Across the United States, the classic model of monopoly, investor-owned utilities (IOUs) is failing to provide affordable, clean, and reliable electricity. In New Mexico, these challenges are compounded by a regulatory system that frequently sidesteps everyday consumers’ priorities due to backroom deals cut by utilities, decision-makers, and special interest groups. And the result is a system that fails to deliver on the goal of cheaper, cleaner energy for all.
For this episode of the Local Energy Rules Podcast, host John Farrell is joined by Stephen Fischmann – former chair of the New Mexico Public Regulation Commission and former New Mexico state senator.
Listen to the full episode and explore more resources below — including a transcript and summary of the episode.
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Backroom Deals Undercut Everyday Consumers’ Priorities
In New Mexico, as in many other states, utility regulation is supposed to make sure the voices of ratepayers are heard. However, as Fischmann points out, the reality is far different. “The general public is not well-represented,” he explains. “Interest groups with specific agendas often dominate the conversation, leaving the average consumer on the sidelines.”
Utilities and select interest groups often negotiate side deals to avoid protracted litigation and public scrutiny. The more complex the negotiations, the more the utilities stand to benefit. This “deal-cutting” process not only sidesteps ratepayers, but also drives up the cost of clean energy, ultimately slowing progress toward a greener, more affordable grid. “If clean energy becomes expensive, the public will lose faith in its potential,” Fischmann says.
“We need to eliminate settlements; let’s pursue litigation and let the commission decide what’s in the public interest.”
To address these backroom deals, Fischmann advocates for a fundamental shift in how utility cases are handled. By moving away from informal settlements, he believes states can push for decisions that prioritize the needs of consumers, rather than the financial interests of utilities.
Standing Up to the Utility Shakedown
Regulators and legislators also need to stop routinely agreeing to overpay utilities for the services they’re already obligated to provide. In a dynamic Fischmann refers to as a “continual shakedown,” the utilities refuse to act unless they’re generously compensated. They get away with it, in part, because they’re monopolies.
“The legislature gives these utilities a monopoly. They have the power to take it away, yet [legislators] always act as if they’re the victim because it’s a shakedown.”
Utilities contribute heavily to political action committees that finance legislator campaigns, with the outcome being that politicians act in the utilities’ interest rather than that of their own constituents. For Fischmann, the failure of legislators to wield their power to rein in utilities and the rollover of regulators to utility demands amounts to a form of racketeering, where utilities commonly get away with earning ten percent returns. In contrast, any other enterprise generally expects a six percent return while also carrying much higher financial risks.
The Need for a Unified Vision
While New Mexico has made progress with renewable energy mandates and grid modernization legislation, approaches to generation, transmission, and distribution planning remain fragmented and uncoordinated. Currently, grid investments in New Mexico are divided into separate laws and reports and different jurisdictions, leading to inefficiencies and missed opportunities for coordination.
“It’s all balkanized and it leads to high [prices], poor coordination, poor decision making, and a lack of a cohesive vision of how all the parts move together going forward.”
Fischmann’s experience chairing the regulatory commission revealed the importance of treating the grid as an interconnected system, rather than as a series of isolated components.“There’s a lack of integration, and that’s where the real gains lie. If we can streamline the process and simplify outdated systems, we can make real progress.” By connecting these projects under one umbrella, regulators could approach the process like it’s an enterprise, with a focus on efficiency, safety, and sustainability.
Shift the Focus to Distribution
Historically, the regulatory focus has been on generation. But distribution – the poles and wires that deliver power and that account for half of utility investments – has been left largely unregulated.
“IRPs in New Mexico never included distribution, only touched on transmission, and yet these are 30 to 40% of utility investments and probably a growing share going forward. Well, what business gives you half a disembodied business plan looking at just generation? This is madness.”
This narrow focus leaves many consumer goods – electric vehicles, induction stoves, etc. – disconnected from the grid’s overall strategy. And distribution, in Fischmann’s opinion, is one place where a monopoly model actually makes sense – “you don’t need ten sets of power lines from ten different companies serving the same customer base.”
As a commissioner, Fischmann pushed for reforming New Mexico’s 440 rule, which now mandates that utilities submit annual budgets for their proposed distribution projects, forcing utilities to present their distribution projects holistically rather than piecemeal. This is a step toward creating greater transparency and accountability in the distribution system.
A Path Forward: Prioritize Ratepayers
Fischmann advocates for a regulatory system that keeps ratepayers at the forefront. Regulators need to to stop acting as mere rubber stamps for utility plans and instead adopt a forward-thinking, cohesive vision that benefits the public and prioritizes transparency. “The ratepayers should be the primary client for commissions,” he insists.
“Legislate policy. Don’t legislate details.”
Fischmann suggests there are three ways policymakers can start doing this: 1) by insisting that all rate cases are adjudicated according to the law rather than through side deals, 2) by designing legislation that is explicit in its intent, and 3) by ensuring that legislation is not burdened by too much technical detail, which can make oversight all but impossible. The success of clean, renewable energy and affordable electricity for all depends on leaders taking these steps.
Episode Notes
See these resources for more behind the story:
- Dig into New Mexico’s Rule 440, which stipulates utilities’ reporting and filing requirements.
- Listen to Local Energy Rules episode 209 with New Mexico consumer advocate Mariel Nanasi.
- Read ILSR’s recent report, Upcharge, which explains the hidden costs of electric utility monopoly power.
For concrete examples of how towns and cities can take action toward gaining more control over their clean energy future, explore ILSR’s Community Power Toolkit.
Explore local and state policies and programs that help advance clean energy goals across the country using ILSR’s interactive Community Power Map.
This is the 224th episode of Local Energy Rules, an ILSR podcast with Energy Democracy Director John Farrell, which shares stories of communities taking on concentrated power to transform the energy system.
Local Energy Rules is produced by ILSR’s John Farrell and Ingrid Behrsin. Audio engineering by Drew Birschbach.
For timely updates from the Energy Democracy Initiative, follow John Farrell on Twitter or Bluesky, and subscribe to the Energy Democracy weekly update.