New Mexico PRC Approves Scaled-Down REC Purchase Program

The New Mexico Public Regulation Commission approved a final order on August 31, 2010 that significantly scales back Public Service Co. of New Mexico’s plans for solar photovoltaic generation.

The PRC cut the amount of solar PV that PNM had proposed to install on its system from more than 80 megawatts to about 45 megawatts, said Commissioner Jason Marks. By downsizing the solar targets, the PRC aimed to cut costs for rate payers and leave room for more renewable installations later, Marks said.

The original plan would have cost ratepayers about $40 million, or 4 percent more on their electric bills. Now, it will cost about $15 million, representing less than a 2 percent increase in charges.

“PNM’s original plan came in way too expensive,” Marks said. “Commissioners reached a compromise rather than throw the whole plan out and start from scratch. I think it’s a win-win solution because it moves us forward while keeping it under our reasonable-cost threshold.”

The threshold, set by the PRC after hearings in 2007 and 2008, allows cost recovery for renewable procurements to be limited to 2 percent in 2011 and 3 percent in 2015.

PNM’s initial filing ignited a wave of opposition from clean energy advocates, because the utility had proposed to scale back investments in rooftop solar systems while procuring more wind generation. At that time, PNM said its rooftop program was too expensive because it paid a customer up to 22.5 cents in incentives for each kilowatt-hour of photovoltaic energy produced by a customer’s rooftop system – in order to help the customer lower the cost of installing PV.

Payments include up to 15 cents per kWh for helping PNM meet its RPS obligations, plus 7.5 cents for unused electricity that customers send back to the grid – a process known as “net metering.”

Solar advocates opposed PNM’s plans to limit that program, leading to lengthy negotiations that culminated in a stipulation agreement in January that called instead for an expansion of the program, with measures to offset the costs. Under that agreement, net metering and RPS credits would have been replaced with a single, fixed payment that ranged from 22 to 26 cents. It would have decreased over time to 16 cents.

But in its final ruling, the PRC rejected the new incentive scheme, opting instead to keep net metering in place but decrease the amount paid for RPS credits over time. Marks said commissioners wanted to maintain net metering because it gives customers with solar rooftop systems a cushion against rising electric prices.

“It allows customers to keep a hedge value on future energy rates,” Marks said. “In addition, there would be federal pre-emption issues if we approved a feed-in tariff, which is basically what PNM was proposing.”

The PRC also rejected a PNM plan to deploy 10 megawatts of utility-owned rooftop PV on targeted buildings, such as schools and government institutions. And, it cut PNM’s proposal to install 45 megawatts of utility-scale PV systems around the state to 22 megawatts. Finally, it rejected a PNM request to earn two renewable energy credits for each kWh of solar energy generated, something PNM said it needed to make RPS compliance less costly.

By scaling back PNM’s plans, Marks said the PRC has left money on the table for more renewable procurement plans in the next few years. And, even with the plan revision, about 45 megawatts of utility- and customer-owned PV will be connected to the grid, up from just two megawatts now. “We’re not doing less, we’re just setting limits on what gets done now,” Marks said. “PNM needs to come back with future plans. In the end, we’ll get more solar for less money.”

Source: New Mexico Business Weekly


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