El Paso Electric Co. (EPE), which sits outside Texas’ main power market, managed to become both a superhero and a villain in environmental circles in the past year as it moved to shed coal and shift its approach on rooftop solar.
Yesterday, the company paused to celebrate its newly minted status as a coal-free electric utility for power generation. EPE appears to be unique in this status among integrated utilities in Texas and New Mexico after recently selling a stake in the Four Corners station near Farmington, N.M.
But EPE continues to manage the fallout from its attempt to implement changes in how residential solar is treated for Texas customers, including a possible surcharge of up to $11 per month. Its ideas drew opposition and prolonged a rate case, leading EPE to abandon the proposal and reach an unopposed settlement. Regulators could approve the rate settlement soon, while EPE officials said the solar issue will return.
"On the one hand, we congratulate them for the very cost-effective and wise decisions that they’re making with regard to their coal generation capacity," said John Hall, state director of the Texas clean energy program at the Environmental Defense Fund (EDF).
At the same time, Hall urged EPE "to take additional steps to ensure a cleaner and more cost-effective energy future" for customers "by investing in wind and solar and energy efficiency." He said he’s glad the utility pulled back from a "punitive" approach to rooftop solar and hopes it becomes a long-term decision.
Mary Kipp, EPE’s CEO, touched on both coal and solar during an earnings call yesterday. The coal decision, she said, will create a cleaner utility while limiting financial obligations tied to environmental regulations.
"As a result of this sale, we will be able to reduce by 1 billion pounds the carbon dioxide from the company’s annual emissions," Kipp said, adding that large-scale solar also prevented a billion pounds of carbon from being emitted.
The 2 billion pounds would equate to removing 190,000 cars from the road or planting 20 million trees, according to Kipp. In the meantime, EPE hit a new native system peak on July 14. Kipp said her company continues to plan for more generation while it reviews demand-response options that could help customers cut load at peak times.
Hall said leaving coal behind is smart, given declines in natural gas and renewable prices.
"What El Paso is doing should provide significant benefits to its residents," he said, "and it’s a good example for the other generators to follow."
EPE’s generating mix is about 66 percent natural gas, 30 percent nuclear and 4 percent solar, including purchased power.
Al Armendariz, a former U.S. EPA regional administrator, congratulated EPE on exiting coal via a statement in a company news release.
"While there is still more work to be done to fully realize Texas and New Mexico’s renewable energy potential, we know that shifting away from carbon-polluting coal plants is one of the most important things we can do to avoid the worst impacts of climate change, which is already making droughts more serious and drying up the Rio Grande," said Armendariz, who is a deputy regional director of Sierra Club’s Beyond Coal campaign.
Seeking dialogue
In an interview, Armendariz said EPE’s move shows that old coal technology isn’t needed to power cities such as El Paso or large geographic areas. He said the utility is seeking to boost solar in its portfolio, with more work needed to be less reliant on natural gas and eventually nuclear.
Gas can continue to play a role in electricity, according to EDF’s Hall, but gas prices may rise significantly after 2030. He said clean power sources can help reduce emissions and water use.
"We think that by beginning to invest in more energy efficiency and renewables now, the utility can position itself to provide lower-cost generation, lower-cost electricity for its citizens for the foreseeable future," Hall said.
On solar, Kipp said the cost of serving residential customers would be addressed in a future proceeding.
"Until then, the cost to serve rooftop solar customers will continue to be subsidized by non-rooftop solar customers," George De La Torre, a company spokesman, said via email. He said the utility is evaluating all options.
Utilities and solar interests around the country have clashed over the costs and benefits of solar energy and various rate structures. With Texas residents, EPE has been using a solar approach that involves retail rates and avoided costs.
Armendariz said he was happy that EPE pulled back on its rooftop solar surcharge plan. The Sierra Club is looking forward to "thoughtful dialogue," he said, on how to avoid disincentives on solar while enabling utilities to find sufficient revenue. Armendariz suggested that utilities, state regulators, customers and the solar industry would help find approaches that work.
Also yesterday, Environment Texas and the Sierra Club released a report showing that Texas ranked 23rd in the United States for installed per-capita solar through last year. A news release raised concerns about the lack of a state program for net metering — which involves credits at retail rates for excess rooftop solar — as well as possible efforts to aid coal-fueled plants in the main Texas power region, which is managed by the Electric Reliability Council of Texas (ERCOT).
"We call on ERCOT and the legislature to allow the market to work as it should, with older, dirtier resources like aging coal plants being replaced by newer, more efficient solar and wind without bailouts or long-term reliability contracts," said Cyrus Reed, conservation director at the Lone Star Chapter of the Sierra Club, in a press release.
EPE said it plans to launch a community solar program if it receives regulatory approval in Texas. That would let Texas utility customers subscribe to solar power from a facility in the area.
"We remain committed to building a portfolio that includes renewable technologies that complement our local, quick-start, clean-burning natural gas units," Kipp said in a statement.
EPE also said it plans to file rate cases in Texas and New Mexico next year. The company’s shares fell 1.5 percent in regular trading yesterday.
