Sometimes New Mexico's winds are too much of a good thing--even for ardent supporters of renewable energy. This high wind episode happened earlier this week in Quay County on the state's Eastside, toppling a giant wind turbine that now looks other-worldly.

The good news: wind energy is becoming much cheaper to produce, making it more competitive to produce and to replace fossil fuels.

FAKE NEWS?

Is it a real crisis or "fake news' when it comes to the hue and cry over the condition of the state's giant Public Employee Retirement Association fund (PERA). We vote for the latter and it appears MLG agrees. She kicked the can down the road amid panic from some bean counters that some retired state employees perhaps in the year 2060 or beyond are going to take a hit to their pension checks.

(MLG) ordered the creation of a Public Employees Retirement Association Solvency Task Force. The executive order. . . directed members to immediately begin identifying reasonable and measured changes to contributions and benefits that will both prevent the need for more significant changes in the future and address the liabilities associated with the state’s pension plans. . . Recommendations to preserve PERA’s defined benefit system will be made to the governor no later than Aug. 30, 2019. These will subsequently be presented during the legislative session in 2020

PERA currently has $15.4 billion in cash. There is no "crisis."  Wall Street investment banks, however, want PERA and other similar funds around the nation to have all their current and future pension liabilities funded at 100 percent--a near impossibility and ridiculous on its face. But if they were to reach that 100 percent, that would be billions of dollars more for them to manage, and over the years millions more in lucrative fees for managing those assets.

Currently PERA has over 71 percent of the cash needed to fund all current obligations and all of those in the future. That theoretically leaves an unfunded liability of $6 billion. There is no immediate or intermediate term threat to retirees pension. None. Zero. That's why the Governor has rejected advice that she cancel the annual 2 percent cost of living increase for today's retirees. (It has already been cut once and her task force plan effectively kills the bill at the Legislature seeking a COLA cut).

The Governor is calling for "reasoned and measured" changes to decrease the amount of the unfunded liability. That's because she realizes there is no threat whatsoever to retiree checks during the four or eight years she serves nor in the term(s) of her successor. But the bean counters would have you believe a threat is imminent and would frighten the legislature into diverting new found surplus dollars into the funds in the name of people who have not even started working or may not even have been born yet. If those leading the fright parade really want to do something useful to improve the health of PERA they could start with investing more of PERA's billions in passive stock index funds--such as those that replicate the S&P 500 index. Such low cost investments would alone save millions in PERA management fees in the years ahead.

By the way, those funds are much more likely to improve PERA's performance because studies show that over the long-term over 90 percent of the time the passive index funds beat the performance of "actively managed" funds from which Wall Street makes those handsome commission fees.

No fake news there. That's a fact, Jack.

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

Keith Gardner with Rep. Cook

There's no cooling off period for former Governor Martinez Chief of Staff Keith Gardner--he's joined the legion of lobbyists at the Roundhouse after finishing an eight year stint under Martinez at the end of 2018. Gardner signed up this month to lobby for oil services company Select Energy Services of Houston as well as the National Shooting Sports Foundation, the trade association for the national firearms industry.

We wondered on the blog recently what Gardner was going to do. Political insiders expressed some surprise that he had not landed a comfortable gig.

His decision to become a lobbyist does raise the revolving door question--top government officials going to work to influence legislators after completing their government jobs. But Gardner can argue the government he would influence is no longer, as Martinez has been replaced by MLG. Still, his government tenure made many contacts for him in the bureaucracy which brings up this from Martinez in her 2012 State of the State speech:

It's why all of my appointees must disclose their financial interests online and it's why my appointees are barred from lobbying state government for 2 years after serving in my administration. Public service should be about serving the public--not setting up a future payday.

Gardner may be happy to have any job. As chief of staff he once confronted a female lobbyist for the ABQ Public Schools at the Roundhouse and was accused of physically assaulting her by grabbing her arm. That's not much of a selling point on your resume in the "Me Too" era.

Then there was the disclosure of secretly recorded audio tapes in which Gardner, a former GOP Roswell state representative, trashed numerous politicos including former Roswell State Senator Tim Jennings He also opined about state legislators in general, saying, "I hate those fuckers."

Well, politics is nothing if not notorious for having short memories, a blessing so far for freshly minted lobbyist Keith Gardner.

THE GREAT ETA DEBATE (cont/)

A lot of fun this week here debating the Energy Transition Act (ETA) (SB489) with some of the sharpest minds around when it comes to the environment and energy.

Reader Robert Levy jumps into the fray with an idea that may have seemed off the wall a decade ago, but may now cause some pondering:

Joe, the state of New Mexico would be smart to buy PNM. The regulated utility has a state guaranteed rate of return which I believe would be higher than the interest rate on the bonds that would be needed for the buyout. NM should be selling energy country or worldwide. PNM has always been in the way.

Interesting stuff. The stock market currently values the electric utility at $3.47 billion. That's a lot of money but not that much if paid off over 30 years. And the state could aggressively market renewables to sell on the open market as Levy suggests. NM bonds are being floated in the 3 to 4 percent area so that does indeed look good with nearly a 10 percent rate of return guaranteed. 

Shakespeare was called into service in Santa Fe Tuesday as cries of "a pox on both your houses" echoed in the Capitol Rotunda when the controversy over the UNM Athletic Department (AD) broke into open warfare between the chairwoman of the powerful House Appropriations Committee and UNM President Garnett Stokes.

In a blatant attempt at micromanagement, Chairwoman Patty Lundstrom is telling UNM: Either you reinstate men's soccer and three other cancelled sports or else $4.6 million in state money for the department goes away. Blackmail?

