In Santa Fe, Momentum Builds for Locals to Take Charge of Electricity System – Episode 39 of Local Energy Rules Podcast

John Farrell:

In recent years, a thirst for more responsible energy policy has sparked campaigns for municipal utilities in several U.S. cities. Boulder and Minneapolis are some of the highest profile examples, but a battle underway in Santa Fe, which has enormous renewable energy resources continues to pick up momentum. Mariel Nanasi is at the center of that effort. She runs New Energy Economy, a local advocacy group that has taken its fight against a monopoly utility to the state Supreme court. She spoke with John Farrell about what’s at stake in Santa Fe and the Winland policy plan that could solve its energy problems. This is Local Energy Rules, a podcast sharing powerful about local, renewable energy.

John Farrell:

So I think a little context is important for folks here in terms of the what’s happening in Santa Fe and in New Mexico around clean energy. I think the first thing would be that PNM, public service company of New Mexico, is their big monopoly utility company. And even though you guys are basically ground zero for the best solar resource in the country, my understanding is they don’t have much plan to use a lot of solar in terms of serving the electricity needs of either Santa Fe or their other New Mexico customers. Is that true?

Mariel Nanasi:

Yeah, that’s correct. PNM has 80% coal and nuclear on their system and only 3% solar and a little over one of those 3 percent,  PNM includes all the rooftop solar and individual businesses that produce their own solar. So PNM is taking credit for that as well. And PNM has about 7% wind. So they’re far behind regulated utilities across the nation. And it’s true what you say. It’s especially concerning given the abundance of solar and wind potential we have here.

John Farrell:

And it’s funny that you mentioned that they take credit for what their customers are doing around root top solar. Because as I understand it last year, they were proposing to change the way that folks pay for energy and put more of the bill into a fixed energy charge rather than a charge based on how much they use, which would’ve actually made it harder to make money or to save money, I should say, on your electric bill, by going solar.

Mariel Nanasi:

That’s exactly right. They also had a solar access fee proposed in a rate case, and we won a motion to dismiss against PNM and they refiled their rate case, which is currently pending. And literally it could be today that the hearing examiners recommended decision will come out and they want to increase their fixed fee, but there was so much pushback solar access fee that they didn’t refile that in this new rate case, but they’re proposing in this rate case to increase the fixed charge from $5 to $13 and something cents. I forget exactly, but it’s 163% increase in the fixed charge. And, and so you’re right, that is a disincentive for solar people who put solar on their house.

John Farrell:

I should add just as a little plug, we did an interview with Rick Gilliam from Vote Solar a few weeks ago on that issue of fixed charges. So for folks who are interested in learning more about why that is a particularly bad and perverse policy, I would suggest that interview. So let me pivot a little bit here. You know, we’ve got a utility company that’s not really doing a great job of supplying renewables, despite an abundant and inexpensive resource. And so folks in Santa Fe have been looking at alternatives, you know, you’ve been battling with them at the public regulatory commission, but in 12, there was a study done, and I think you had something to do with, on the benefits of forming a municipal utility – of having Santa Fe take over energy services for folks that live there. And if I recall correctly, it not only said that you could do more renewables, but that you could do it at a lower cost than the incumbent utility. Tell me more about that study.

Mariel Nanasi:

That’s absolutely true. You know, one of the things that just, I don’t know how much your listeners know, but in a situation where there’s a regulated monopoly, the regulators who are supposed to be regulating on our behalf, we have found, and I think that it’s pretty common across the country, is that oftentimes the monopoly is actually regulating the regulators and they’re not really regulating on our behalf. And so what that means is when they come in and they ask for stranded assets, or they ask to reinvest in their coal or nuclear, they tend to shave off on the price, you know, a million here, 10 million there, but they don’t really shift the energy portfolio that’s aligned with the preference of the people.

