We Can Transform NM’s Energy Future In 2021, IF…..

We have written how municipalization can create local energy autonomy & free us from utilities like PNM. But Local Choice Energy offers a far easier lift to achieve the same end: energy independence & local control without costly legal battles. Local Choice Energy (also know as Community Choice Energy or Community Choice Aggregation) allows local governments and Native American Tribes to form Joint Power Agreements that enable them to pool (or aggregate) their electricity load in order to purchase and/or develop power on behalf of their residents, businesses, and municipal accounts.It has transformed energy use dramatically wherever it has passed. Time to bring it to NM.

Local Choice Energy:
A Path to a Just, 100% Renewable Transition

On Monday, we wrote about how local jurisdictions could create locally controlled utilities and eliminate privately-owned, profit-driven utilities like PNM. The problem is that each city would need to sustain a very costly and contentious legal battle with the utility company, often extending for years, as each locality would need to negotiate a fair price for the acquisition of the existing grid that delivers the energy. In NM that would mean legal battles replicated in one city and county after another in a chaotic and unpredictable process. Despite this challenge, these battles have been won in 49 of 50 states resulting in thousands of municipal utility districts managing their own energy.

But there is another path in which there is just one legislative hurdle: passing Local Choice Energy. And while the political environment at the Roundhouse in 2019 made passing such legislation impossible, the situation will be remarkably different in 2021. We can do this. Read on.

A Changed Political Environment

In the 2019 legislative session SB 374 Local Choice Energy, sponsored by Senators Jeff Steinborn and Benny Shendo, was introduced and was assigned to Senate Conservation Committee where then Chair Joseph Cervantes let it sit….and sit….and sit, ultimately dying without a hearing. But since 2019 a remarkable number of factors have changed to improve the political prospects for Local Choice Energy:

  • A significant change in the composition of the NM State Senate has transpired with five Democrats In Name Only removed from office in the primary, with the far more progressive challengers who defeated them highly likely to win at least four (and quite possibly five) of the general election races. With five very powerful and conservative DINOs removed, the math in the Senate changes considerably.
  • What’s more several good candidates are challenging Republican Senate incumbents, poised to take more seats in the Senate. Together, this will significantly improve the likelihood of passing good progressive legislation.
  • Sen. Liz Stefanics now chairs the Senate Conservation Committee and she is far more predisposed to supporting and moving environmental legislation out of that committee, e.g. her current leadership of the study group focused on developing Community Solar legislation in 2021;

What’s more, in a collapsed gas-price and COVID-depleted economy, Local Choice Energy offers several important economic boosts to local economies without requiring state funding.

  • Local Choice Energy would provide significant ratepayer relief in any jurisdiction implementing the plan;
  • Local Choice Energy would generate hundreds, perhaps thousands of well-paying jobs for local communities;
  • Local Choice Energy would provide significant financial benefit to cash strapped cities and counties;
  • Local Choice Energy would not cost the state a dime;
  • Local Choice Energy programs are being successfully implemented across the nation, currently meeting 25% of U.S. annual electricity demand in eight states, with over 1300 municipalities (rapidly growing) nationwide and the results have been widely applauded, increasing the credibility of the model here in NM.
  • For example, in California according to California’s Public Utility Commission up to 85 percent of California’s retail load could be served by Local Choice Energy or direct access providers by 2025.

So what is Local Choice Energy?

Local Choice Energy (also know as Community Choice Energy or Community Choice Aggregation) allows local governments and Native American Tribes to form Joint Power Agreements that enable them to pool (or aggregate) their electricity load in order to purchase and/or develop power on behalf of their residents, businesses, and municipal accounts.

Established by law in eight states thus far, Local Choice Energy (LCE) is an energy supply model that works in partnership with the state’s existing investor-owned utilities (IOUs), which continue to deliver power, maintain the grid, provide consolidated billing and other customer services. A critical difference between LCE and municipalization (described in Monday’s post) is that the the existing private utility company, e.g. PNM, continues to own and operate the transmission lines but is now not the provider of power. With LCE, local jurisdictions avoid the costly negotiating process with their existing private utility, significantly accelerating the time frame from passing the JPA to implementing LCE.

LCE providers have demonstrated the ability to provide highly reliable electricity at rates that, based upon national data, average 15 to 20 percent below those of investor-owned utilities like PNM. Similarly, LCEs provide flexibility, cost efficiencies, and local control—making it possible for people to quickly transition to 100% renewable energy while strengthening the local economy, as our case study below demonstrates.

Discussed in Monday’s post, the non-profit municipal utilities, or munis, also can provide local communities highly reliable electricity supply at rates averaging 15 to 20 percent below the rates of traditional investor-owned utilities. Like munis, an LCE offers cost efficiencies, flexibility, and local control. But by virtue of the governor signing a LCE bill, any jurisdiction in the state would have the capacity to form a Joint Power Agreement and purchase and/or develop their own 100% renewable energy, often at significantly lower rates. But unlike munis, they do not face the capital-intensive and open-ended challenge of valuing, purchasing, and maintaining expensive utility infrastructure and the inevitable and always costly and lengthy legal battles that ensue from that process.

LCE offers a “hybrid” approach that exists between the investor-owned (often monopoly) utility and a municipal (or member coop) utility. The LCE community reaps the benefits of controlling power supply and generation without the financial drag of purchasing and maintaining sometimes antiquated utility infrastructure. In this way, it is a great option for municipalities who want control over their power supply but don’t want the financial and operational burdens of owning their own utility.

