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Home / Articles / News / Local News /  Breakup
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PNM is looking for nonprofits with big plans.
Corey Johnson

Breakup

Should Santa Fe part with PNM and run a municipally owned utility?

September 24, 2013, 12:00 am
Before Karl Rábogo electrified an audience of 82 about the benefits of Santa Fe owning its own power company, technical difficulties caused him to pause. The audio malfunctioned at a recent forum held at the Scottish Rite Temple, sponsored by the Santa-Fe based clean energy nonprofit New Energy Economy.

So Rábogo, former vice president of Austin Energy, a municipally owned utility in Texas’ capital, relied on his booming voice instead and issued a soaring, 10-minute speech during the Sept. 18 meeting.  He waxed on about the benefits of publicly controlled utilities to an audience largely receptive of the idea that Santa Fe can split with Albuquerque-based Public Service Company of New Mexico, a company that distributes power to 43,000 customers in Santa Fe.

Santa Fe is the latest city nationwide to consider dialing back the clock to the 19th century, when many utilities were publicly owned. Boulder, Colo., is currently trying to break from Xcel Energy in municipalizing its utility. El Paso Electric won a protracted battle in Las Cruces’ bid to part from that power company. The fight endured through several local election cycles and ended after legal costs mounted, with El Paso Electric successfully arguing the city would have to pay for more than the power company’s distribution system—but also millions in stranded costs, or the company’s investments in that system.

Supporters contend the financial interests of utilities like PNM are aligned with its shareholders and that those interests clash with values like conservation and holding down rates.

Skeptics of the proposal for Santa Fe warn that the devil’s in the details, and Rábogo’s speech glossed over many of them, leading the audience through what he hoped was “an auspicious start to the most important discussion this community has ever had.”

He quoted philosophical novelist Daniel Quinn and painted Santa Fe’s acquisition of an electric utility company as its foundation for a “revolution in transportation and electric sector growth” in which the community can lead in nationwide campaigns that commit automakers to manufacture electric vehicles; build solar systems on dozens of schools; and construct the “first zero-energy, low-income housing development.”  

He was joined by Nann Winter, who has made a career representing governments across the state in utility issues, including Las Cruces in its bid to run its own utility; and Paul Campos, former Santa Fe County commissioner credited with being responsible for planting the idea for a 2012 study conducted with New Energy Economy that considered both the city and county. The report said that with an investment of at least $155 million, the local governments could take ownership of Santa Fe’s electricity.

“If you try locally controlled distributed-energy options, you can drive down electric bills so that the average residential bill for your customer is 20 percent lower than the average residential bill for any other residential customer in the state of Texas,” Rábogo said. “Not because rates are lower. But because the energy use is more efficient throughout the city, and because the utility puts a priority on quality rather than the cheapest price.”

PNM—which has served Santa Fe since 1946—is watching the proposal closely. Three of its representatives were in the audience Wednesday, PNM communications director Valerie Smith confirms.

PNM’s recent efficiency rebates help small businesses use less electricty, and its priority, Smith writes, is “providing our customers with reliable power at affordable rates while investing in New Mexico communities and protecting the environment.”

“When you look at the facts and figures, we believe they show that creating a publicly owned and operated utility is not in the best interests of the people of Santa Fe,” says the statement. “However, we are following the discussions regarding municipalization to better understand and be responsive to issues raised.”

Observers note the parallels between this proposal and Santa Fe’s purchase of the water system from PNM. Supporters of that proposal argued the investment would keep water rates low, but rates have increased repeatedly. Even so, managers still say the city of Santa Fe has offered conservation incentives to users that PNM would have likely not offered because those programs would undercut the company’s bottom line.

PNM electricity rates have also climbed in recent years.  A recent presentation by the Southwest Energy Efficiency Project ranks PNM among the bottom in energy savings as a percentage of retail sales compared to six other utilities.

PNM spokeswoman Smith says that’s partly because New Mexico has some of the lowest energy consumption in the Southwest.

Supporters of the proposal to municipalize electricity distribution in Santa Fe likewise say it goes against PNM’s shareholders’ interests to incentivize citizens to cut down on electricity use—not to mention rely on renewable energy sources like wind and solar.

Santa Fe Water Division Director Nicholas Schiavo says when the city took over the water supply, rates were $3.50 per 1,000 gallons. Rates have increased 42 percent since then, according to his figures, now at $6.06 per 1,000 gallons. But he notes the price of water inevitably rises as supply decreases, and that Santa Fe is one of the best cities in the Southwest when it comes to conservation.

“PNM is essentially a regulated monopoly, and their goal is to make money,” Schiavo says. “Our goal is to provide water, good, clean water at a reasonable rate and have people conserve.”

Bruce Throne, a Santa Fe lawyer for 37 years with experience on utility regulation and renewable energy procurement, sat on a citizens’ advisory committee to provide input on the city’s purchase of the PNM water company. He supported the idea, but says even then, members of the commission thought it was “a little misleading” to promise long-term lower water rates.

“At the time, as I recall, there were a lot of supporters who promoted [the purchase] based on lower rates,” he says.  

Those promises are something people should pay attention to, he says.

New Energy Economy contracted Santa Fe-based MSA Capital Partners to conduct the joint county-city study on the feasibility of acquiring the local electric utility from PNM. An executive summary of the study contends, under two different scenarios, that a municipally owned utility here could “sharply increase use of renewable energy sources” like wind and solar, while providing utility rates anywhere from 9 to 35 percent less than what PNM will offer through 2028.

The study estimates acquisition costs could range from $155 million—considering PNM was cooperative—to $255 million assuming “unforeseen legal and regulatory costs” along with increased credit requirements for the purchased power. The acquisition would likely be funded through revenue bonds approved by voters, and the debt on those bonds would be paid off through users’ electric bills.  Many say the acquisition would not be easy.

When Winter made her remarks to the crowd at the Scottish Rite Temple, she said the way ahead depends on local political will, adding that a grassroots endeavor would likely run through “several municipal election cycles.” 

Correction: A previous version of this article incorrectly stated the acquisition would likely be funded through revenue bonds, which would be paid off through users' water bills. It should have stated the bonds would be paid off through electric bills. SFR regrets the error.

 

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