You’d think we’d all be happy that PNM is interested in developing solar in Santa Fe. But as New Energy Economy points out, the proposal is not what it appears and the City has far better options. Details in this post. Time to contact our Councilors and Mayor.
New Energy Economy Takes on PNM Proposed Santa Fe Solar Installation: Public Hearing Monday, Dec 11, 5pm at City Hall
One thing I’ve learned in my now five years in Santa Fe: If PNM makes a suggestion, you’d best read the fine print. Fortunately, New Mexico has New Energy Economy, an organization that has made a career of reading the fine print and repeatedly defending New Mexico’s best interests. Over the past few years, NEE has gained increasing credibility, to the point now that the Public Regulation Commission staff examiners routinely side with NEE only to have the PRC vote 3-2 to ignore its own staff’s well-considered recommendations. Now, PNM has crafted a resolution that would direct the City staff to work with PNM to develop a PNM-owned solar project to offset electricity consumption on city facilities. As noted yesterday, the City should be commended for seeking to solarize our City facilities. But as also noted yesterday, when PNM offers to do something that seems like a good idea, you are probably being duped. Thankfully, NEE has read the fine print and found several fundamental problems with the resolution to be considered soon by the City Council.
Action Needed Today: First read over this blog and then send a link to the blog to the Mayor, your City Councilors and to Public Works Committee Members, Councilors Lindell, Rivera, Dominguez and Trujillo. With the link to this blog, include your comments as to why you oppose this partnership. It can be as simple as saying you don’t trust PNM. Click here for contact info for the Mayor and Council members. Please do this NOW. It will only take a very few minutes. And if you possibly can, attend the public hearing at 5pm today (Monday, Dec 11) in City Hall Chambers. We need to raise our voices. I have heard from several Councilors that they were not aware of the issues raised by NEE. Let’s make sure they are made aware of those problems.
Problem # 1: The procurement process itself is likely illegal and if not illegal it is at least not best practice in transparent government as the project unfairly discriminates against local solar businesses, is anti-competitive, and is contrary to the stated goals of the resolution: 1) reducing electricity costs 2) making community solar legal and 3) providing transparency and accountability in City procurement. Before we examine how well PNM’s proposal addresses each of these goals, let’s examine further why the deal they propose is likely illegal. The contractual arrangement proposed by PNM to create a 3.5 megawatt system off site to offset the usage of 22 city facilities and give the City credit for the power produced is akin to “community solar.” A community solar project—sometimes referred to as a solar garden or shared renewable energy plant—is a solar power plant whose electricity is shared by more than one household or business. PNM has told the City that their deal with Facebook could serve as a financial agreement model for the City. But this is simply not legal. Facebook is an entirely new entity in New Mexico. As such, PNM was able to carve out a special deal for them. However, the City of Santa Fe is not a new entity and so PNM can only offer rates to the City consistent with the rates they offer other customers in the City’s classification. The New Mexico Supreme Court has held that it is illegal to treat one customer within a rate class differently (with a special arrangement) than another within the same class and stated that it would result in “undue discrimination.” UNLESS PNM offered the same “contracts” to all those other customers (in rate class 3B) this preferential treatment would be deemed discriminatory.
Problem # 2: PNM could not propose a new rate relationship to the PRC until 2020, so we would have at least 24 months and likely far more before this deal could advance. This delay is the result of PNM’s pending settlement stipulation before the PRC, Case No. 16-00276-UT, in its current general rate case. In that rate case, PNM has committed to not file another general rate case application with the New Mexico Public Regulation Commission (“PRC”) until at least the 2019 and for new rates no earlier than 2020. So, even if PNM could make such arrangement it could not implement it before 2020.
