PNM, Xcel and El Paso Electric have slow-walked toward renewable energy goals and that walk is about to become a crawl, if we don’t take proactive action. And we are. Retake is working with other energy activists to seek energy democracy in NM.
At the bottom of this post is a link to our Thursday, July 8th Zoom Webinar on Public Power in NM. In this Zoom we benefitted from the insights of two Maine advocates who are working together to create public power in Maine, we also had two advocates from Renewable Taos. There is a 60 minute panel discussion followed by 30 minutes of Q&A.
The post below views public power from a national perspective. It will tell you what public power is, how it can be achieved and offers examples of successful public power campaigns in other states. We will post an update on the post below that specifically outlines what can be done in NM and how. We can do this in NM and it could diversify our economy, while accelerating our drive to 100% renewable in NM.
How To Achieve Public Power and State or Local Control of Our Energy
The looming threat of an Avangrid/Iberdrola acquisition of PNM is causing Retake and other energy advocates to think more offensively and proactively. Instead of just resisting the merger (which we certainly will), we have also begun researching alternative models of generating and distributing our own energy and even selling NM wind and solar to other states. This is exactly what Avangrid intends to do at great profit to them and little to no benefit to NM. At the Zoominar above, we will hear how Maine (and NM) can seize control of our energy futures and create truly sustainable, 100% renewable energy democracy.
In conversations with other NM energy activists, we have learned that the cost of generating renewable energy has declined by 85% over the past ten years and is projected to decline another 85% in the next decade. This decline in the cost of energy is not something a utility company can abide. Their profit depends upon the 9.5% profit they can charge on the cost of energy. Coal, gas and nuclear generated power is costly and hence profitable. If renewables costs continue to decline, so does the profit for PNM, et al. But if NM takes control of its energy future, the beneficiaries of the decline in renewable costs will be NM ratepayers. And if we take control of our energy future and begin generating and transmitting our energy to other states, we take a giant step toward diversifying our economy. This is not a pipe dream. It has been done elsewhere and it can be done in NM.
Today, we lay out the parameters for what Public Power is and how it can be achieved. Read on!
Retake often notes that the Democratic Party must return to its FDR roots and his perspective on public power offers just another example of how this can be done.
““I therefore lay down the following principle: That where a community–a city or county or district–is not satisfied with the service rendered or the rates charged by the private utility, it has the undeniable basic right, as one of its functions of government, one of its functions of home rule, to set up, after a fair referendum to its voters has been had, its own governmentally owned and operated service.”Franklin D. Roosevelt, September 21, 1932.
The American Public Power Association (APPA) is a think tank that has created a website with a clear delineation of the rationale for public power accompanied by a step-by-step guide outlining precisely how any county, city or tribe could develop its own publicly owned, operated and managed utility company. Despite the formidable challenges, this is hardly a pipe dream. Forty-nine states in the US have at least one publicly owned utility company and there are over 2000 communities and 48 million Americans served by public power. So it can be done.
Today’s post will tour APPA’s public power guide which is laid out in five sections:
- What is Public Power?
- Benefits of Public Power
- Forming a Public Power Utility
- Myths and Misinformation
- Successful Public Power Campaigns
What Is Public Power
“Public power utilities are like our public schools and libraries: a division of local government, owned by the community, run by boards of local officials accountable to the citizens. Most public power utilities are owned by cities and towns, but many are owned by counties, public utility districts, and even states.From APPI: “Municipalization”
Retake has also about creating a public option in our development of pharmaceuticals and vaccines, here too, the basic design is that instead of a privately owned utility managing our energy options and producing or procuring our energy, we would own our utility. Instead of the company being driven by a thirst for the greatest possible profit, it would be driven by seeking the greatest possible community benefit. The graphic below depicts the differences between a publicly owned utility, a privately owned utility and an electric coop.
The business model for public power is quite simple: it is a publicly owned, locally managed, non-profit that benefits from a lower cost structure because publicly owned utilities can access tax-exempt financing, enjoys a better credit rating and also does not pay out shareholder dividends or CEO bonuses and huge salaries.
What are the Benefits of Public Power
As a result of being more transparent and accountable and enjoying a lower cost structure, public utilities offer communities served a number of important direct benefits.