And what we did was we did a couple things. One is we did some polling to actually find out because, you know, we have our own gut feelings and I’m not a big polling person, but we did a really honest poll. And what we did was we did it based on the census. We had Spanish speaking pollsters and we asked people about what their preferences is and what we found out exceeded what we thought, which was that 89% of the people want solar. And what was really amazing about it is it cut across party. It cut across ethnicity, it cut across age. And we found that single parents with children was the single greatest demographic that really wanted solar. And that’s kind of an interesting thing to think about like basically, Hey, we need to partner for a hopeful world for our kid. That’s my interpretation of that. And so the reason why we are investigating alternatives to this current institutionalized system that really has not served the needs of the people is because it’s not aligned with our values and it’s not aligned with what we know we have to do both in terms of the environment and climate health, but also the economy.

And then the, the sort of backwards fifties thinking of let’s invest in a big centralized coal plant far away from the load centers and just run wires, which also has the negative impact of people not being conscious about where their energy comes from. And also where it’s physically located is in our case, is in a Navajo Nation, or adjacent to Navajo Nation. And therefore the people who suffer the most are living literally under the toxic shadow of these coal plants are native people. And so there’s a whole environmental racism aspect to our energy policy as well. We have sustainability goals, we have carbon neutrality goals, but there’s no way that we could meet them when we have this monopoly that’s, as I said to you before, 60% coal and 20% nuclear.

And so we want to be putting solar on our rooftops and we have a lot of land. We are blessed with a lot of land. And so to the extent that we can’t meet our needs through rooftop solar, we could put it out on the land that we have, but we want to go in that order, by the way. That’s another preference of people to, to use the current flat roofs that we have or parking lots instead of creating, you know, more intrusions onto land. So we’re looking at two things. One is municipalization, which is first of all, just creating the authority within the city of Santa Fe to become a municipal utility.

And the things that we could start with is any new load, I like to call them islands of competence. What there would be is let’s say there’s a new housing development that goes in. Well instead of PNM providing that electricity, the city of Santa Fe would say that they could, and they could do it in one of three ways. One is they could just put out a request for proposal, an RFP like they do on cleaning services in the convention center or something, and say, look, we want 50% or 75% or a hundred percent renewable energy. And you have to have, and I’m just making this up, you know, 50% local employment. They could put out an RFP and see who applies and PNM could apply for that as well. And then that enclave, that new housing development, could be supplied with a hundred percent renewable energy, or they could provide it themselves. So Santa Fe could literally go into the business of putting solar on every house that’s built there and requiring the developer to do that as part of like everything else you have to put in a house like you have to put in a boiler, like you have to put in a refrigerator, you’d have to put in solar panels.

And then the city of Santa Fe could either purchase power for times when the solar isn’t providing energy or provide it in another way, whether it’s wind turbines or a backup generator or the possibility of battery storage. So those are the possibilities or a mixture. And so those are the different possibilities that we’re looking at. I wanna start with islands of competence is because unfortunately, we’re at a time where there’s such fear of government competence and reluctance to trust government. And so what we wanna first establish, and this would be like a step is to show that it’s possible and expose the vision of what’s possible once that let’s say housing development as I’ve chosen, but it could be anything. It could be the newest, you know, industrial park. It could be whatever it would be. We’re talking to the mayor about making the city of Santa Fe municipal airport completely solar, and having that be so that when people arrive, they realize that this airport is being run on solar, which would be really cool.

So we’re thinking about actual examples of competence and when those bills are cheaper than PNMs, which we believe is absolutely possible, because I just will say that PNMs rates have risen since 2008, over 50%, for average residential customers. There’s a rate case that’s pending right now. And they said already that there’s gonna be another rate case that they’re gonna file before the end of 2016. So their coal and nuclear legacy investments continue to cost rate payers more and more and more money. And really why it’s because basically if you had a choice between brand new solar and wind or 40 and 50 year old coal, it’s a no brainer just from the top without even knowing anything. And without even comparing all the risks associated with them because old things break. And so those are gonna cost more money.

And then if you add pollution controls and other kinds of regulatory risks and decommissioning risks and liabilities associated with it, you’re talking about a lot of money. And that’s what PNM is desperately afraid of is for shareholders to get stuck with these stranded assets that have huge associated risk and liabilities. And that’s why they keep on reinvesting in that rather than changing to solar and wind.

