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Power struggle: Santa Fe looks into possible local electric utility

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Santa Fe city and county officials are taking small steps toward consideration of creating a local electric utility, in part as a way to ensure more renewable, cleaner energy sources are used to power the Santa Fe area. (Eddie Moore/Albuquerque Journal)

By T. S. Last / Journal Staff Writer

Friday, December 5, 2014

A power struggle over the source of energy used by people in Santa Fe County may be sparking up with the introduction of a city resolution that calls for the city and county to explore the idea of operating a local electric utility.

The resolution was introduced at Wednesday’s Public Utilities Committee meeting by City Councilor Joseph Maestas, who said the purpose was to pick up where a jointly commissioned 2012 feasibility study left off.

The $50,000
feasibility assessment, paid for with funds provided by both the city and county, was conducted by Santa Fe consulting firm MSA Capital Partners under a city contract with New Energy Economy – a nonprofit advocacy group for clean energy and an outspoken critic of PNM’s use of coal. The study urges policymakers to seriously consider forming a municipal electric utility, an effort the city of Boulder, Colo., has already undertaken.

“Since this study was done, there’s been no formal effort to continue this partnership, this journey of exploring a very worthy concept,” Maestas said. “I think it’s a concept that does have a lot of risk and, for that very reason, I feel the city should not go it alone.”

Maestas said he had the support of at least two members of the five-person County Commission and expects a similar resolution to be introduced there.

He also had the support of two city councilors at Wednesday’s meeting. Committee chairman Chris Rivera and Peter Ives, who previously introduced a resolution later passed by the Council declaring the city’s intent to become carbon neutral by 2040. Both signed on as co-sponsors.

Patti Bushee abstained from the vote, saying she supported the concept but wanted to see a fiscal impact report first. “I seriously want to know what we’re getting into,” she said.

What’s pushing the efforts is the desire of local elected officials to reduce, and even eliminate, the use of coal-generated power and shift to cleaner sources, such as wind and solar. Currently, about 60 percent of the energy used in Santa Fe comes from PNM’s coal-fired plants in northwest New Mexico.

Rivera said in an interview after Wednesday’s meeting that it’s PNM’s reliance on coal that ignited the effort.

“The main goal of this is to protect our climate for future generations,” he said. “If PNM were incorporating more wind and solar in their long range plans, this would be a moot point.”

Asked for comment on the issue, PNM provided the Journal with a statement that said it’s the company’s priority to provide customers with reliable power at affordable rates while protecting the environment.

“We are committed to adding renewable energy to the system and, by the end of 2015, we will have enough renewable energy to power 150,000 average homes,” it said. “We add renewables responsibly, in a way that minimizes the cost to customers and maintains reliability. We currently have the largest customer-owned distributed generation program in the state, which has been a boon to the local solar industry.”

But its critics complain PNM still isn’t packaging enough renewable energy sources in its portfolio, even as the company is replacing two coal-fired units at the San Juan Generating Station in the Four Corners area and has announced plans for four new solar plants in 2015. News broke this week that PNM, which provides energy to 500,000 residential and business customers statewide, is negotiating to buy a coal mine near Farmington.

“The creation of a public utility in Santa Fe is an effort to set the stage for opportunities that will move us toward greater use of renewable energy,” said Councilor Ives, who also is drafting an ordinance that would create a public utility in Santa Fe. “Whether (a municipal utility) is a course Santa Fe eventually takes, it’s too early to tell.”

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City Councilor Joseph Maestas, left, has introduced a measure calling for city and county governments to collaborate on exploring the idea of operating a local electric utility. Also discussing the idea at a Wednesday meeting were Councilors Patti Bushee, center, and Peter Ives. (Eddie Moore/Albuquerque Journal)

Charting a path

Ives said Mayor Javier Gonzales’ newly created Climate Action Task Force, of which he’s a member, will help chart the course. But an emphasis on the use of renewable energy sources and reducing or eliminating entirely the use of coal-generated energy is the objective, he said.

Mayor Gonzales campaigned for greater use of renewable energy, particularly tapping the city’s solar potential, prior to his election in March. He laments only 25 percent of the city’s facilities use solar power and 30 percent of street lamps have LED lighting.

While a public utility is part of the renewable energy conversation, he says his focus now is on tightening up energy gaps and pursuing community solar efforts.

“There is so much we can do when it comes to energy strategy outside of municipalization, in addition to community solar, that can really move the needle when it comes to a healthier community,” he said. “Those are the areas I’ve asked the Climate Action Task Force to look into and build a set of plans we can begin investing in.”

Whether those plans might include a public utility remains to be seen. It’s a complicated issue, Gonzales said.