“When all taxes, tax equivalents and other contributions to state and local government are considered, public power’s contributions, as a percent of electric operating revenues, were 33 percent higher than those of investor-owne utilities.”From APPI: “Municipalization”
The section on Benefits of Public Power offers a litany of other ways in which a public utility benefits communities and targeted populations from offering discounted rates to the city, county or state governmental operations to conducting an array of public services related to energy efficiency. Plus, public power results in significantly lower rates for ratepayers.
Year after year, for more than 50 years, data from the U.S. Department of Energy show that investor-owned utilities and rural electric cooperatives charge more, on average, for electricity than public power utilities. In 2014, residential customers of investor-owned utilities paid average rates that were 14 percent higher than those paid by customers of public power utilities.”From APPI: “Municipalization”
As reported in APPA’s “Municipalization” guide, locally managed, publicly owned utilities are more responsive to ratepayer and local community needs and deliver energy more reliably. When you add up these benefits, you wonder why all communities don’t opt for municipalization. The reason is actually quite easy: privately owned utilities desperately want to subvert these efforts. Privately-owned utilities like PNM enjoy a largely unregulated monopoly with a locked in profit and guaranteed customer base. That is an awfully sweet deal. And with a war chest of funds to support misinformation and distribute modest contributions to popular causes and non-profits, PNM and other privately owned utilities can devote considerable resources to building good will. Ongoing advertisements–paid for by ratepayers–promote the utility as a good contributing neighbor to the community.
If a private utility gets wind of an effort to municipalize, those public relations efforts ramp up and are buoyed by misinformation promoting myths about the inefficiencies, unreliability and higher costs of a public utility. Those public relations efforts are accompanied by threats of legal actions. It isn’t just that the privately held utility imposes significant barriers to successful municipalization, the process itself is daunting. Local community leadership is a key ingredient to success, usually the initial ingredient is a mayor and city council majority advocating for municipalization. Such leadership is required to marshal sufficient resources and resolve to mount a successful campaign. APPA lays out in clear detail the common steps to conducting a successful campaign, including:
- An independent evaluation to assess the economic viability and the level of public understanding of and support for the concept. Often this assessment considers issues ranging outside the actual benefits of public power. As important, is the public perception of local leadership and trust in the efficiency and effectiveness of city/county/state government. The assessment would also include an evaluation of the condition of the private utility power generation and distribution system.
- Assessing the legal ramifications, a step that always involves review of state law and the degree to which it allows, supports or impedes jurisdictions creating a public utility;
- Valuation of the existing private utility is an important and almost always a contested phase in the process, as the private utility company almost always grossly inflate their own assessment of its value often offering estimates double or more what an independent evaluation projects. These competing assessments ultimately wind up on the negotiating table if the process advances further
- Referendum. Here is another costly phase to the process as to form the utility, the community must approve a referendum. Santa Feans will recall the ugly public battle over the soda tax a few years ago. Confusing claims and counter claims flood the airwaves and mail and private utilities have a war chest in place to disseminate false claims and ignite community fears. Should a referendum be successful the next phase is almost certain to land in the courts.
- Price Negotiation & Condemnation.
“For example, in the early 1990s, the city of Las Cruces, New Mexico, commissioned two independent valuation studies when it looked at purchasing its local electric system. The incumbent investor-owned utility was demanding $176 to $250 million for the system. Las Cruces commissioned two independent studies; both consulting firms told the city the system was worth about $38 million.”From APPI: “Municipalization”
With a huge difference in valuations, protracted legal battles are common, adding another cost for the local jurisdiction, while the cost for legal fees from the private utilities are subsidized by ratepayers. In effect, the privately owned utility company tries to wear down local leadership and pile on costs for more studies, protracted negotiations and costly legal proceedings.
Despite all these challenges, as the APPA“Municipalization” guide makes clear, the benefits outstrip the challenges and the path to success is doable. Below, you will find links to each of the sections to the APPA “Municipalization” guide. Each section offers brief summaries from 4-5 communities on how the day was won or lost. The myths and misinformation section lays out ten common myths that private utilities promulgate, offering the counter argument to each. And the last section offers ample evidence that success can be had.
- What is Public Power? – Explains the public power business model, how public power differs from investor-owned or cooperative utilities, and other basics.
