An independent evaluation committee, void of city officials, set the stage last week for Socorro to own its own electrical utility.
However, council members were timid about awarding any agreement until it had a chance to thoroughly review both proposals. As a result, the council tabled discussion and will not render a decision until its July 1 meeting.
Chief Procurement Officer Polo Pineda Jr. told council members the committee had selected Guzman Energy. Guzman Energy was one of two proposals submitted under review. The other proposal reviewed was submitted by Macquarie Energy LLC.
Guzman Energy is the same company selected by Kit Carsen Cooperative, who terminated its services from Tri-State Generation with a penalty.
The rates for both proposals for long-term wholesale power were far cheaper than those offered by Tri-State Generation which sells electricity to Socorro Electric Cooperative (SEC), which, in turn serves city customers. In addition, the rates and financing proposed to the city were based on a seven-year contract.
As part of the proposal, each business was asked to include a preliminary engineering design and report for the facilities necessary to receive electric power from the grid and distribute said power to the select end users in the City of Socorro Industrial Park Corridor and New Mexico Tech.
The proposals lay out financing details and proposed rates based upon a seven-year contract, which will be used by the city in a financial analysis.
Mayor Ravi Bhasker reiterated to council members Guzman and Macquarie Energy are “very significant and credible” proposals. “This is just the first step in the process,” he said. “They are willing to take this on by funding us the utility money with the belief we will be successful.”
Should the council approve either of the RFPs (Request for Proposals) the next step in the process would be a Preliminary Engineering Report. At that point, either Guzman or Macquarie will do a detailed business analysis to determine if the project is financially feasible.
“We’re slowly going through these steps. I think Guzman and McCreay are credible,” said Bhasker. “The committee picked one of the RFPs they believed was the best with the city. And we wanted an independent group to look at it rather than city officials.”
Councilor Michael Olguin expressed his concern that he wanted to review both proposals before making a decision. His main concern was that either company could “sugarcoat” the numbers.
Ed Reyes of Enchantment Energy Consulting said, “They wouldn’t want to sugarcoat the numbers. Because they know the city is going to be able to pay back the loan. If they put up the money and the numbers aren’t good … they won’t move forward. They won’t loan the money for the second phase.”
Thwarting business growth:
Bhasker said the initial proposal is for supplying electricity to New Mexico Tech, the city’s industrial park, and new businesses locating within the park.
“This project is for the people that are here. This is to decrease the rates of Tech, decrease the rates for the hospital,” he said.
Councilor Mary Ann Chavez-Lopez asked when the city would consider including regular households within the city to the grid.
“I haven’t been timid about saying this: The co-op will collapse. We’re going to take 25 percent of the city grid away from them,” said Bhasker. “We don’t have to litigate, we don’t have legal consequences. We are doing this completely on our own by not using their grid.
“The co-op has been dragging their feet … because they thought we’re not going to do anything,” Bhasker said. “At this point they realize we are on the way of doing this. We’re going to take away 25 percent of their load away. And … that’s going to cause them some grief.”
But before that collapse, Olguin was concerned about how long community residents would suffer or deal with the co-op staying afloat and raising rates. “They’re going to want to stay in the game as long as they can,” said Olguin.
Chavez-Lopez agreed. “They’re not just going to hand it over.”
“The bottom line is, it may take us another five years to do the whole city, said Bhasker. “And if they raise residential rates, they’re going to have to go to the PRC (Public Regulation Commission). “We want them (SEC) to come to the table and talk seriously about electrical rates.”
Olguin and Chavez-Lopez said they were concerned about protecting local residents from even higher rates from the SEC. “We will still have to answer to the public,” said Chavez-Lopez.
Anton Salome countered, “The co-op board is the first line of defense for citizens on their grid. And they haven’t been able to control or manage the rates. We are the second line of defense for our folks (city residents). If they don’t step up to the plate then it is our obligation to step up to the plate and get folks some relief in regards to energy costs.”
Bhasker noted there is a chance with the city forging ahead with its own electric utility, that the Socorro Elective Cooperative will raise rates on residential home owners and other small businesses located in the city.
“I do have several businesses in town and if they do raise the rates, it will cost my businesses extra money,” said Bhasker. “But they’ll (SEC) have to go through the PRC to get those increases. What will the co-op do? I have no idea.
“We’re stuck with a business (Tri-State Generation) out there that is strangling the economy of this state,” Bhasker said. “We’ve got to do something – which means taking some chances.”