Bill Number(s): SB 43

Status: Passed Both Houses! Signed in Law by Governor Bill Richardson

CCAE applauds Governor Richardson for endorsing New Mexico's RPS in August 2003, and for his championship of this bill in the 2004 Legislative Session. CCAE also applauds New Mexico's Investor Owned Utilities (PNM, SPS, and El Paso Electric), and New Mexico Industrial Energy Consumers for their strong support of this bill, and especially PNM's efforts to help guide this bill through the session.

Sponsor(s): Senator Roman Maes

Bill Text: http://legis.state.nm.us/Sessions/04%20Regular/final/SB0043.pdf 

Background History and Provisions:

New Mexico Renewable Energy Portfolio (RPS): New Mexico’s Renewable Portfolio Standard, which requires investor owned electric utilities (coops and municipal utilities are exempt) to provide 10% renewable energy in their mix by 2011 (and 5% by 2006), was first crafted and adopted by the New Mexico Public Regulatory Commission (PRC) in December, 2003. The ruling also included provisions requiring the utilities to offer “green power” programs to their customers, in which customers who want to purchase green power can do so (and the utility must provide it) at a PRC approved premium.

The PRC’s ruling followed several years of public hearings and comment, and intense advocacy by the Coalition for Clean Affordable Energy (CCAE) and its member organizations, and other groups including ranchers from the Eastern Plains interested in wind power. The RPS component (but not the green power component) was at that time strongly opposed by all four of New Mexico’s investor owned utilities and various other parties.

During the 2003 State Legislative Session, several bills were introduced both for and against the RPS. In the end, legislation emerged that encouraged the development of renewables with little impact on the actual rule. Also during this session, a large, statewide, scientific poll found strong public support for the RPS rule in New mexico. Click here for an overall summary of New Mexico consumer interest in an RPS.

Following the 2003 Legislative Session, one of the investor owned utilities, El Paso Electric, challenged the RPS provision in State Supreme Court, claiming that the PRC lacked regulatory authority to impose an RPS. Other utilities, such as Public Service Company of New Mexico (PNM) and Southwestern Public Service (SPS), also criticized the RPS publicly. CCAE responded to these criticisms in the media, and following this, there was some questioning of the utilities position on an RPS versus voluntary green power programs by the editors of the Albuquerque Journal and the Santa Fe New Mexican.

Public controversy then died down, and CCAE and PNM then focused on negotiations for several months on the PNM's green power premium (tariff) for the Sky Blue Green Power Program. PNM and CCAE agreed on a tariff of 1.8 cents/kWh, and PNM agreed not to count these power sales towards their RPS requirements. PNM, notably, also did not join the El Paso Suit.

Then, following the electricity blackout in the Northeast, Governor Bill Richardson endorsed the RPS (in August 2003), and shortly afterwards, PNM publicly announced plans to attempt to “codify” the RPS at the Legislature in order to fix the percentages (so that the PRC could not suddenly increase them in the future at a whim), and to strengthen certain cost recovery requirements.

Following PNM’s announcement of their intention to have the RPS codified in statute, the Supreme Court and El Paso Electric agreed to delay hearing El Paso’s suit until after the Legislature considers an RPS bill, and negotiations began between CCAE, the utilities, the Richardson Administration, the New Mexico Attorney General's Office (AG), the Public Regulatory Commission (PRC), David Cohen (a bioenergy developer), and the New Mexico Industrial Energy Consumers (NMIEC). Initially, the PRC, AG, NMIEC, and Cohen strongly opposed the bill (up to an including the first two Senate Committee hearings). Finally, however, after an intense period of negotiations between the parties, a bill was crafted that satisfied everyone's concerns, and this bill was passed in the 2004 session. In the end, Public Service Company of New Mexico (PNM), Southwestern Public Service Company of New Mexico (SPS), and El Paso Electric, ALL publicly supported the legislation.

Changes to the original RPS

Tradable Credits: As with the original RPS, the new version allows credits to be traded among utilities to satisfy the RPS requirements, a mechanism intended to keep costs low for consumers and to make it easier for utilities (especially those that have little access to cheaper sources such as wind power) to comply. And as in the original, the renewable power associated with these credits must be delivered in-state, so that in-state development of renewables is emphasized.

Under the new legislation, however, the PRC may open up these credits to regional credit trading systems if the Commission deems that this is in New Mexico's interest. This change came in light of the fact that the California Energy Commission is developing a Western Regional system, and also because of the growing recognition that New Mexico can be a major renewable energy exporter. The credits can be weighted to promote diversity: The weighting of the original RPS will likely remain - wind and hydro get 1 credit per megawatt-hour, biomass and geothermal get two, and solar gets three.

Reasonable Cost Threshold: The new legislation requires, as a new consumer protection mechanism, that the PRC to establish a reasonable cost threshold, above which costs for renewables will not be passed onto consumers, and which will limit the amount of renewables a utility must provide if it finds it cannot procure renewables at prices below the threshold.

Cost Cap for Large Industrials: Another consumer protection mechanism is a new provision in the legislation that protects large industrial consumers with loads at a single service location exceeding 10 million kWhs (which corresponds to average loads of a little more than one megawatt - enough power for 1000 homes). These (large) consumers of electricity are protected from being charged more than $100,000 per year extra for renewables, or no more than a 2% increase in electricity charges, whichever is lower.

The idea behind this cap is that such users, unlike most smaller users, are much more likely to move to other states or overseas if their electricity rates become uncompetitive (i.e. they play in an inter-state market).  The cap of $100,000 per year, however, still translates into a significant amount of support for renewables - for example, it translates into buying the total output of 2.6 megawatts of wind generation when one assumes a capacity factor of 33% and an extra cost of 1.3 cents per kWh. At the same time, this cap precludes large industry from claiming that it was severely harmed by introduction of renewables - so some protection is afforded to the renewable energy proponents as well. Based on some information from PNM, CCAE estimates that this cap will effectively reduce the RPS target of 10% to approximately 9% with a renewables premium of about 1.3 cents/kWh. As renewables become cheaper, the effect of the cap on the actual amount of renewable power disappears (a crucial feature of a cost cap as opposed to a kWh cap that was identified during negotiations).

Impact of the RPS: CCAE estimates this RPS will result in between 500 to 600 megawatts of renewable energy generation to be built in New Mexico, enough to power roughly 200,000 homes on average. This will probably consist mostly of wind power (bringing hundreds of millions of dollars in economic development to the Eastern Plain’s area), with some solar, geothermal, and biomass based generation. This generation will offset approximately 1.5 million tons of carbon dioxide pollution per year (pollution that causes global warming), and significantly decrease water use by power plants. Besides promoting utility scale renewable energy generation, the RPS can in principle also directly benefit residential scale solar and biomass power if these sources are aggregated and credited for their contributions, something that CCAE hopes to promote once the RPS is fully secure.

Legislative History: On the way, it passed Senate Committees Committee, Senate Conservation, Senate Corporations and Transportation, and then the Senate (35-4), where a new version with some friendly amendments was introduced on the Senate Floor. It then passed House Energy and then the House (56-1).

Click Here for Other Energy Bills in this Session