It’s been a tough month for the Public Service Company of New Mexico.
The utility has two contentious and increasingly public cases pending before the state Public Regulation Commission.
In one, PNM seeks to cover costs by raising its customers’ rates by an average of 10.8 percent. In another, it seeks to delay compliance with certain aspects of the state’s renewable energy requirements for another year.
PNM faces fervent opposition in both cases, each of which represents opposing aspects of the company’s future: the short-term demand to keep rates low versus the long-term imperative to rely increasingly on renewable energy.
Steven Michel, the attorney for Western Resources Advocates, a party on the renewables case, says raising rates “is most important to them; developing renewable energy is a far second behind that.”
According to the state’s Renewable Energy Act, signed by Gov. Bill Richardson in 2004, utilities must generate 10 percent of their electricity from renewable energy sources by 2011 (that requirement increases to 20 percent by 2020).Of that 10 percent, a certain minimum percentage must come from wind, solar, another renewable source and from localized generation.
PNM’s successive plans to meet those requirements, however, have met with heated resistance.
The utility’s 2010 renewable resource plan, for instance, endured more than a year of opposition from various groups, and wasn’t resolved until more than halfway through the year.
The 2011 plan elicited a similar backlash. Initially, PNM requested exemption from the solar and “other resource” diversification requirements. On April 14, the PRC’s hearing examiner confirmed that PNM had agreed to withdraw the exemption requests.
Still, Cynthia Bothwell, PNM’s director of integrated resource planning, says full compliance with the state’s diversification criteria could prove prohibitively costly.
“We’re up against the cost of renewables; they’re a lot more expensive than the resources we’re using right now,” Bothwell tells SFR. “Fuel prices are extremely low—natural gas is the lowest I’ve seen it in many years—so our customers aren’t really receiving that many benefits for buying those renewables.”
Under state law, PNM is required to develop renewable resources—unless the PRC decides to let slide its own rules on diversification.
PNM has requested permission to satisfy its renewable energy requirements by buying up clean energy credits from wind farms. Solar, Bothwell explains, “is the most expensive renewable resource there is.”
The Renewable Energy Act states that if meeting renewable standards passes a “reasonable cost threshold” and raises rates by more than 2 percent for consumers, then a utility may be excused from those requirements. If PNM can prove that solar is too costly, then it may be able to buck the diversity requirement in 2011.
But Michel says there’s controversy over how much renewable energy development actually costs.
Since costs are calculated according to how they’ll impact future customers, he says, they incorporate a host of confusing assumptions.
“Every time the cost of natural gas changes, all your calculations go out the window,” Michel tells SFR. “It’s just a huge mess to try and figure out.”
Bruce Throne, the attorney for the Renewable Energy Industries Association, which also is a party to the case, makes the same argument in a brief filed April 18.
In its 2011 case, PNM proposes using a new method to calculate renewable energy costs—which Throne says makes PNM’s claims about the cost of solar energy even more dubious.
“This is a good example of the sort of contradictory ‘heads we win, tails you lose’ approach in different cases PNM often argues for at the PRC,” he writes in an email to SFR.
Customers will have to pay either way. According to PNM spokeswoman Cathy Garber, PNM will need to recover $18 million in 2012 and $24.6 million in 2013 to cover the cost of complying with state renewable energy quotas in 2010 and 2011. Those amounts are the maximum the company can recover according to rate case agreements, Garber says, adding that the earliest PNM will file a rate case to cover those costs will be July 2012.