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Regulators expected to decide on PNM-Facebook power deal next week

ALBUQUERQUE, N.M. — The New Mexico Public Regulation Commission is expected to decide by Aug. 17 whether to approve a deal under which the state’s largest electric utility would supply power to a proposed Facebook data center in Los Lunas.

At a public hearing on Tuesday, a Public Service Company of New Mexico executive disclosed that the company already has signed a special services contract with Facebook, though the social network is still deciding between Los Lunas and West Jordan, Utah, for the site of its new $250 million data center.

The executive, PNM’s vice president of regulatory affairs Gerard Ortiz, said the contract is meant to help Facebook meet its desired in-service date of the third quarter of 2017.

“There’s a lot of work required (of Facebook and PNM) to make that date, including the construction of an electric line,” said Ortiz.

Facebook has committed to paying for the cost of the electric line, as well as the other costs associated with the project, according to PNM’s application.

Facebook did not respond to a request for comment. A PNM spokesman said he had no comment at this time.

Ortiz’s statement was made in response to a question from Steve Michel, attorney for Western Resource Advocates, who had asked Ortiz why PNM’s application included a statement saying if the PRC didn’t approve the special service agreement, Facebook would have five days to terminate the contract.

Ortiz told the PRC the contract has a term of 25 years.

Under the terms outlined by PNM’s application, Facebook could pay PNM around $31 million annually for electricity supplied by renewable energy. A rate of $0.0574 per kilowatt hour would be set for 10 years, with a pre-determined formula for calculating the rate thereafter. It was unclear what rate of return PNM would receive on revenues from the Facebook deal.

In his testimony, Ortiz objected to a suggestion by PRC staff to submit an annual report that would include the revenue PNM earns from Facebook. He argued that the report would not provide useful information and could potentially disclose “confidential, customer-specific information.”

PRC utility accounting bureau chief Charles Gunter, the staff member who suggested the reporting requirement, disagreed with Ortiz, saying the report could be written in a way that did not reveal sensitive material but would still provide the PRC with information about the transaction.

“The commission is entirely within its authority to require annual reporting,” said Gunter. “The purpose of such reporting would not be to require some type of clawback from PNM or Facebook, not to disclose private information, but rather for informational purposes.”

Under questioning by Commissioner Pat Lyons, Gunter said it was possible such a disclosure requirement could dissuade other companies from doing business in New Mexico.

Ortiz also said PNM is considering several sites for three proposed solar facilities that would supply power to Facebook. PNM is looking at locations in Valencia and Sandoval counties to build the facilities, which would each supply approximately 10 megawatts of power, he said.

According to Ortiz, while solar facilities would supply 30 megawatts of power, PNM anticipates supplying Facebook with wind power as well, and possibly geothermal and other renewable resources.

Ortiz said PNM anticipates that Facebook would eventually be supplied with equal amounts of solar and wind power.

PNM’s application to the PRC includes, among other things, a mechanism for the utility to recoup the costs of supplying renewable energy to the data center.

Utah’s public service commission is expected to complete its review of a similar proposal by Aug. 31. PNM requested that the PRC expedite their review process in order to make New Mexico’s bid for the project more competitive. PNM also asked the PRC to waive the public hearing, which it refused.

All of the intervening parties in the PNM case have expressed their support for the project. No members of the public spoke at the hearing.

In June, the Los Lunas Village Council approved a $30 billion industrial revenue bond proposal that outlines a process by which Facebook will provide payments in exchange for a 100 percent property tax abatement. Facebook was not disclosed as the owner of the data center before the council voted on the measure.

The data center is expected to create 200 to 300 construction jobs for seven years and between 30 and 50 full-time jobs at the data center in its initial phases.