Florida energy company to help Aztec go solar

James Fenton

AZTEC — The city is closer to offering residents lower costs for electricity — with a portion coming from solar power — than it has been in a decade.

Ken George, director of the Aztec Electric Department, on Jan. 19, shows the boundary of a piece of property where a solar farm will be located in Aztec.

In January, Aztec landed a seven-year power purchase agreement with Guzman Energy — a Coral Gables, Fla.-based energy company, with offices in Denver — to start July 1. The contract also marks the end of the city's 10-year power agreement with Public Service Company of New Mexico, or PNM, that came with rates fixed when the city negotiated the deal. That resulted in Aztec paying the highest utility rates for electric power in San Juan County.

When the city's contract with PNM ends on July 1, Aztec residents will pay the lower rate.

In 2006, Aztec locked in a rate of 7.5 cents per kilowatt hour with PNM that included yearly increases based on natural gas futures, which has meant the city is actually paying PNM closer to 8 cents per kilowatt hour. The city's new contract with Guzman is set at 5 cents per kilowatt hour. Currently, the city charges its residents about 13 cents per kilowatt hour.

Iris Kolaya, Guzman Energy spokeswoman, said the company is able to offer competitive rates because, unlike PNM, Guzman is not burdened by the costs associated with generating power.

"Incumbent, older, legacy energy companies that have been around for a long time have accumulated a large amount of high-cost fixed assets, many of which are no longer profitable given the nature of how quickly the energy landscape has changed," Kolaya said in an email. "Since they have to cover those costs, they may pass them along to the cities and other entities that they serve in the form of higher costs. Guzman Energy is intentionally not beholden to fixed assets and therefore does not have the burden of these costs and also is able to be more nimble and adjust as the market adjusts."

The contract includes a 1-megawatt solar-powered electric energy generating facility that will deliver approximately 8 percent of Aztec’s electricity with the balance coming from Guzman Energy’s other assets​.

Those assets include a combination of wind, natural gas and fossil fuel-fired power, Kolaya said. But that mix will vary over time, she said.

"Given the broad range of energy resources at our disposal, and the constant variations of sources such as wind and solar power, the breakdown will vary greatly over the life of the contract," Kolaya said. "Energy diversification is a key component in our strategy. Guzman Energy looks at a wide array of resources in our portfolio and deploys those as needed. Our challenge — and opportunity — is to work across a volatile energy market and access a number of sources with an eye toward renewable energy options."

Aztec's agreement with PNM allowed for up to three megawatts of solar power, but City Manager Josh Ray said PNM's solar rates were never affordable.

"PNM didn't offer us any good solar or renewable energy opportunities," Ray said. "PNM did allow for smaller solar projects, but none that could have had any significant impact on our overall power load. PNM restricted the city in our renewable energy search. We tried to work with them on a number of projects, but they did not receive our requests well."

Jodi McGinnis Porter, PNM spokeswoman, said the utility doesn't comment on confidential information like proposals or contracts. She said PNM has no other power agreements with municipalities.

"PNM is proud to have served the city of Aztec for 10 years, and we look forward to future opportunities to work with the city," she said in an emailed statement.

Solar energy and other renewables are a growing portion of PNM's utility profile, she said. PNM has spent $270 million on utility-scale solar energy facilities in the state and has more than one million solar panels at 15 different solar centers that, in total, provide 107 megawatts.

She said PNM, the largest utility in New Mexico, currently has the largest customer-owned solar program in the state with more than 5,900 solar customers connected to the PNM system. Since 2007, those customers have been paid approximately $31 million by PNM.

But Ken George, Aztec's electric director, has said that Guzman's solar rate represents about half what the city was offered under PNM.

Getting out from under the decade-long reputation for having the highest electric rates in San Juan County is welcome progress that has been a long time coming, Ray said.

He said city officials are reviewing the site plan for the solar facility, which will be constructed on an eight-acre parcel of undeveloped land south of Western Circle, referred to by the city as the Townsend property.

The solar facility is expected to be completed at a cost of $2 million by mid-June. Guzman Energy will pay the cost. In 2023, the city will buy the solar facility from Guzman Energy for $1, according to the contract.

The lifespan of the solar facility is "well in excess of 20 years," Kolaya said.

Aztec has been trying to add alternative energy sources such as solar power for the past 14 years, Ray said.

Ray said coming out from under a no-wiggle-room contract with PNM and striking a deal at a lower rate with a renewable energy component is the future for cash-tight municipalities like Aztec.

"I hope that other municipalities will see this agreement with Guzman and work with them to create similar partnerships," he said. "Guzman is a friend to small-town, local governments and can be a great partner to other cities looking for a new purchase power contract."

James Fenton is the business editor of The Daily Times. He can be reached at 505-564-4621.