overbuild.
PRC, please explain!
Long-term planning
Successful businesses look carefully into the future before making investments. They cannot survive in a competitive environment without effective long-term planning. Not so for PNM and El Paso Electric. As regulated monopolies, they have no competition.
PNM and El Paso Electric’s legally mandated 20-year plans show the continued operation of coal facilities and construction of new gas generation at costs to ratepayers ranging from $40-$110 per MWh. Recent Colorado bids for clean wind and solar with storage range from $21-$36 per MWh. Renewables with storage can often provide comparable or superior service to fossil fuel plants.
Energy storage is treated as a novel experiment in PNM and El Paso Electric planning. Meanwhile, utilities in North Carolina, California, Arizona and New York are already implementing multiple uses for these technologies.
Incredibly, neither PNM nor El Paso Electric has any comprehensive strategy to deal with the potentially huge impacts of an impending electric car boom.
PRC, please explain!
There are solutions
The PRC can and must do better. Adjusting priorities, requiring more transparency from utilities, better training of staff and bringing increased order to case and information flow can go a long way toward fixing the situation.
The public deserves an agency that understands 21st-century utility regulation and protects the public interest. Good governance demands it.