Problem # 3. PNM’s proposed project is not competitive and locks the City into working with PNM on their terms without seeking competitive bids from others.. Besides being illegal today without a legislative and/or PRC change in law or regulation our other concerns are that this resolution calls for the development of an electricity offset project with PNM without a determination that this project is the most cost effective means to develop a solar project among feasible alternatives. It directs the City staff to work with PNM, to the exclusion of other independent renewable producers, and does not use language that this investigation is exploratory in nature. Nor does it reference any competitive process that would inform the City’s evaluation and selection of a partnership. The appropriate process is for the City to issue a request for proposals (RFP) — a competitive bidding process – with the specifications of the project to meet the needs of municipal building solarization. Issuing a Request for Proposal (“RFP”) is the standard procurement process for the City of Santa Fe but this Resolution bypasses this competitive and transparent process. Why has the City consistently deployed the RFP process in other contexts?
- It protects the public from unnecessary cost and waste; and
- It protects the market from favoritism and unfair dealing; and
- It produces the greatest transparency; and
- It equips decision-makers and the public with the information they need to make a sound assessment of the best path forward.
Why is the City even thinking of working with PNM without a competitive RFP process?
Problem # 4. PNM’s proposal is NOT the most cost effective possible. The available evidence shows that PNM-owned solar is NOT the most cost effective resource among feasible alternatives and will result in unreasonably high solar procurement costs to the City of Santa Fe. Why? PNM enjoys a guaranteed return on assets of 9.575% annually. So, PNM will charge the City the cost of electricity for the 3.5 megawatt system plus a nearly 10% return. Can independent local power producers install solar on City owned facilities for less than PNM-owned solar + 10%? Most Probably. In fact, recent actual PNM evidence shows that independent power producers’ prices have come in dollars per megawatt cheaper than PNM-owned solar. This is not just NEE’s opinion. From Albuquerque Bernalillo County Water Utility Authority’s Brief, November 22, 2017, 17-00129-UT: “PNM’s bid of $44.63/MWh was not shown to be the most cost effective bid among feasible alternatives. 2016 RFP bids were lower than the price of PNM’s $44.63/MWh bid. In 2016 PNM received and did not pursue, PPA [Independent Power Purchase Agreement] solar bids of $41.63/MWh, $42.35/MWh and 42.65/MWh. …There is overwhelming additional evidence in this case that PNM’s proposed turnkey bid is not the most cost effective bid among feasible alternatives. The terms of the three PPAs, dated April 28, 2017, provide for an energy output payment rate of up to $39.85/MWh.” Hence NEE is not alone in questioning PNM’s claims of cost-efficiency. What’s more, if the City owns the solar at some point the solar-produced electricity is virtually free!
Problem # 4. PNM’s priorities are shareholder profit, not ratepayer benefit. PNM’s fiduciary duty must maximize its financial arrangements to create the highest return on equity for Wall Street shareholders and long-term monopoly control of resources at the expense of customers, if the Council adopts this Resolution, the City of Santa Fe. A PRC Hearing Examiner recently found that PNM’s solar was not the best option and found its procurement “unfair and anti-competitive.” (Case No. 17-00129-UT, Recommended Decision, October 17, 2017). As noted in yesterday’s blog, we desperately need to transition to renewables, but at this juncture, we also need a pivot in our relationship with energy itself and bring ownership and oversight back to the public and out of the hands of a private sector that has repeatedly placed profit over people or planet and shareholders over ratepayers. To read more about the importance of public ownership click here to review the bi-partisan op-ed about the need to look at ownership by Albuquerque City Councilors Brad Winter and Isaac Benton.
In closing, when PNM proposes anything you will always find beneath the surface terms and conditions that are not in your interest. That is the case here with PNM’s proposal to the City. Please write to you City Council and to the Mayor and ask them why the rush to work with PNM without a competitive RFP process and why not at the very least craft an RFP to see whether the City can get a better deal. There is abundant evidence that a better deal is possible. Click here for contact information for the Mayor and all City Council representatives. Forward them this email as evidence of why they should reconsider support for this partnership.
Paul & Roxanne