Power to supply Facebook Data Center in Los Lunas
BELEN — As the city of Belen begins negotiating tax breaks for 1,600-acre solar farm, the state Public Regulation Commission has told PNM and the company that will be the sole beneficiary of the power to work out a new agreement.
Sky Ranch Solar, a subsidiary of NextEra Energy Resources, LLC, is planning to build the large solar project at the northern end of the master planned Rancho Cielo area, west of Interstate 25 and south of El Cerro de Los Lunas. The project will have a capacity of up to 190 megawatts of solar energy and 100 megawatts of battery energy storage.
Sky Ranch Solar received preliminary approval from the Belen City Council last week to begin the process of negotiating for an Industrial Revenue Bond worth about $273 million.
A day later, the PRC turned down a power storage proposal between PNM and Greater Kudu, a subsidiary of Facebook, saying the proposal was too complicated and it seemed intentionally deceptive. The agreement would help the social media giant expand its data-center operation in Los Lunas.
During the city council meeting last week, Steven Tomita, the city’s planning and economic development manager, said he’s hoping this is just the beginning as additional phases would be available to attract clean industrial manufacturing companies wanting to use green energy.
“The key, for us, is the future that it provides clean energy and prospects of clean-energy business,” Tomita said.
Eddie Duffy, the attorney for Sky Ranch Solar, the resolution that was eventually approved by the city council is simply a step forward in negotiations and doesn’t commit the city.
“The next step would be we would move forward and work with your counsel on the definitive bond documents, and those would include an ordinance, an IRB lease and a bond purchase agreement,” Duffy said.
“What the IRB is, if you approve it, you’d be providing tax breaks to the company. They will get property tax breaks on the equipment and any property that is part of the facility,” Duffy explained. “They’ll also get gross receipts and compensating tax breaks on tangible personal property, so essentially, the big benefit to the company is the big tax breaks.”
Duffy said while the city would be the issuer of the bond and intermediary, none of the city’s money can be used for the project assets or the debt of the bond. The city’s role is just to provide the tax break.
“The scope of the tax break will be determined by the scope of the project,” the attorney explained. “What does the city get out of this deal? Every wind or solar project is done through an IRB … but there will be a proportional payment in lieu of taxes paid to the city and the school district, as well.”
Gabe Henehan, director of development with NextEra Energy, said the amount of money the company would pay the city and Belen Consolidated Schools in lieu of taxes hasn’t yet been determined, saying it’s still under negotiation.
Henehen said the IRB would be paid out over 30 years, during which the city and school district would be paid about $13 million.
“Every single (solar) project in New Mexico has an industrial revenue bond,” Henehan said. “They wouldn’t be built without one.”
Henehan said an open house to talk about the solar project is scheduled for Wednesday, Aug. 25, at the Belen Community Center, where they will be able to answer questions from the community.
Councilor Danny Bernal Jr. asked what benefits, in regards to jobs, would the project have for Belen.
“During construction, which will start with building an access line, will last about 14 to 15 months, with about 200 people working out there during the peak,” Henehan said.
The site itself, can be operated remotely with four or five highly-skilled employees, he said.
When Councilor Frank Ortega asked where the power was going, Henehan said he couldn’t disclose that information yet, only saying it would be consumed in New Mexico.
Tomita said he and City Manager Andrew Salas have been speaking with our congressional delegation about the project, and are once again asking for funding to build an interchange that would connect to the Rancho Cielo area.
“They’re very excited about it,” Tomita said of the delegation. “It would be a huge benefit for Belen.”
While the city is moving forward with negotiations with Sky Ranch Solar, members of the PRC told PNM and Facebook to go back to the drawing board and make their agreement for the energy produced at the proposed facility less complicated.
According to the PRC’s order of continuance for Greater Kudu, LLC, and PNM’s application of two purchased power agreements and an energy storage agreement, they are requesting the companies modify their agreement to be fair to other PNM customers in New Mexico.
“While PNM’s current proposal … could result in economic development benefits and renewable energy benefits that may be in the public interest, PRC staff found that they could not conclude that there would be ‘no net adverse impact’ on PNM’s other customers, as required by the special services contract,” the order reads. “The PRC asked PNM and Greater Kudu, LLC, to address the Commission’s concerns with the proposed financial transaction.”
The PRC noted this is not logical — that a customer could reduce its bill by using more resources. PNM testified that future costs to non-Facebook customers are highly uncertain and will be determined in a future rate case.
The order says the proposal asked the PRC to make a decision without the benefit of key information, such as production revenue requirements and whether the currently projected storage demand might change.
District 1 Commissioner Cynthia Hall said she saw “no reason for many of the provisions [in the proposal] other than to make it complicated.”
She called on PNM and Greater Kudu, LLC, to create “a simple agreement … that is separate and distinct from PNM serving their remaining customers in New Mexico.”
“This continuance and the articulation of our concerns … demonstrates our desire to see this project go through,” Commissioner Joseph Maestas of District 3 stated.
Commission Chairman Stephen Fischmann of District 5 closed his comments by saying, “We’re looking for every possible way to make this deal work … but it has to be a fair deal.”
The PRC ordered PNM to file a written, mutually agreed upon renegotiated modification to its application by July 14, and staff shall file a response by July 21.
PNM, Greater Kudu order for continuance