Proposed New Mexico Renewable Energy Mandate Could Raise Prices

Published April 4, 2019

Legislation introduced in the New Mexico legislature would increase the state’s renewable energy mandate (REM) and provide a consumer-paid financing mechanism for a forced transition to wind and solar power.

Senate Bill (S.B.) 275 would increase the amount of electricity utilities are required to provide from “renewable” sources from the 20 percent by 2020 currently required by the state’s REM, to 50 percent by 2030 and 80 percent by 2045.

S.B. 489 would help finance the transition from fossil fuel powered electric plants to renewables through the establishment of “energy transition bonds” to be paid off by a “non-bypassable charge paid by all customers of a qualifying utility for the recovery of energy transition costs,” the bill states.

Documented Cost Increases

States with REMs have had their energy costs rise twice as rapidly as the national average, with electricity prices being 26 percent higher on average in states with REMs than in those without them, states a paper by Timothy Benson, a policy analyst for The Heartland Institute, which publishes Environment and Climate News. The higher the REM, the greater the increase in electricity prices.

Benson’s paper cites a study by the Brookings Institution which found replacing conventional power with wind power raises electricity prices by 50 percent and replacing conventional power with solar power triples electricity costs.

Benson found New Mexico’s existing REM cost state taxpayers and ratepayers more than $192 million in 2016, raising electricity prices by 6.18 percent. Additional REM-related costs included a loss of more than $405 million in economic activity and the loss of more than 3,000 jobs in the state.

This research indicates New Mexico’s current REM will increase electric power prices in the state by an additional $206 million by 2020, with electricity prices increasing by a further 6.77 percent, resulting in an additional 3,500 jobs lost and $444 million in additional foregone economic activity. Those costs would be expected to rise substantially if New Mexico increases its REM requirement as proposed in S.B. 275.

Says Repeal, Don’t Expand

Expanding the REM would not improve the environment, but it would harm New Mexico’s working families, says Benson.

“Affordable energy is the key to productivity growth and the production of virtually all goods and services economy-wide,” said Benson. “Increasing New Mexico’s REM would have no tangible impact on global carbon dioxide emissions while making everything more expensive for working families in New Mexico and raising costs for businesses.

“Instead of seeking to expand New Mexico’s renewable energy mandate, the state’s legislators should be looking to repeal it,” Benson said.

Rough on Ratepayers

Increasing New Mexico’s reliance on renewables is going to hit New Mexico electricity consumers hard, says Paul Gessing, president of the Rio Grande Foundation, citing data from Arizona State University’s business school which estimated New Mexico’s electricity rates would more than double if the state adopted a 50 by 30 plan as proposed in S.B. 275.

“New Mexico is already on its way to 20 percent RPS by 2020, and research from the University of Wyoming’s Timothy Considine indicates increasing the state’s REM would cost ratepayers $2.3 billion more than if the state did nothing,” said Gessing. “This current proposal is way more complicated than proposals Considine looked at, with the possibility the legislature could push the REM to 100 percent by 2050.

“We at the Rio Grande Foundation are generally agnostic concerning how utilities generate their power, and we’ve been arguing for a price cap to say, ‘Hey, if this wind and solar is really cheaper like they keep claiming, then maybe they should be willing to accept a reasonable cap on prices, say like about the level we are paying today, rather than forcing ratepayers to accept ever-rising rate increases over time to pay for electricity from higher-cost sources,'” Gessing said.

Price Hikes, Job Losses

Gessing says the two Senate proposals would cost New Mexico jobs for no environmental gain.

“These two bills will rake New Mexico’s taxpayers over the coals with a massive increase in electricity costs for, at best case, minimal gains in the environment that could be achieved at lower costs and possibly better outcomes through other technology,” Gessing said. “Obviously, New Mexico is a very small component of the United States’ carbon emissions, and when you factor in China and other global carbon emitters, New Mexico’s share really becomes a vanishingly small portion of overall global emissions.

“On the jobs front, New Mexico is Navajo country, and there’s a lot of poverty on the Navajo reservation,” said Gessing. “A lot of people—Anglo, Navajo, etc.—work at the coal mines and at coal-fueled power plants, and despite there often not being high levels of educational attainment in the region, workers are making good money because power plant and mining jobs pay well; yet these jobs are going to go away if these Senate bills become law, necessitating the end of coal-powered energy in the state.”

Kenneth Artz ([email protected]) writes from Dallas, Texas.

Internet Info

Timothy Benson, “Research & Commentary: Renewables Portfolio Standard Expansion Would Disproportionally Harm Low-Income New Mexicans,” The Heartland Institute, February 15, 2019:–commentary-renewables-portfolio-standard-expansion-would-disproportionally-harm-low-income-new-mexicans