A coalition of grassroots organizations with support from some cities and counties are promoting a new Local Choice Energy Act to allow municipal, county and tribal governments to take over electric generation in their communities.
Senate Democrats Carrie Hamblen of Las Cruces and Liz Stefanics of Cerrillos introduced the bill, SB-165, in the current legislative session to allow local governments to launch publicly owned utilities that, once approved by the state Public Regulation Commission, would immediately take control of local electric generation away from privately run utilities like Public Service Company of New Mexico. Community consumers now served by PNM or other utilities could choose to continue under their current providers, but they must directly notify the newly-formed government utility of their choice to opt out.
Government utilities would only manage electric generation in their communities, leaving transmission and distribution in the hands of private companies.
The bill is supported by organizations that want to empower local governments and residents to speed the adoption of renewable energy like solar and wind in their communities faster than privately-run utilities are now. The coalition says similar initiatives in other states have allowed many cities and counties to rapidly transition to 100% renewable generation while also lowering costs for their consumers.
It’s all about providing local choice, said initiative Campaign Director Alysha Shaw.
“It gives local governments a lot of flexibility to develop and launch renewable programs that meet the needs of their communities,” Shaw told the Journal. “It’s a simple legal change that can have profound impacts on communities to accelerate the renewable transition, lower prices and create jobs in the process.”
But the proposal could generate significant controversy, especially from private utilities that would be forced to hand over responsibility for local electric generation and transfer their current customer base for those services to government utilities in towns, cities and counties that opt to pursue a local choice energy initiative.
“The legislation is a wolf in sheep’s clothing seeking to allow a government takeover of the power grid to the detriment of New Mexicans,” PNM spokesman Ray Sandoval told the Journal. “This would make the state’s grid less safe, less reliable and more expensive.”
Community choice
The initiative is largely modeled on a national movement, usually called Community Choice Aggregation, or CCA, that currently exists in about 1,300 places around the U.S. That includes communities in 10 different states with laws that allow local governments to manage their own electric generation.
Most of those CCA communities have significantly ramped up local non-carbon generation, according to Public Power New Mexico, the organization promoting the initiative here and working to build grassroots support.
Public Power NM says consumers served by CCA utilities pay 15% to 20% lower rates nationally than private utility customers, based on U.S. Environmental Protection Agency data.
In part, savings come from reduced overhead and other financial advantages enjoyed by public utilities compared with for-profit private entities, said Public Power board member Mariel Nanasi, who heads New Energy Economy, one of the principal organizations behind local choice energy.
That includes eliminating excessive salaries and benefit packages for utility executives, removing income taxes as government entities, accessing low-cost financing through tax-exempt bond rates, and abolishing return on equity for shareholders, Nanasi said.
“Community-owned utilities can produce lower-cost energy for customers and put utility earnings back into municipalities or tribes for community benefit, rather than send profits to shareholders on Wall Street,” Nanasi told the Journal.
Legislative approval is critical, because currently, if a New Mexico municipality or county wants to create its own independent utility, it must use eminent domain to acquire the assets of private utilities if they refuse to sell their holdings, Nanasi said.
Significant risks
PNM, however, says the initiative could actually raise rates for customers, not lower them, while creating significant grid reliability issues.
For one thing, local choice customers would be hit with two bills, one for municipal electric generation, and another for transmission and distribution services that PNM and other utilities will still provide, said PNM spokesman Sandoval.
As locally focused entities, government utilities won’t have the broad, real-time awareness of the entire grid needed to make rapid decisions on wholesale power purchasing to obtain the lowest prices, or to provide alternative power in a crisis situation, such as brownouts or blackouts from severe weather, Sandoval said.
In addition, local choice entities must still rely on third-party developers to build solar and other renewable facilities, often under power purchase agreements where the developers own the new plants. That means government utilities will face the same market prices for acquiring renewable generation that private utilities face, and returns on electric sales will still be siphoned off by for-profit entities, not pumped back into local communities, Sandoval said.
“Those entities also won’t be regulated by state and federal commissions the way we are to ensure high reliability standards,” Sandoval said. “They won’t have any significant regulatory oversight, and that’s a real problem.”
In any case, New Mexico’s Energy Transition Act, or ETA, is steadily moving the entire state toward 100% non-carbon generation by 2045, with mandates to achieve 50% renewables by 2030 and 80% by 2040, Sandoval said.
First hearing pending
The bill is now awaiting its first hearing in the Senate Conservation Committee.
“More than 30 organizations have signed on now to support it,” Shaw said.
That includes some local governments. The Bernalillo County Commission, for example, unanimously approved a resolution last week to support the bill.
But significant opposition is also likely, including from other renewable energy advocates.
Renewable Energy Industries Association Executive Director Jim DesJardins said the bill is unnecessary given the ETA mandates already in place, plus new initiatives to promote renewables, such as promoting community solar projects around the state.
“The ETA is one of the more progressive pieces of legislation in the country,” DesJardins told the Journal. “We should focus on what we already have in place. For me, this whole issue is just kind of a distraction.”
Editor’s note: This story originally said a bill to authorize local government control of energy generation would force private utilities and electric cooperatives to hand over local generation responsibilities to newly-formed public utilities if the legislation is approved. The bill does require private utilities to do that, but not cooperatives, which could agree to do so only if a majority of a cooperative’s board members votes to authorize it. This story has been updated.
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