Back on the energy beat today, and why not? More than ever it's defining the state's political narrative. . .

--The bean counters at the Legislative Finance Committee are maintaining their forecast for revenues for the budget year that begins July 1 and which lawmakers are now legislating for. They reiterate their earlier prediction that revenues will be up a whopping $1.1 billion which appears to be the largest yearly increase in our history.

--The LFC came with its customary doom and gloom, warning that an "energy crash" could send revenues into a death spiral but even they had to add that lower oil prices are not the revenue killer they once were. That's because of the huge, historic oil discovery in the SE NM Permian Basin where production using fracking is less expensive and continues to ramp up even with lower prices. That this is a new era is not at issue; how long it lasts is the question.

--Given that backdrop bills to raise the royalty rate for oil leases on state lands and and to slap a moratorium on fracking for four years are dying or about to die quiet deaths in the Legislature.

--After those defeats it's a good time to remember Governor Lujan Grisham's admonition to the left wing of her Democratic Party when it comes to oil and gas as stated in a July '18 interview:

Speaking about those in the progressive wing of the Democratic Party who are openly hostile to the oil and gas industry, Lujan Grisham says, “They’ve lost their minds. “We’re the third-largest oil producer in the country. I’m (as governor) going to get a benefit from that.”

--Finally, it's also an appropriate time to recall a blogging point from years gone by--during the decade-long NM depression/recession/stagnation the LFC often underestimated the huge revenue shortfalls that befell the state and that led to drastic budget cuts. Now with the shoe on the other foot, the LFC numbers have to be watched for underestimating the possible surpluses that will accumulate. Now that's good news.

THE GREAT ETA DEBATE

Reader reaction came flowing in following our Monday blog about the major energy bill of the legislative session--the Energy Transition Act (ETA). Its main sponsor, ABQ Dem State Senator Jacob Candelaria, deflected criticism that it's a bail out for PNM, which faces a huge expense for closing down the Four Corners coal-fired San Juan Generating Station (SJGS). Candelaria's bill would allow PNM to issue bonds to pay those closing costs--and the bond bill would be footed by PNM ratepayers on their monthly bills for 25 years.

Enviro Mariel Nanasi split with most of her colleagues and said the ETA--while mandating a dramatic and laudable increase in the use of renewable energy sources in the state--is an end run around the Public Regulation Commission (PRC) and a legislative bail out for PNM. We start reader reaction with a Senior Alligator, well acquainted with the matter:

Joe, I read your very fine entry on PNM's current attempt to re-run last year's San Juan bill--albeit now gussied-up with some worthy 'green' stuff. Last year's similar bill--that would have enabled the PRC to approve issuance of bonds to pay off the closure of San Juan--did not survive. This year, PNM shrewdly won environmental support with the bill's proposed increase in the Renewable Portfolio Standard (RPS). Effectively, PNM is 'forum shopping'  for legislative assistance for its SJGS closing. It's better left to the PRC to review such matters.

The Legislature delegated its authority to the PRC which has legal authority to review a utility decision to 'abandon' a plant. PRC started a SJGS abandonment case in January. It found that PNM had begun an orderly process to close two of the four SJGS units. A majority of the plants' owners decided that SJGS is more expensive than available alternatives. The economic reality is that natural-gas and renewable resources are cheaper than coal-and-nuclear-fueled generation. 

The PRC case also will examine what (and who) will replace SJGS power and at what cost? The consumer parties to the PRC 'abandonment' case support PRC review: the Attorney General, the major industrial customers, the ABQ Bernalillo County Water Authority and the environmental group New Energy Economy. The environmental group Western Resource Advocates supports legislative action as a means to a 'greener' result--a higher renewable standard. This has brought the 'green' groups along. But PRC review--not legislative action--is the best way to balance the interests. That's why PNM wants to try to legislative a deal and avoid the PRC.

GOP reader Jim McClure takes the side of Candelaria:

I rarely agree with Sen Candelaria, but he is one of the few legislators who seems to understand the economics of utility regulation. Regulated utilities factor the long-term depreciation of their facilities into their rates under the scrutiny of state regulators. The ability to recover long-term costs enables utility companies to raise money from investors for the massive capital needs of power generation. This economic model is one of the reasons why New Mexico has reliable electricity and Puerto Rico does not.

When politicians compel utilities to replace power plants before they’re fully depreciated, this creates additional costs and there is no environmental tooth fairy. Sen. Candelaria’s bill is a reasonable compromise to share the cost of the state’s political decision to accelerate the phase-out of coal. Paying off the government bonds with tax revenues will be less regressive than the kind of rate hikes that make electricity 40% more expensive in California than in New Mexico.

Reader Larry Gioannini in Las Cruces writes:

Joe, probably the two most knowledgeable experts on PNM and El Paso Electric operations in the state--Merrie Lee Soules and Public Regulation Commissioner Steve Fischmann--oppose ETA (SB489). Here is Steve on Santa Fe radio on 2/16. It seems to me PNM could get a low rate of interest on bonds if the state guaranteed repayment in case PNM defaulted. That would mean the taxpayers would not have to be the ones to pay off the principal and interest.

Arcy Baca came with this take:

Senator Candelaria is screwing the ratepayers big time. Remember the Four Corner plants were built and paid for by the ratepayers. The stranded cost for San Juan should be paid by the PNM shareholders and not the ratepayers. PNM diversified its company in order to be able to produce and sell power to PNM the service company! The ratepayer belongs to the service side. This is a horrible bill. The shareholders made huge profits on these plants just for running them. Senator Candelaria is acting like a Republican and screwing the consumer for higher profits for the corporation.

THE BOTTOM LINES

ETA, SJGS, RPS, NEE. We feel like we're swimming in alphabet soup. But, hey, that's the blogging biz, kids. Thanks for diving in with us.

This is the home of New Mexico politics.

E-mail your news and comments. (jmonahan@ix.netcom.com)

Interested in reaching New Mexico's most informed audience? Advertise here. 

(c)NM POLITICS WITH JOE MONAHAN 2019