Well, whatever you call it that ultimatum is in the state budget that passed out of Lundstrom's committee this week. Her demands brought out the boo birds who are already bone weary of the last two Governors trying to run UNM by remote control. Now the House is getting into the act.

But UNM President Garnett Stokes, who firmly backs the elimination of the four sports to improve the AD's financial standing, is also getting catcalls over her seeming inability or unwillingness to form a working relationship with Lundstrom and craft a compromise that would get this nasty battle settled.

Stokes does have Senate Finance Committee Chairman John Arthur Smith as her backstop. He's not inclined to support Patty's micromanaging in the Senate version of the budget.

What we appear to have are two rookie mistakes--an overreach by the new appropriations chairwoman and ditto for the decidedly undiplomatic one year UNM President. Maybe some of the referees at the Athletic Department can broker a deal.

And how about the UNM lobbyists who get paid to smooth over ruffled feathers? They are the estimable Dan Lopez, former president of the NM Institute of Mining and Technology and Joe Thompson, a former state House Republican leader. Is Stokes getting advice from them or are they not whispering in her ear?

Like the prison warden said in the film Cool Hand Luke, "What we have here is failure to communicate."

ENVIRO INFIGHTING

Enviros fighting for a more green economy are seeing red when it comes to one of their own. New Energy Economy (NEE) is alone among the major enviro groups opposing the Energy Transition Act (SB489). That bill calls for a dramatic increase in the use of renewable energy but also calls for a ratepayer bail out of PNM for the costs of closing its Four Corners coal-fired San Juan Generating Station. It received extensive coverage on your blog this week.

Now as the battle over the Act escalates at the Roundhouse, NEE is being scorched by its enviro colleagues, including those at ProgressNow NM.

We’ll be blunt. A progressive ally, New Energy Economy (NEE), is letting their zealous hostility toward PNM stand in the way of a once-in-a-generation opportunity to reduce climate change impacts in New Mexico and provide economic relief to coal miners in the Four Corners area.
. . . We know that many of you on this list are also supporters of NEE, and for good reason. NEE has done great work on clean energy and environmental issues. But on this bill. . . NEE is just wrong. NEE seems to have lost their focus on the transition to a clean economy and replaced it with the mentality that utilities must be punished at all costs. . . For most of us, the goal is economic justice, carbon reduction, clean energy, and slowing down climate change. . . But for New Energy Economy, it seems like the goal has become to destroy PNM at all costs, regardless of what else is at stake--even a transition to clean, renewable energy. . . 

NEE and its executive director Mariel Nanasi are also getting under the skin of Conservation Voters of NM. That group came with a page titled "Energy Transition Act Myths and Facts."

Sen. Joe Cervantes, chair of the Senate Conservation Committee, tells us that he will "likely" schedule the ETA for a hearing this Saturday. The bill has also been referred to the Senate Corporations and Transportation Committee.

ODDS AND ENDS

An interesting profile and interview with Brian Blalock, the new head of the Children Youth and families Department (CYFD), perhaps the most challenging agency to lead in this era. We noted his outsider credentials in a January blog--he comes in from the San Francisco Bay--and that a fresh pair of eyes may be what the department needs after years of deep troubles. We had his age at 50 but the profile says he's 43. Well, after dealing with CYFD for a couple of months he will probably feel like 50. . .

In blogging of that on-line petition drive to impeach MLG we mentioned how in 2005 State Treasurer Michael Vigil was faced with a rare impeachment proceeding in the state House before he decided to resign but we did not mention two other recent prominent cases. Veteran political reporter Steve Terrell writes:

There was state Treasurer Robert Vigil — who resigned in 2005 when a House impeachment committee began deliberating about actual articles of impeachment. Six years later, Public Regulation Commissioner Jerome Block Jr. resigned as a part of a plea deal with the Attorney General’s Office that came as another House impeachment committee was investigating him. And in 2013, Secretary of State Dianna Duran resigned as a part of a plea deal while another impeachment committee had started investigating her.

Reader Chris Brown points out that the 2018 investment return for the Educational Retirement Board (ERB) fund was 0.6 percent, not the 6 percent that was on Friday's blog. However, the annualized five year return of the fund is 6.3 percent.

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

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

Are enviros giving away the store to PNM because they relish the prospect of a bill passing that would dramatically increase the amount of renewable energy required to be generated in New Mexico? Or is the chief critic of the proposal, the enviro group New Energy Economy (NEE), an out of touch outlier? Let's take a deep dive into SB489:

Environmentalists at the Roundhouse are ecstatic over this major piece of legislation that has won the support of the Governor and just about every major enviro group--except one--and that is the thorn in the side of the Energy Transition ACT (ETA).

ETA would put New Mexico on an ambitious course to generate 50 percent of its energy needs from renewable resources by 2030 and 80 percent by 2040, all in the name of fighting climate change. If approved, those would be some of the strongest standards in the nation. But there is a catch. . .

In order to help get rid of all that nasty carbon pollution PNM has to finish shutting down its Four Corners coal-fired San Juan Generating Station. That's an expensive proposition but under the ETA consumers would step up for the the electric company by paying off bonds that would be floated to cover costs of the closure.

That brings us back to the thorn in the side. Enviro group New Energy Economy says ETA is a blatant bail out for PNM and will end up costing consumers dearly on their monthly bills for years to come. Here's how the ETA will work when it comes to PNM as described by its enviro backers:

The ETA provides low cost financing to pay off coal plant costs and close the facilities, often referred to as “securitization,” a tool used by environmentalists in many states. . . The lower interest bonds will reduce the overall cost of closing coal plants by as much as 40%. . . and pay for things like economic transition funding for displaced workers and communities. For New Mexico, securitization is a fair way for utility customers and shareholders to move away from coal and share in the responsibility of doing so.