And then the second option that we’re also pursuing at the same time as municipalization is something community choice aggregation. Community choice aggregation has been now adopted in a number of states in the United States. And what that means is instead of it just being the city of Santa Fe municipal, it essentially allows each municipality, whether it’s a city or a town or a conglomeration of municipalities, to aggregate their demand and say, we wanna choose our energy because we think that we can get it cheaper and better for all the things, jobs, and health and environment than what the utility can provide. And what’s so interesting is that corporations are already figuring this out.

And I don’t know if some of your listeners have realized, but like in Nevada, MGM resorts and another casino, it’s called wind resorts. They are paying to leave Nevada energy, paying to leave the utility. And still they believe that it will be cheaper for them to procure solar energy, either somewhat by putting solar on their buildings themselves or purchasing through a PPA, it’s called a power purchase agreement from a solar provider or combination. And so we’re seeing data centers, Google, and Facebook and casinos, but Kaiser Permanente. And like these big corporations are saying, you know what, actually, we don’t really want the energy from the local utility. We want to procure it ourselves and see they have enough clout to do. And so what we’re trying to do is exercise that same kind of clout, not just in terms of corporations, but for the people.

John Farrell:

In the case of community choice aggregation, if I’m not mistaken, you would need to change state law before you’d be able to do that. Right?

Mariel Nanasi:

Yes, that’s true. And that has been done. So this is clearly a movement whose time has come, because people are frustrated by the lack of change.

John Farrell:

I really appreciate that. You’ve kind of outlined, I think, kind of two clear paths for this work at the local level though, of course, community choice aggregation will require some state change. I’d love for you to talk a little bit too, about some of the other ways you’re fighting. You just finished filing a brief. I believe it was at the Supreme court over these issues. Tell me a little bit about what was involved in that fight. And then also some of the work that you’ve had to do at the public regulatory commission in order to carry this fight forward, that hasn’t been at the local level.

Mariel Nanasi:

While we are pursuing this other path, we still continue to oppose PNM in the regulatory body and have made changes. We’ve saved rate payers literally hundreds of millions of dollars, but that is not our purpose. Our purpose is to actually change the energy portfolio mix. And so in 2012, the EPA told PNM you have one of the dirtiest coal plants in the entire nation, 18th of 500 and something. And your plant is spewing such toxic waste that it is causing the skies to be hazy. And Santa Fe people have come here. It’s some of the most beautiful air in the entire country. And so tourism is a very big deal to New Mexicans. And what EPA said was you are blurring the skies. This is a visibility that was actually the legal hook under the clean air act. You are obscuring the visibility as far away as the grand canyon and Utah. So of course in real life in the air, there are no borders. So this plant was causing haze in Colorado and Utah and Arizona. And of course in New Mexico. So when that happened, EPA only has certain tools in their tool boxes. And they said, okay, you have to put on pollution controls, and we helped get that rule passed.

But the problem is, is that we didn’t really want that rule because that would’ve extended the life of the plant. And also that would’ve meant paying a lot of money for pollution controls when we wanted it to be shut down. And in fact, we agreed that they would shut down two of the four units at the San Juan plant, which was a really, it was like a great moment in my life. But the next day I had to experience this intense grief. And that was that PNM said, well, we are going to replace that power with buying more coal and more nuclear. And the more coal came from the same plant, California utilities, who also are part owners in that plant, decided to leave and said, this is a great moment for us to escape from this huge liability.

If people know that there’s a phrase that was coined in the 2008 housing meltdown called toxic assets. And that was when you had a mortgage that was more expensive than the worth of your home. Well, that’s the same thing here. PNM actually bought the assets from California for $0. So wouldn’t that raise a red flag? And unfortunately it didn’t with the PRC and they rubber stamped PNM’s purchase of more coal shares at San Juan over New Energy Economy’s objection. And so New Energy Economy appealed that decision. And last Friday, we filed our opening brief against the New Mexico Public Regulation Commission. So it was New Energy Economy versus the New Mexico Public Regulation Commission for their approval of PNMs purchase of more coal and more or nuclear to replace the lost capacities that they had in these two units that are going to be shut down by the end of 2017.

