New Mexico’s Energy Future: A PNM/Avangrid Monopoly or a Competitive Energy Marketplace?

New Mexico’s Energy Future: A PNM/Avangrid Monopoly or a Competitive Energy Marketplace?

The proposed $8.3 billion merger of the Public Service Company of New Mexico (PNM) with the Spanish energy giant Iberdrola and its U.S. affiliate, Avangrid, might sound like a good idea for an energy monopoly seeking to further entrench its grip on the region it serves. But energy monopolies, in themselves, are a generally bad idea for ratepayers in terms of cost, reliability and consumer choice when compared to regions with competitive energy markets.

And if there is anything voters, citizens and consumers need right now in this hypercharged, climate-change world of trouble, it’s a reliable energy supply and efficient service.

Last week, when the Public Regulation Commission (PRC) hearing examiner, Santa Fe attorney Ashley Schannauer, recommended in a 445-page report to the PRC that it reject the proposed merger on the grounds that it could destabilize the reliable delivery of energy to consumers, the unspoken issue of monopoly versus competition came once again into focus.

When it comes to energy, government will always have to have the final word in regulation. But within a competitive energy marketplace, the market itself provides the first level of accountability. If you can’t compete, you can’t survive. Government oversight is a kind of final polish. But with a monopoly like PNM, the PRC — made up of five elected, partisan commissioners — is the only mechanism of oversight, and its deliberations are inevitably as political as they are technical. The current PRC is composed of four Democrats and one Republican. The Democratic governor and attorney general have both recently endorsed the merger. Conservatives like the idea as well. Others, myself included, think the merger will likely be better for PNM’s shareholders, who stand to make a considerable profit, than it will be for its customers, who could be faced with diminished service brought to them by an energy company controlled not necessarily by local interests and local people but by a mega corporation thousands of miles away in Europe.

The PRC could well vote on the merger before the end of the year. If the PRC rejects it, the decision could be contested in the New Mexico Supreme Court.

The PRC hearing examiner based her rejection of the merger, in part, on Avangrid’s and its subsidiaries’ regulatory behavior and negative customer satisfaction performance in some of its American locations in Connecticut, Maine and other areas in New England. What Avangrid/Iberdrola’s leadership knows about New Mexico and its cultural and business expectations is probably minimal at best.

The Santa Fe New Mexican reported that Schannauer said the “service problems in the Northeast appeared related to Avangrid’s ‘insistence that the utilities cut resources to meet Avangrid, Inc.’s financial goals.’” One of its subsidiaries was fined $2.1 million for, the New Mexican said, “inadequate service in Connecticut.”

Urban New Mexico cannot face the turbulent future without a responsive, service-oriented and reliable commercial source of energy transmission. Our droughts are likely to continue, compromising not only our water supply and our agriculture, but also potential hydrologically-generated energy. That’s the only conclusion one can reach in the face of the world’s leadership at the COP26 Glasgow climate summit last week seeming to wimp out on agreeing to hard deadlines for reducing carbon emissions around the world — and the tragic climate repercussions that’s sure to bring to us all. Nor can New Mexico afford to have a dubious energy supply while trying to make adequate use of the $3.7 billion windfall from the Infrastructure Investment and Jobs Act to repair roads and bridges, create statewide broadband internet coverage, pay for cleaning up dirty drinking water and build a renewable energy infrastructure.

No matter how annoying PNM’s all-too-frequent power outages are to all of us, it is a local company with a largely local board, and its service people tend to be cordial and efficient. As a monopoly it’s “the devil you know” that is preferable to the devil you don’t. PNM serves nearly half a million customers from Albuquerque, Santa Fe, Las Vegas and Ruidoso, to Silver City, Deming, Lordsburg and Clayton. It runs over ten thousand miles of electric transmission and distribution lines. And over the years, PNM has been noted as a top company in the U.S. for minorities to work.

Granted, PNM is a small company without, it says, adequate capitalization to adapt its infrastructure and transmission system to zero carbon emission goals 15 years down the road without the backing of a corporate mega-monopoly. Up-front infrastructure costs of energy companies have always been the traditional excuse for allowing energy monopolies to exist in the first place. Monopolies are, of course, at least a theoretical anathema to a supply and demand, market rules economy like ours. They do not have competitive incentives to innovate, to improve performance or to connect customer satisfaction to increasing profits. As Wayne Winegarden wrote recently in Forbes, “inefficient investments and large cost over-runs are rampant in the monopoly markets” due to the lack of incentives. But they are not the only game in town.

Well over half the states in the union have regional wholesale power markets, or competitive markets, including Texas, California, Nevada, Oregon, Montana, Wyoming, Illinois, Georgia, New York and most states in New England except Vermont. It seems it would be a decided advantage to Avangrid/Iberdrola to become a part of New Mexico’s energy monopoly, and potentially Arizona’s, having to compete in Connecticut with Connecticut Power and Light.

But what about the power disaster in Texas last winter? Wasn’t it caused by a deregulated competitive energy market? According to Winegarden, that’s a “misguided” criticism. The real cause was “insufficient weatherization and, unique to Texas, the state’s isolation from the national grid.” Texas operates its own power grid, which is regulated by state government but not the Federal Energy Regulatory Commission.

Competitive energy markets, Winegarden writes, “have a demonstrated track record of providing reliable and affordable electricity for customers, and are better positioned to implement efficient low-emission technologies.”

Could New Mexico ever overthrow its monopolistic energy culture and become a competitive energy market still overseen by state government and an elected PRC? It’s not impossible at all. But it wouldn’t be easy.

“Today, the states that have restructured their electricity markets to allow competition among power providers are concentrated in the Northeast and New England,” according to facingsouth.org.

But most states in the South have monopoly energy markets. North Carolina, Arkansas and Florida have started the political process of restructuring. The Florida-based Citizens for Energy Choices struggled to place a monopoly-ending amendment to the state constitution on the 2020 election ballot. Florida’s power comes largely from a classic monopoly, Duke Energy, the subject recently of environmental law suits and accusations of excessive fees. Floridians for Affordable Reliable Energy, a business-oriented group, opposed the amendment and eventually prevailed when the Florida Supreme Court ruled that the anti-monopoly amendment had “misleading” statements and blocked the amendment from appearing on the ballot. I’m sure there will be other such amendments proposed in Florida’s next election cycle.

New Mexico’s monopoly energy status is largely an urban and small town matter. Rural New Mexico, on the other hand, is powered by 16 electric distribution cooperatives, many of which get their power from the Tri-State Generation and Transmission Association, so the idea of an anti-monopoly restructuring here is not completely out of the blue. And one definitive way to start the process would be for the PRC to deny the PNM and Avangrid/Iberdrola merger. But now that PNM/Avangrid have agreed to implement the PRC hearing examiner’s many recommendations, the odds seem to be against the political establishment choosing the possibility of energy competition over monopoly in the near future.

*Nullius in verba: take nobody’s word for it

(Photo by Tom Taker)