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Consumers Lose in N.M.'s Deregulation Legislation

By Robert Haspel

New Mexico's Electric Utility Restructuring Act (Senate Bill 428) was passed during the state legislature's 1999 session. It was a barebones piece of legislation that, even by the sponsor's own admission, dealt only with the narrow issue of consumer choice, doing nothing to foster or create competition among electricity providers for residential customers. SB 428 gave only token attention to the other issues that are essential to the electric utility restructuring or deregulation debate; as it stands it favors large industrial consumers such as Intel and Chevron and the incumbent utilities, particularly Public Service Company of New Mexico (PNM). The losers are individual and small business consumers.

SB 428 provides for utilities to recover from ratepayers their stranded costs. In PNM's case these represent its investment in Palo Verde Nuclear Power Generating Station in Arizona. Consumers will get nothing in return for assuming the stranded costs—estimates range from $200 to $800 million—which may have been avoided in the old regulated environment. The total sum is still to be determined, and, while the legislation guarantees "no less than 50 Percent" to be paid by consumers, it provides for the possibility of 100 percent.

After stranded costs are paid, the consumer is left to pay the transition costs to competition — those administrative activities, billing system adjustments, legal costs (for example, the legal costs to create a PNM holding company that separates its regulated activities from its nonregulated activities) required by the utility to accommodate the shift to a competitive power market—costs incurred only by the legislation. Ratepayers are promised "choice" in return — but since residential customers are not as attractive to power suppliers as industrial users who use a large volume of electricity around the clock, they may well be stuck by default with the existing utility's standard offer, which could end up costing consumers more than before restructuring.

Some consumer protection issues are to be determined by the new Public Regulation Commission (PRC) in rule-making procedures over the next two years. The PRC is to address such issues as the separation of regulated activities — electricity transmission, distribution, meter reading and billing functions — from the generation and marketing functions. A code of conduct is to be developed that should prevent the regulated side of utilities from favoring their own affiliates, prevent practices that impede a customer from generating all or a portion of their own energy, prevent the public utility from disclosing individual customer information unless the customer has provided written consent; and prevent the disclosure of aggregated customer information to any person, including an affiliate, unless the information is provided to all competitors. The code should also grant customers and competitive power suppliers equal access to utility lines.

All competitive power suppliers must be licensed by the PRC. The licensing provisions require a demonstration of financial integrity, compliance with New Mexico tax laws, submission of a proposal for renewable energy supply options, and disclosure of information on the generation mix and emissions associated with the supplier's power.

A very modest Systems Benefit Charge (SBC) of $0.0003/ kWh is to be administered by the N.M. Environment Department. The approximately $15 million annually generated will be used to fund consumer education, provide assistance for low-income users, encourage the use of renewable energy for local governments and tribes; and provide power to underserved rural areas. The SBC will increase to $0.0006/kWh in 2007.

The PRC is also required to conduct examinations regarding: 1) the standard offer; 2) consumer education; 3) safety and reliability and performance standards; 4) the advisability and desirability of a renewable energy portfolio standard (a requirement that all competitive power providers must provide a percentage of the power to New Mexico customers from renewable energy); and other technical issues.

There is still time for New Mexico's citizen ratepayers to participate in the electric utility deregulation process, in particular, to persuade the elected members of the Public Regulation Commission that renewable energy and establishing a renewable portfolio standard are critically important. Rules to guide the Environment Department in administering the SBC are also still to be shaped, and citizen oversight in that process is particularly important to counter expected efforts to divert the SBC from renewable energy projects to building new distribution lines in rural New Mexico.

There will be attempts during the next several legislative sessions to further weaken the already meager consumer and environmental protections people fought so hard for. Though New Mexico's consumers got far less than they deserved, it will require diligence to protect even those small gains.

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Robert Haspel was formerly employed by New Mexico's Public Utility Commission and is a consultant to the Coalition for Clean Affordable Energy.