Status of Renewable Energy Credits
This case is an extremely important case that could greatly impact the ability of net-metered and other distributed renewable energy generators to obtain fair value for their Renewable Energy Credits (RECs), and the ability of utilities to be able to provide that value by purchasing such RECs for purposes of compliance with the RPS.
Status of the Case: All the testimony is now in (see below for the testimony of the parties), and we await a "recommended decision" from the Hearing Examiner (Lee Huffman). Parties may file "exemptions" to the recommended decision if they don't like something in the recommended decision. The Commission will then consider all of this in making their decision. Parties may request to make oral arguments before the Commission as well. Commissioners may not talk about the case with parties outside of official proceedings.
Background: This case was brought by PNM, who requested that the Commission issue an explicit "Declaratory Order" clarifying the discretion of utilities to acquire or not to acquire RECs (Renewable Energy Credits) from QFs ("qualifying facilities") that they purchase power from and that interconnect under NMPRC Rule 570, which implements PURPA in New Mexico.
The intent of PNM was to establish explicitly that they could actually decline to acquire RECs automatically (without paying the QF more than avoided cost), and instead pay the QF more than avoided cost. The reason PNM brought this case appears to have been opinions expressed by Commission Staff that utilities should just acquire the RECs automatically. Staff, and other utilities, have expressed such opinions in the testimony to date, although there is some middle ground between all the parties as well.
CCAE's Position: CCAE agrees with PNM that utilities ought to be able to pay for RECs, and applauds the utility for taking a position that supports the development of distributed generation. As stated above, Staff, and other utilities, have expressed different opinions. A good summary of the current positions is found below in CCAE's Reply Brief.
CCAE believes that:
- According to the RPS Law (quoted explicitly below) utilities may in fact automatically acquire RECs associated with QFs from which they explicitly purchase the power from under Rule 570, but may also choose to decline doing so and offer instead to pay fair value for the RECs (if such an offer is also approved by the Commission);
- That the RECs associated with net-metered systems NEVER belong to utilities automatically (except for any portion of the power that a utility purchases at avoided cost when a system disconnects or there is a true-up), because utilities are not explicitly purchasing the power from a net-metered system on a day-to-day basis: Net-metering, as determined by the Federal Energy Regulatory Commission (FERC), is a power-swap, not a power purchase.
- That the RECs associated with net-metered systems are in fact still eligible for a utility to use for RPS compliance, if they are purchased by the utility at a price agreed to by the net-metering customer, and if the renewable energy generated is properly measured with a second "RECs meter" that measures the full renewable energy production of the net-metered system (including both power consumed on-site and the power fed back into the grid.
The language in the RPS Law that supports CCAE's position is as follows (italics ours):
- That utilities must explicitly purchase QF power to own the RECs automatically, and that they may also enter into an agreement to purchase them instead: This is found in Section 5B1(a):
"(1) renewable energy certificates: (a) are owned by the generator of the renewable energy unless: 1) the renewable energy certificates are transferred to the purchaser of the energy through specific agreement with the generator; 2) the generator is a qualifying facility, as defined by the federal Public Utility Regulatory Policies Act of 1978, in which case the renewable energy certificates are owned by the public utility purchaser of the renewable energy unless retained by the generator through specific agreement with the public utility purchaser of the energy;"
Note the word "purchaser" here indicates the utility must explicitly purchase the renewable energy to automatically own the RECs. But FERC has explicitly ruled that net-metering is not a power purchase. See the FERC ruling here. - That RECs associated with net-metered systems are eligible. First, the section quoted above clearly indicates that RECs associated with QFs are eligible in general, and net-metered systems are in fact QFs according to NMPRC Rule 571. Secondly, Section 5B1(b) of the RPS Law states that:
"renewable energy certifications: ... (b) may be traded, sold or otherwise transferred by their owner to any other party; provided that the transfers and use of the certificate by a public utility for compliance with the renewable energy portfolio standard shall require the electric energy represented by the certificate to be contracted for delivery in New Mexico unless the commission determines that there is a regional market for exchanging renewable energy certificates;
Staff has suggested in the proceedings that power consumed on-site is not "contracted for delivery". But note that the language "contracted for delivery in New Mexico" does not specify whether the power is delivered to the utility grid or to the customer's load directly, but only that it is delivered in New Mexico. We therefore believe Staff's interpretation is too narrow and taken out of context (the context of the statement is whether or not the Commission opens things up to a regional market, not some kind of special limitation on how the power is delivered within New Mexico). Secondly, we note that there is indeed always a "contract" associated with and governing the delivery of net-metered power. - Finally, there is language in the statute that allows the Commission to set credit multipliers for different sources that allow some sources to be counted more than others with respect to satisfying the RPS, with the idea that the Commission can then allow utilities to pay more for certain sources such as distributed solar, while at the same time lessening the impact of such purchases to ratepayers. This is what allows the Commission to approve utilities paying fair value for RECs from say, net-metered PV systems. The Commission is also empowered by the RPS statute to set "reasonable cost thresholds", or "RCTs", for each source to limit the price of these purchases. But in doing so, the statute allows the Commission to take a wide range of factors into account, including "societal benefits". This is a very big break with the past history of utility regulation: Instead of "least cost", we now have "reasonable cost", and instead of simply governing "rates and services", the Commission may now take into account "societal benefits".The Commission may also "modify" the RPS "procurement plans" of utilities, which gives them significant power to require a utility to purchase RECs at a fair price.
Many of the comments of PRC Staff in this case seem to ignore all of these factors. For example, Staff has suggested that utilities only pay "avoided cost" for RECs associated with net-metered systems.
Testimony and other documents
- PNM's Initial Request for a Declaratory Order on RECs for Systems Interconnecting under Rule 570
- Commission Procedural Order: Note that this greatly expanded the scope of the case relative to PNM's initial request
- First Round of Testimony
- Rebuttal (Reply) Testimony
- Transcript of the Public Hearing
- First Round of post-hearing legal briefs
- Reply Round of post-hearing legal briefs