What we basically argued was that the PRC did not approve of PNM’s plan with substantial evidence, which is what the legal standard is. We said that there is other alternatives, but PNM refused to look at them on a consistent and comparable basis. So just like we were talking about before, would you want more coal and nuclear, or would you want brand new, shiny wind turbines and solar panels that are often guaranteed for 25 years? And, you know, the cost up front because there’s very little maintenance costs and use no water and create jobs, et cetera, et cetera. And without the risks and liabilities, without the environmental regulatory risk, a whole bunch of things. And so we said, if you had done an honest assessment of these alternative resources, then you would’ve picked solar and wind, and instead you picked your own out of all the possibilities out there, you picked your own coal and your own nuclear to basically, as I said before, shift the risk, the financial risk from shareholders to rate payers.

John Farrell:

And let me tell, dive into that for a second, cuz people might not understand this. So when you build a power plant, you have the owner of the plant that paid for it to be built. But then you have folks who will contract to buy the power from it. And if I understand correctly, what essentially happened here is you say, you take half the power plant, this San Juan coal power plant, and you were gonna shut it down. And the other half you had a California utility who had agreed to buy power from it who said, you know what? This is a great time to get out of it. So now you have PNM owning a power plant where half’s gonna get shut down. And the other half no longer has a buyer. And they say, Hey, we have all these captive rate payers. Why don’t we make them pay for the electricity from this thing? So we don’t have to take the loss as shareholders. Perfect. Does that sum it up?

Mariel Nanasi:

That’s summed it up perfectly. You got it. Okay. That’s exactly right. This is one of the pitfalls of capitalism, which is that we’re we look at the next quarter. And so it’s my belief, the executive at PNM when it comes time for decommissioning, which, you know, some, I don’t know if people are following it, but like one of the nuclear plants that’s half the size of the nuclear plant that PNM is involved in in Arizona is in Santa Nori. I think they’re talking about a 5 billion, 40 year decommissioning. Well, it’s kind of Orwellian because we have no idea what to do with the waste and they don’t know what they’re gonna do and how they’re gonna clean it up. So that 5 billion is a conservative estimate. And so what the executives at PNM I believe that one of the real purposes, and I didn’t know this when I first got into the case in the beginning, I just thought, Hey, why don’t we up solar and winds? And then I found out why. And the reason is, is because this crop of executives are thinking, look, we don’t wanna deal with decommissioning. So let’s just keep an open a little bit longer. And the next crop of executives will be there. And then they can deal with decommissioning and have to go in front of the PRC and say, Hey, how are we gonna pay for this? Shareholders don’t wanna do that. Let’s make the public.

In California, I think it was Southern California Edison went in front of their PUC, public utility commission and said, oh, our idea is that shareholders will pay a quarter and rate payers will pay three quarters. Isn’t that great. And even the PUC there said, I don’t think so. Maybe we should flip that. So that’s what’s being discussed right now in California. And that’s what’s coming up in a lot of places in the country, which is, right, as these plants close, coal plants, nuclear plants, and they’re closing because they can’t compete economically against solar, wind and gas.

John Farrell:

It reminds me a little bit of publicly financed football stadiums. You know, the team is always really excited to announce they’ll pay for 10% of it

Mariel Nanasi:

And do they get the profit from, from all the sales? No. Do you know what I mean? Exactly. And so that’s what’s coming up. That is gonna be something that’s gonna be being fought out in public regulation commissions all over the country right now, which is how to deal with the decommissioning, how deal with the stranded assets we want to defect from the utility, because they’ve managed this so poorly and have failed to sort of see what’s going on and to plan. I know it’s such a, it’s the P word. We call it to plan into the future, right? And to assess what’s happening in these end energy markets.

