Legal & Regulatory

New Mexico Clears Hurdle to Provide Power to Facebook Facility

A unanimous vote by New Mexico’s Public Regulation Commission (PRC) today determined that Public Service Co. of New Mexico (PNM) will be allowed to provide new renewable capacity to a proposed Facebook facility through a special service agreement.

After comments from PNM and very brief comments by a couple of PRC commissioners, the motion was passed, with commission Chair Valerie Espinoza saying that the deal is “a huge economic win” for the state. Perhaps now, she joked, more people will understand that New Mexico is part of the United States, not part of Mexico.

Social Media Muscle

Facebook has proposed building a $250 million data center in either New Mexico or Utah. The company is seeking at least 30 MW of solar power and has agreed to finance the cost of developing and connecting that generation and to sign a 25-year power purchase agreement.

Facebook's Prineville, Oregon, data center, in a photo taken January 2012. Courtesy: Creative Commons, Intel Free Press
Facebook’s Prineville, Oregon, data center, in a photo taken January 2012. Courtesy: Creative Commons, Intel Free Press

On August 9, the Albuquerque Journal reported that the deal signed between Facebook and PNM would be worth “around $31 million annually” with a rate of $0.0574/kWh for 10 years, “with a pre-determined formula for calculating the rate thereafter.” The paper said that “It was unclear what rate of return PNM would receive on revenues from the Facebook deal.”

In early July, Facebook said it wanted a guarantee that the facility would be powered by 100% renewable energy before deciding where to locate the new data center, which would also bring jobs to the chosen state. PNM on July 8 filed an application for expedited approval with the PRC to provide that power through a “Green Energy Rider” that would allow PNM to procure up to 100% renewables to cover Facebook’s load in the state.

The social media company has pledged to power its company by 50% renewables by 2018.

In testimony before the PRC earlier this summer, PNM’s vice president of regulatory affairs, Gerard Ortiz, said the utility anticipates providing solar, wind, and possibly geothermal and other renewable resources should New Mexico be chosen for the project.

Rocky Mountain Power Co. in Utah is also in competition for the Facebook facility. However, the Albuquerque Journal reported yesterday that the Utah tax-break plan had hit a snag and that the Salt Lake County council has said it will vote against it in a meeting next week. The village council of Los Lunas, N.M., south of Albuquerque, already voted to approve up to $30 billion worth of industrial bonds for the proposed data center.

About-Face on Renewables?

The fast action by PNM is somewhat ironic given that the utility has long been castigated by renewables advocates for slow progress on adding renewables, especially as New Mexico solar and wind resources are plentiful.

The company has previously said that wind and solar are too expensive, though it has slowly been adding renewable resources to meet the state’s 15% renewable portfolio standard (RPS). Utility opponents counter that PNM has locked itself into uneconomic fossil and nuclear capacity (which includes power purchases from Arizona’s Palo Verde Nuclear Generating Station). Facebook’s offer to pay for the new capacity appears to have changed the calculus on renewables development.

PNM has noted that any renewables capacity provided to Facebook will be backed up by fossil and nuclear generation.

Today, a PNM spokesman told the PRC commissioners that the Facebook agreement would add renewables beyond what is required by New Mexico’s RPS.

The data center is also expected to bring 50 to 70 jobs, not including construction and “ripple effect” jobs, according to a second PNM spokesperson during today’s testimony before the PRC.

The development comes at a time when the utility is clearly looking for new load and revenue. On August 4, the PRC rejected a requested revenue increase of $123.5 million that would have meant a residential rate increase of 15.8%. As reported by the Santa Fe New Mexican, a hearing examiner recommended a PNM revenue increase of $41.3 million.

Most recently, PNM said on August 16 in a document filed with the PRC that up to 300 employees could be laid off if the company didn’t receive its requested rate increase. The document did not specify what types of employees would be subject to layoffs, and the utility did not respond to information requests from the Albuquerque Journal.

Gail Reitenbach, PhD, editor (@GailReit, @POWERmagazine)

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