Good morning and welcome to the 2005 New Mexico Youth Conference on the Environment.

Last fall I was elected to represent the Albuquerque-area on the Public Regulation Commission, the state body that regulates electric, gas, and telephone utilities, commercial transportation, insurance, among other areas.

I’ve been serving now for three months, and thinking back over those three months, it seems like we’ve done a lot of work on telephone issues. Work that should save your families money over the next few years and give our homes and businesses better telephone and data services.

This is an important function for the Commission – protecting families and businesses in the here and now – but the telecom world is changing so fast – with advances in wireless, internet, tv convergence – that whatever we do today is unlikely to have lasting impacts on peoples’ lives 10 or 15 years from now.

That’s not the case when it comes to the other major industry we regulate, electricity. For electricity and other energy issues, it’s all about the long term. Decisions we make in the next few years won’t just impact how much it will cost to turn our lights on or drive a car when you all are my age, but will also make profound differences in our health, the health of our planet, and our ability to sustain our modern economy.

You know, just about everyone this side of Dick Cheney understands that we cannot continue our reliance on fossil fuels. By the second part of this century, we will have moved from an economy that relies on burning coal, gas, and oil for over 90% of our energy needs, to one in which alternative energy sources, like wind, solar and biomass, supply the majority of our energy needs.

The only question is how we accomplish that transition.

Do we continue on with business as usual until we’re forced to take action by severe climate changes from global warming that ruin our agriculture or flood cities?

Do we wait until gasoline is $10 a gallon – if you can find it – and our economy is at a standstill?
Or do we start now and move aggressively on a plan to accomplish that transition to a sustainable energy economy in a way that benefits us economically and environmentally?

This is a problem begging for national and international solutions. Unfortunately, there’s been a lack of interest lately on this front at the federal level. That’s why it’s especially important, and gratifying to me, that New Mexico state officials, along with our counterparts in other states, have taken a leading role in energy matters.

In 2002, my predecessors on the Public Regulation Commission enacted one of the earliest, and one of the strongest Renewable Portfolio Standards for electricity in the country. Under the RPS, which has now been adopted as a statutory law, NM utilities are required to provide 5% of their retail electricity sales from renewable sources in 2006, increasing 1% a year until we reach 10% in 2011.

There are a number of other energy initiatives under way in New Mexico that I want to tell you about, but first I want to say a few words about a question that may not even have occurred to you

Why do we need government laws and regulations -- and regulators --- to mandate energy efficiency, renewable energy use, or subsidize one form of energy over another?

My job as a public regulation commissioner is the economic regulation of particular companies. Our commission tells these companies how they must conduct their businesses, and what prices they can charge!

The main – no the only – reason we have economic regulation is what the economists call “market failure.”

There are several kinds of market failure. A natural monopoly is a market failure. For example, home telephones service is a natural monopoly because the costs would far exceed the benefits of having two companies run duplicate sets of wires to every home or business in an area. But if there’s only one company, then we can’t let them charge whatever they want or they’d charge way too much. Compare that situation to the wireless phone business, where the technology makes it economically viable for multiple to serve the same area and natural competition – not regulation – can be relied on to force prices as low as possible.

Unequal bargaining positions can also be market failures - for example, my commission regulates the rates charged by Ambulances because the person needing an ambulance is usually not in a position to call around for the best price before making the purchase.

In these examples, if we didn’t regulate what the companies’ charged, the company would take advantage of the customer’s lack of choice to over-charge.

When it comes to energy we also have market failure. But the result is that the prices are too low! That may sound counter-intuitive, especially to those of you who have bought gasoline lately, but let me explain.

The problem with the market-based prices for our energy supplies is that important costs associated with using fossil fuels are external to the transaction between the buyer & seller - they are shifted to the general public.

The major externalized cost for our coal, oil, and gas consumption is the environmental cost of carbon dioxide and other emissions. If you had to vent the exhaust from your car into the passenger compartment, you’d drive a zero-emissions electric car or ride a bike, no matter the cost or inconvenience. But we don’t have to do that, we can vent our CO2 and other emissions into the outside atmosphere ….. where they have an increasing impact on all of us, but not in proportion to our own use of gasoline.

When the total costs of fossil fuel use are not captured in the price, we get distorted incentives – coal and gas fired electricity look cheaper than electricity from wind, solar, and biomass, when in reality, it’s the opposite. Government regulations, mandates, and incentives are needed to counteract the market failures that have caused us to over-rely on fossil fuels.

New Mexico is ranked twelfth in the nation for wind power availability and second in the nation for solar potential! New Mexico wind and solar resources could easily supply the entire country’s energy ….assuming we had the generation, storage, and transmission infrastructure needed to transform this raw resource into power on demand at the point of use.

In large part because of the RPS requirement, PNM opened a 204 Mw wind farm in SE NM in late 2003. When the wind is blowing, around 8% of our electricity is coming from this green source. Other companies are following suit. We have another 100 Mw online now, with more in the building and planning stages. In addition to the renewables mandate, we are supporting wind energy with a tax credit for producers.

Wind is actually proving itself to be very competitive economically – cheaper than electricity from coal and gas – but the problem is that it is unreliable – you can’t guarantee you’ll have it when you need it. That’s why we need to start working on utility scale solar.

Solar power, by its nature, is likely to be available at the times it’s needed most – hot summer afternoons, when we draw lots of electricity for air conditioning. Solar is still expensive, but with development, prices will come down, just like they did for wind.

I and other PRC Commissioners are hoping to fit a sizable solar project into the utilities’ resource plans sometime soon. I am thinking and hoping we can do it without putting undue burdens on electric bills.

We are also poised to begin working on utility-sponsored energy efficiency projects under a new law that was just signed by the Governor. Efficiency, as you may know, is the cheapest and greenest source of energy.

We’ve reached the point where it no longer makes sense to fuel our industrial economy by burning and consuming the legacy of fossil fuels deposited by nature over hundreds of millions of years. My generation and yours need to take on the work of creating a new legacy of sustainable and clean energy for the future of our planet. I commend you for your interest in becoming involved in this critically important challenge.