“It’s not as easy as creating a power company and all of a sudden you get to deliver power,” he said. “When it comes to a power company, I think we have to look at how does it fit in with our energy strategy for the future? What is the cost to the taxpayer? And how is it going to play a role in helping mitigate the threats of climate change? And what can be done on a more immediate basis?”

Municipally owned utilities are far from a radical idea. There are more than 2,000 of them in the country, including city-owned electric companies in Aztec, Farmington, Gallup, Raton and Springer.

The city of Santa Fe operates its own water utility, and has partnered with the county on the Buckman Direct Diversion facility to pull water from the Rio Grande and on the Santa Fe Solid Waste Management Authority.

Gonzales and everyone at Wednesday’s committee meeting said it would be critical that any consideration of a public utility would have to involve public input.

That’s what happened in Boulder, where voters twice in recent years approved measures that endorsed the city’s efforts to establish its own electric utility.

The effort was met with resistance by the power company Xcel Energy. It sued the city after the city council took formal action to form the utility last spring.

‘Divisive agenda’?

There are two ways a municipality can take over an energy system from a power provider. One is for the company to sell off its system willingly and the other is condemnation through the state’s eminent domain statute.

Gonzales said the city attorney’s office has informed him that “there is no legal pathway for the city itself to condemn the existing utility. So that means PNM would have to be a willing seller and the city would have to be a willing buyer capable of putting together the funds to do all that.”

PNM says it isn’t interested in selling its system. Its statement says PNM is committed to serving the best interests of the people of Santa Fe. “However, we are following the discussions regarding municipalization to understand and be responsive to issues raised,” it said.

In a
guest editorial that appeared in Journal North last month, Amy Miller, PNM’s director of community, environment and local government, said Santa Fe shouldn’t be considering starting its own electric utility. She touted PNM’s efforts to reduce its environmental impact and its contributions to the community.

Miller, who is also a member of the mayor’s task force, said PNM’s own plans will decrease the use of coal by 30 percent, reduce seven different emissions by 50 percent and cut water use at the generating plant by 50 percent. She noted that PNM’s plans for the San Juan station include adding more solar generation and natural gas, which will create jobs.

She also emphasized PNM’s contributions to the community, spending $5.1 million in taxes to the city and county, $3.4 million to support local businesses and organizations, and investing $8.2 million in electric infrastructure in 2013 alone.

“In any discussion about energy, it’s important to consider the facts and not be misled by myths from anyone pushing a costly divisive agenda,” she wrote.

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How to acquire or replace the infrastructure of PNM’s existing power system is one question facing advocates for creating Santa Fe’s own electric utility. (Eddie Moore/Albuquerque Journal)

‘Beat this drum’

Still, the question of a local power company is being discussed and legislation has been introduced by the city based on the 2012 feasibility report.

“I realize the assessment is dated, but it’s a public investment that needs to be continued,” Maestas said of the report. “We need to have this dialogue and continue to work with the county on some of these things in the feasibility study.”

“We need to continue to beat this drum to phase coal out of the portfolio,” added Maestas, whose resolution asks for an analysis as to how a “Santa Fe Public Power” utility could provide “a sustainable power supply sourced entirely from natural gas, solar and wind.”

“And that is totally doable,” said County Commissioner Kathy Holian, who also serves on the mayor’s task force. “Especially in our area where you have a mix of other energy sources, like solar and wind, and can back it up with a natural gas plant. It can be done without coal, easily.”

Holian said such a goal will take years to achieve, but “we should start now. It takes time to make things happen.”

Holian said she was working with county staff to draft a resolution in support of Maestas’ proposal.

A problem, she said, was that a detailed technical-level engineering analysis of PNM’s distribution system – one of the next steps identified in the feasibility assessment and something Maestas said he wanted to see conducted – could cost $750,000 or more.

“It always comes down to funding,” she said.

Big bucks needed

The really big bucks would come in acquisition or building of a power system and other startup costs.

Estimated costs for acquisition are uncertain. The 2012 study from New Energy Economy indicated the cost would be determined by appraisal and could range from a book value of about $65 million to a replacement cost of more than $100 million.

But PNM says that, from 2010 to 2013 alone, the company invested $34.3 million in Santa Fe system infrastructure.

In addition, Santa Fe Public Power could expect to incur startup costs close to $50 million, which could rise to as much as $100 million if unforeseen legal and regulatory costs arise, the report said.

Funding for the acquisition, construction and expansion of facilities could be done through utility or revenue bonds, according to the 2012 assessment.

But a next step might be coming up with the money to conduct a more detailed study. Maestas said the resolution he introduced Wednesday would have no fiscal impact because it calls only for collaboration between city and county staff at this point.

“Let’s determine whether we should continue sharing costs and sharing risk to move this concept forward,” he said, adding that his resolution was really a continuation from where the city and county left off two years ago.

“Let’s stop messing around,” he said. “Let’s go forward.”