- Benefits of Public Power – Explores the many benefits public power utilities may offer, in 4 broad categories: local choice, reliable customer service, affordable prices, and local economic development.
- Forming a Public Power Utility – Walks through the steps of forming a new public power utility, and common responses to expect from the incumbent utility.
- Myths and Misinformation – Addresses myths and misinformation about public power and the process of forming a new utility that may come up during the municipalization process.
- Successful Public Power Campaigns – Case studies of utilities that successfully formed new utilities, or got more favorable outcomes from the incumbent utility because they explored the public power option.
Retake is in the process of doing a deeper dive into municipalization as it could apply in NM. We’ve spent too many hours in PRC and legislative hearings listening to disingenuous arguments from PNM, El Paso Electric and Xcel, arguments designed to mislead and allow continued abuse of our environment, our community health, and the budgets of ratepayers. The guide we’ve previewed today offers all the tools needed to determine the viability of municipalization as an option at a state and local level.
If you want to explore how other cities have used municipalization to either create their own public utility or use the threat of municipalization to extract far better deals from the monopoly utility, click here. The piece is quite short, but offers a clear view of what is possible.
And if you want to see how the state of Hawaii has used the threat of municipalization to extract industry concessions resulting in the most sweeping reform of utility regulation in the nation, click here to review. Essentially, Hawaii served their private utility companies with a clear warning: clean up your act or we will terminate the franchise agreements granting you monopoly status. When the utilities failed to take the threat seriously, Hawaii began taking steps to terminate the franchise agreement. This got the attention of the utilities and brought them to the table. The result is a groundbreaking new approach to regulating utilities. No more guaranteed profit. Instead, utility rates reflect the performance of the utility in relation to reliability and meeting energy transition goals established by the state. Great stuff.
Public Power in NM? Quixotic Dream or Transformational Opportunity to Create a Diverse, Sustainable NM Economy
It is not exactly breaking news that for decades NM has been far too reliant upon gas and oil revenues, hampering efforts to regulate gas and oil and accelerate a just transition to renewable energy. The ETA has set an ambitious goal for NM’s transition to renewable energy use. But it was not designed to facilitate a transition to a more sustainable economy.
While increasing tax revenues by reforming our tax system (see Kelly O’Donnell interview below) is one important source of sustainable revenue and while growing film, media, eco-tourism, and other NM-bred industries would also help, public power offers the state a sustainable revenue opportunity that holds more potential for revenue than any of these very worthwhile efforts.
The video below will lay out how NM to create a path to public power and why we want to take that path.
First, we will hear from from two Maine energy activists who are fighting Avangrid and advancing a statewide initiative to develop a state public utility in Maine. Then we will hear from NM experts on how a NM public utility could be created as an alternative to private shareholder owned utilities like PNM, Xcel and El Paso Electric:
- Vaughan Woodruff. Woodruff has been an outspoken advocate for renewable energy in Maine and has extensive experience implementing solar power within the Central Maine Power/Avangrid/Iberdrola utility territory. He has testified at the Public Utility Commission and is a powerful advocate for new legislation in Maine that would create a public power utility, Pine Tree Power, to protect the people of Maine from Avangrid’s incompetent, unreliable service and obstruction of distributed solar power.
- William Dunn, President of Sunset Point LLC. Dunnhas over 49 years of experience in working with electric utility organizations of all ownership types (i.e., public, private, local and federal). He has held senior positions in utilities and on power pool/market committees. Bill is a leading advocate and lobbyist for the newly proposed public power legislation in Maine and has testified extensively about the failures of Central Maine Power, Avangrid and Iberdrola to serve the public interest in Maine.
- Bill Bresnahan is a member of Renewable Taos, a Kit Carson Electric Coop Trustee and a strong advocate for harnessing NM’s immense renewable energy potential by creating a state public utility, accelerating NM’s transition to 100% energy use, while also enabling the state to generate and transmit energy to other states, creating an immense level of sustainable revenue and hundreds of jobs.
- Mariel Nanasi, is Executive Director of New Energy Economy. Nanasi knows well the legal challenges involved in forming a public utility and the immense environmental and economic impact that are possible by creating a public utility.
In solidarity and hope,
Paul & Roxanne
Categories: Climate Justice