We have these things in some, maybe you have it where you are, it’s called integrated resource plans. But up until now, they’ve basically been window dressing. And there hasn’t been any there, there as to what that is, it’s supposed to be a robust stakeholder engagement process where you see what, you know, what people want. What are the preferences of consumers? And then also what’s available. PNM holds these meetings, but then they disregard all what people want. And that is one of the issues on appeal as well, which is, Hey, the, the legislature and the regulatory body as designed this, IRP process, the integrated resource planning process. That’s one of the questions that we have on appeal in the Supreme court. Is this just an academic exercise or is there really something to it? And then it must be followed. And that is, that really goes to the heart of this issue around substantial evidence. And we said, look, you can’t have these rules and then ignore them. They literally waved them, PNM and the other signatories to the agreement waived commission rules in order to effectuate the settlement for more coal and nuclear. So we’re saying that in and of itself is a problem. Like you can’t have rules that are supposed to be rate payer protections and safeguards, right, and then just dismiss them. And that in and of itself is an affront to the idea of why regulatory bodies exist. Right. They’re literally there to protect the public, but then PNM just waves those rules. And the PRC says, okay, so that’s the essence of our appeal.

John Farrell:

So coming back to the, you know, as you put, I think just a minute or two ago here about this notion of defecting from the utility, you, you know, you’ve got this situation where you have a monopoly utility, you’ve got what some of the wonky folks sometimes call regulatory capture. Where as you put it, regulators are being regulated by the utility instead of the reverse. And I think you have some pretty compelling evidence of that. Tell me more about, you know, you’ve got these couple of different ideas for how this could happen in Santa Fe. You have sort of the, the notion that, you know, if community choice aggregation, which I think is a little bit more of a lift in terms of getting something through your state legislature, but you also have this, I like the way that you’re talking about islands of competence strategy, where you could have a municipal utility that sort of just takes over new energy consumption, new load. What are some of the next steps for Santa Fe, for New Energy Economy and for this fight in Santa Fe? And do you think other cities are likely to follow on those footsteps?

Mariel Nanasi:

I think that, you know, one of the things I just should tell people, the energy companies are the wealthiest companies on the planet and they have controlled our democracy. And that’s one of the things that I think has been such an affront. And we see that in Congress. Why is there are no climate legislation for instance. And so you can see it from a far there, but in a lot of local, whether it’s a city or a county or in our state, there have been laws that the PNMs of the world have written to make it extremely difficult to defect. Those are constantly things that we have to overcome and face. And so I just wanna say that, unfortunately, it’s a complex thing, but it’s really about political will and about organizing the people.

What is very exciting is that the push for municipalization, at least in Santa Fe, where people have reallys stood. I think one of the greatest contributions that New Energy Economy has really given to people in Santa Fe, but also in the state is to try to be a translator of this wonky stuff that happens in the PRC and explain why this matters so much. Santa Fe has like all these great resolutions passed about wanting to be carbon neutral in 2040, but there’s no way we can be that way while we are getting our energy from coal, for instance. So how do we separate ourselves and begin to transition? Well, it’s a little bit more complicated, but at the same time, it’s really about building political will and removing the social license of these energy companies that are not doing what they’re supposed to be doing. It’s exciting. It’s very exciting because people feel like we wanna literally take our power back. And so we are going to be initiating a resolution and an ordinance in the city Santa Fe government, but we are building a network state wide to explain what community choice energy is all about, which is in essence municipalization on the statewide basis.

We are also excited about the prospects of a new governor in 2018. And I think that because we have worked to expose was PNM and, and their shenanigans, there are more people who are open to this idea and, you know, it’s kind of un-American to have monopolies. And so while some people can make the argument that that was a positive thing in 1950 to have, I mean, we didn’t really know better. We have centralized energy productions and then wires coming sometimes 300 miles to people’s homes. Well, this is a totally different model. This is decentralized energy and much more control, and therefore also much more economic, local, and energy and sustainability. And that has really profound impact for the local economy. And so the money isn’t going to executives who make 600,000 or $3 million a year, and then shipping the profit to shareholders on Wall Street, no, it’s recirculating and being repurposed into our community. And that’s one of the, the benefits. So it’s a, it’s a long haul, but it’s an exciting proposition to create the energy future that we want.

John Farrell:

That was Mariel Nanasi, executive director at New Energy Economy, speaking with John Farrell, ILSR’s director of Energy Democracy about the push for municipalization in Santa Fe. Learn more about Mariel’s work at newenergyeconomy.org. Head over to ilsr.org to learn more about municipalization and find more Local Energy Rules podcasts. Until next time, keep your energy local and thanks for listening.