RIO RANCHO, N.M. — Environmental groups, Gov. Michelle Lujan Grisham and even Public Service Company of New Mexico want us to believe their plans to rapidly increase renewable energy are cost-competitive.
New Mexicans voted for change in 2018 and, as a result, there are legislative initiatives to raise the state’s “renewable portfolio standard,” or RPS, from 20 percent to 80 percent. Unfortunately, voters haven’t been told this expansion will dramatically increase electric bills.
To make way for rapid expansion of the RPS and bolster shareholder profits, PNM has decided to shut down the coal-fired San Juan Generating Station near Farmington more than 30 years early. For the last 50 years, PNM has credited this plant at the Public Regulation Commission as the reason why PNM has been able to provide New Mexicans with low-cost power.
The plant was also just retrofitted, at a cost of $635 million, to remove more pollutants from its emissions and is now one of the cleanest plants in the country. PNM even admits closing it will increase our electric bills.
Despite price declines in wind and solar, we believe the replacement of a coal-fired power plant with a combination of wind, solar and gas (supplemented by battery backup with unproven effectiveness at large scale) will not be cheap. A 2016 study produced by the Rio Grande Foundation estimated that from 2011-20, New Mexico’s RPS would cost ratepayers $2.3 billion above what they would otherwise pay for electricity. We stand by this report and note that other sources indicate New Mexico’s electricity prices rose about 30 percent since the RPS took effect in 2005. This increase is attributable to the RPS because it occurred when the prices of traditional electricity generation sources, like coal and natural gas, declined. The cost of switching to “cheaper” sources of renewable electricity shouldn’t be borne by ratepayers or taxpayers.
One would hope Lujan Grisham, the legislature and PRC share this view.
They represent average New Mexicans and ratepayers, not just utilities and environmental groups. The economic viability of the Four Corners area of our state needs consideration.
We at the Rio Grande Foundation embrace free-market economics and have no qualms about market corrections and corresponding impacts.
But PNM is shielded from market corrections because it has a monopoly over its customers and a guaranteed rate-of-return. In exchange, PNM is bound to provide customers with reliable low-cost electricity and to conduct its business in a manner not detrimental to the public interest. Here, not only does PNM admit our bills will increase, but PNM’s actions are also detrimental to our state’s budget.
If the market truly is pushing PNM toward other electricity sources, policymakers, taxpayers and ratepayers should welcome that transition, but they shouldn’t be forced to foot the bill in case their assertions prove wrong.
For the good of New Mexico’s economy and ratepayers, any effort to provide PNM a financial bailout for its move out of San Juan Generating Station should also include basic protections for New Mexico ratepayers. The best protection is a hard cap on electricity rates during the rapid RPS expansion.
(Paul Gessing is the president of New Mexico’s Rio Grande Foundation. The foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.)