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Lack of affordable solar energy options in Farmington, clean energy advocates say

Can local governments fairly self-regulate utilities they own?
(Jerry McBride/Durango Herald file)

Thousands of New Mexicans could be missing out on the opportunity to get solar energy options at homes and businesses because their locally run utility company is exempt from a new law requiring them to offer the incentive.

In 2021, the state Legislature passed a bill requiring state-regulated privately owned utility companies operating in New Mexico to adopt community solar, a way for multiple homes or businesses to get solar energy from one local facility and get credit for doing so.

Details in the legislation allow seven utility companies, run by a mix of local city councils and appointed energy commission boards, to skip the program altogether.

Farmington owns and operates a Farmington Electric Utility System, an energy utility that serves more than 46,000 customers. The company argues it provides lower rates and better reliability than privately owned companies, which is where most New Mexicans get their electricity from.

But advocates for solar energy say the companies are limiting New Mexicans from investing in new energy solutions, and the effort is being regulated by people with interests in the extractive industries, which are big businesses in these communities.

“They’re oil and gas folks, and they’re industry folks,” said Mariel Nanasi, executive director of New Energy Economy. “And it’s hurt their community. People are suffering.”

Farmington Electric Utility System, a nonprofit owned by the city, serves customers across San Juan County and east in Rio Arriba County.

Hank Adair is the utility director. He said, as of Monday, there were just under 300 customers who have installed or applied for solar power with Farmington Electric. About 100 of those applications came within the last year, he added. “For our small of a utility, that’s a large number,” he said.

Farmington resident David Fosdeck disagreed. Fosdeck is a solar user who previously worked in the solar industry. He said that’s not many solar installations in comparison to how many people the utility actually serves.

“This is not a friendly place to do solar,” he said.

Fosdeck has also had issues in the past with how much the utility wanted to charge solar users.

In 2019, Fosdeck and others filed a complaint against Farmington Electric with allegations that the utility had discriminatory electric rates through what was called the “standby service rider” for customers using solar power. Farmington Electric settled and removed those bill charges in July 2022.

“They’ll say they’re pro-solar, but the numbers of solar installed speaks for itself,” he said. “The attempt to discriminate against solar using the standby service rider speaks for itself.”

Rick Gilliam is a senior regulatory director with Vote Solar and worked on the Farmington settlement case. He said the utility company fights against solar because customers would pay less for the clean energy and the utility would lose money.

“Everything they’ve done with their customers has been to discourage the use of rooftop solar,” he said.

Still, Adair said solar energy is a great opportunity and there’s low cost in it. But being a municipal utility in a rural area doesn’t always make solar energy an affordable task, he remarked.

He said large-scale solar energy projects are difficult to do on the rural grid where people live further apart. In cities like Albuquerque, he said, more customers are covered in smaller areas, making it cheaper to pursue solar. It’s also difficult to do bigger projects in general because Farmington Electric is a small utility, he added.

Nanasi said these are just excuses to keep delaying the inevitable solar transition. And it goes back to who’s watching over the utility, she said.

Who is regulating the utility?

Farmington’s municipal utilities are overseen by City Council and an appointed utility board. Gilliam said this is standard in most places with locally run utilities, and in many of these situations, he said, the regulators generally take the advice of the utility management.

“They’re really self-regulated with the theory being that they’re not going to do things that aren’t in the community’s own best interests,” Gilliam said.

Gilliam said the resistance to a solar energy transition likely has to do with the fact that the city is politically conservative and many officials support the oil and gas industry.

Nanasi agreed. She said it comes down to officials who don’t want to divest from the fossil fuel industry, despite its limited supply. And those same officials are the ones regulating the utility.

There could also potentially be somewhat of a conflict of interest between the city and its utility, Gilliam said, because municipal utilities often generate money for the community. Adair said 7% of the utility’s revenues go back into the community, which has equaled an average of $6.84 million over the last three years.

“That can then get just kind of confusing and pretty far away from making decisions that are necessarily in the best interest of electric consumers, and it’s more taking into account revenue,” Gilliam said.

But Gilliam said he’s not sure if there’s a better way to regulate municipal utilities. Pushing it onto the state would add work to staff who are probably already overtasked and making a different utility commission would just match the current system and take more money.

“There’s not a great model that I’ve seen,” he said.

Potential solar projects in Farmington

There aren’t currently any large-scale utility solar projects in Farmington, Adair said, but some are planned for the future, with solar ranging from 30 megawatts in the next few years to about 120 megawatts starting in 2037.

Another way that the utility could pursue a smaller clean energy project is through community solar. Gilliam, who worked on the legislation creating the program, said this is perfect for rural areas like Farmington because it’s a “bite-sized project” a smaller utility could reasonably take on. And they have the land area for the solar facilities, he added.

But Adair said the utility came to the conclusion that something like that would cost too much in Farmington when officials debated similar projects in 2019. However, that might change, he said.

The state and federal governments offer tax credits to businesses that use or offer solar energy alternatives. That never applied to Farmington Electric since it’s a nonprofit, Adair said, but the recently passed Inflation Reduction Act is starting to incentivize renewable energy projects for tax-exempt organizations.

The bill offers direct pay instead of tax credits to municipalities like Farmington Electric. Adair said this has prompted the utility to start considering different clean energy options for the future.

“The utility’s really evaluating right now, as well as many of the utilities across the nation, what that looks like,” he said.

To read more stories from Source NM, visit www.sourcenm.com.