Renewable energy is now the cheapest form of energy with wind at 3 cents/kw and solar at 4 cents/kw. Currently, PNM charges customers 14 cents, so it is easy to see how local jurisdictions can significantly cut rates while transitioning to 100% renewable energy. After all a JPA will not pay its CEO $5M a year as PNM does, nor will it export profits to distant shareholders. The money stays here in NM.

Because LCE providers are locally managed, not-for-profit entities, any excess revenue is reinvested into the community through on-bill savings and innovative energy programs, often focusing on historically underserved and disadvantaged communities, including rebates, no-cost and low-cost energy programs, job training and employment programs and more. LCE would enable New Mexican communities to reduce our carbon footprint while driving local economic development and job creation — in a way that’s attainable for all customers.

Case Study for How It Would Work.

If NM passed Local Choice Energy in 2021, jurisdictions across the state could use the legislation to form Joint Power Agreements between a city and county or with tribes for the purpose of purchasing energy or generating their own energy. Let’s imagine that Española created a JPA with Rio Arriba County. That JPA could then issue an RFP asking for bids to sell the JPA 60% of its power. There is a clever reason why this JPA did not want to purchase 100% of their power, but we will get to that.

The JPA would select the best bid and enter into a 20-year agreement with the winning bidder. The JPA would get the power for between 2-4 cents a kw/hour and sell it to ratepayers for 6-8 cents a kw/hour with the remaining profit being used by the JPA to support a variety of social/climate justice initiatives and to build up the JPA reserve account. The JPA would continue to use PNM’s transmission lines to distribute the purchased power.

At the same time, the JPA would seek financing to build a solar or wind array with storage sufficient to provide the remaining 40% of the JPA’s energy needs. When the financing for the array and storage is paid off the JPA would enjoy renewable energy virtually for nothing, paying only maintenance on array and distribution of the energy, a very minor cost.

It gets better.

After the end of the 20-year agreement to purchase energy from the winning bidder, the Española community’s confidence in the JPA will have soared. Twenty years of reduced rates and good paying jobs, will have buoyed confidence in the LCE model here just as they have in Local Choice programs throughout the nation. In Española, the EPA will have been saving money by selling their energy at 3 cents per kw/hour more than the purchase price. These savings would be used, in conjunction with financing, to build a second array of solar with additional storage sufficient to meeting all the JPA energy needs.

This model doesn’t just benefit rate payers, it generates jobs. Lots of them, and these are jobs for local residents employed by local companies.

The clean energy industry employs more people than the fossil fuel industry in nearly every state throughout America where clean energy jobs outnumber fossil fuel jobs by more than 2.5 to 1, according to Department of Energy jobs data. New Mexico too is seeing remarkable job growth in the renewable energy sector. In 2016, according to The Solar Foundation, there were 2,929 family-supporting solar jobs in New Mexico. There was a 54% growth in solar jobs in 2016. Albuquerque had one of the highest increases in solar jobs in the country. Across the country, solar jobs increased by 25 percent from 2015 to 2016, for a total of 260,077 solar workers. Solar powers 144,851 homes in New Mexico. 83% of the solar installations have been on residences, 13% on commercial facilities, and only 1% utility-scale solar. Solar jobs grew 179 times faster than the overall state economy in 2016. There are now more solar and wind jobs in New Mexico today than fossil fuel jobs.

Along with the Health Security Act and a State Public Bank, Local Choice Energy represents another promising piece of legislation that could significantly transform NM. Stay tuned, as we are working with legislators and advocates to cultivate support for several other tranformative bills. We can do this!

In solidarity,

Paul & Roxanne

Categories: energy

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3 replies

  1. Could you investigate and comment on the campaign to change the process for putting Commissioners on the PRC from election to appointment by Secretary of Homeland Security? Many thanks

  2. While I am convinced of the advantages of Local Choice Energy, the description in this post seems too good to be true.

    This may be because I live in Farmington, which is a municipal utility, NOT the same as local choice, and they are takers when it comes to solar energy. Initially, they credited customers with rooftop solar for any extra energy they sent back to the grid. No more. You want solar, fine. But don’t expect to benefit personally from the cost savings involved. The PRC has no authority here, and we aren’t likely to have a Democratic city council any time soon.

    So when you say, “[A]ny excess revenue is reinvested in the community through on-bill savings and innovative energy programs, often focusing on historically underserved and disadvantaged communities….” I wonder how that can be a requirement rather than one option among others. What would prevent cash-strapped governments, as most if not all are right now, from continuing to charge ratepayers rates equal to or even higher than PNM’s and using these higher charges to make up for budget shortfalls elsewhere? Or giving themselves raises and snazzier offices?

    Later you say, “The JPA would get the power for 2-4 cents a kw/hour and sell it to ratepayers for 6-8 cents a kw/hour with the remaining profit being used by the JPA to support a variety of climate and social justice initiatives….” Really? In a perfect world, sure. In this world, I want to know what requires this wonderful development to take place, especially over the twenty years before the next phase and another JPA, time enough for idealism to be replaced by other human reactions to profits. Is this in some kind of binding contract? With strong enforcement mechanisms? And who oversees this process with the muscle to do the enforcing?

    My questions come down to what replaces the oversight provided by the PRC when the PRC has responsible members?

  3. Kit Carson co-op is signing up for a 21 MW solar array in a power purchase agreement. The Co-op does not front any money and the agreement is for 12 years in which Kit Carson pays four cents a kilowatt hour. Currently if they were buying power from Tri-State, they would be paying 7.6 cents a kilowatt hour. At the end of the 12 year contract, Kit Carson Co op will be able to purchase the solar array and I forgot to mention, battery back up,for about one cents a kilowatt hour. Since solar cells last 30+ years, that’s a huge cost savings currently and into the future. Ward

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