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PRC renewable-cost issue flares up anew

How utilities determine the cost of renewable energy that can be included in customer rates is an continuing debate the Public Regulation Commission ultimately will decide. These turbines are located at the New Mexico Wind Energy Center. (Journal File)
How utilities determine the cost of renewable energy that can be included in customer rates is an continuing debate the Public Regulation Commission ultimately will decide. These turbines are located at the New Mexico Wind Energy Center. (Journal File)
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Rules adopted last December to undergo yet another review

Copyright © 2013 Albuquerque Journal

Déjà vu!

For the third time since 2008, the state Public Regulation Commission is bogged down in a contentious debate over how to calculate the costs of renewable energy.

Last December, the PRC approved a new method for utilities to determine the costs of complying with the state’s renewable portfolio standard. That year-end vote ended nearly five years of often-acrimonious debate that dragged on through two lengthy review processes, the latest of which lasted 18 months, from mid-2011 to last December.

But this spring, the commission voted to reopen the rule-making process again, based on requests by the state Attorney General’s Office and industry groups to rehear the case.

Now, environmentalists and renewable-energy advocates adamantly are demanding that the commission reject outright any changes to the rule.

This Public Service Company of New Mexico solar generating station is at the company’s natural-gas peaking power plant just southwest of Paseo del Norte and Jefferson NE.

This Public Service Company of New Mexico solar generating station is at the company’s natural-gas peaking power plant just southwest of Paseo del Norte and Jefferson NE.

“This is a huge waste of the public’s time and energy,” said Camilla Feibelman, director of the Sierra Club Rio Grande Chapter. “The commission has engaged over the last two years in lengthy public hearings, comments and testimony that ended with a vote on the rule. The public has to wonder why they’re investing this time all over again.”

Getting it right

Commissioners say they want to make sure they get it right, given that the rule will have a direct bearing on how much consumers pay for their electricity as utilities struggle to add renewables to their systems.

“We’re trying to enhance the process to make sure it’s fair for everyone,” said Commissioner Valerie Espinoza, who joined the PRC in January. “It’s a delicate process. I’ll do what’s right in the end for consumers, because I ran on a platform of looking out for people’s pocketbooks.”

The December rule sets guidelines for how utilities should choose renewables to comply with the portfolio standard without violating a cost cap, or reasonable cost threshold, which limits annual revenue recovery for clean-energy procurements to 2.25 percent now and 3 percent after 2015.

Under the portfolio standard, public utilities must derive at least 10 percent of their electricity from renewable sources this year, 15 percent by 2015 and 20 percent by 2020.

In addition, the PRC’s December rule obligates utilities to diversify their renewables, with at least 30 percent from wind power, 20 percent from solar and 5 percent from other sources, such as geothermal energy.

Valerie Espinoza: “It’s a delicate process”

Valerie Espinoza: “It’s a delicate process”

Cost concerns

The AG’s office and New Mexico Industrial Energy Consumers want those diversity requirements eliminated from the rule because, they say, it forces utilities to buy more-costly electricity – such as solar rather than less-expensive alternatives like wind – thus driving up charges on consumer bills.

“We think the time has come to set the diversity requirements aside altogether,” said Peter Gould, general counsel for industrial consumers.

The commission also is considering eliminating a clause in the December rule that requires utilities to include savings from avoided construction of fossil-fuel plants and other infrastructure when calculating the net costs of renewable energy.

Public Service Company of New Mexico and others say such projected savings are speculative and that only avoided purchases of fossil fuels should be included when tabulating renewable procurement costs.

“People see the impact of avoided fuel costs directly on their bills, so calculating things on that basis makes the whole process less contentious,” said Gerard Ortiz, PNM vice president for regulatory affairs.

On the other hand, PNM supports retaining diversity requirements in the rule, because the law that created the renewable portfolio standard calls for energy diversification.

PNM wants diversity

“If you don’t have guidelines that provide a framework for what diversification means, then basically every renewable procurement plan will be a big free-for-all,” Ortiz said. “Some will say fully diversified means 65 percent solar, and others will say it’s just 1 percent. It leads to huge, unproductive arguments.”

Steven Michel: “These are really bad proposals”

Steven Michel: “These are really bad proposals”

In addition, PNM has shown that it can meet the diversity mandates while staying within the cost cap. The company’s renewable procurement plan for next year, which it filed July 1 with the PRC, will increase its solar generating capacity by 30 percent and its wind energy by 50 percent, raising its total renewable generation to the 15 percent required by 2015. Nevertheless, the costs will remain under the 3 percent cap for both next year and beyond.

Meanwhile, environmentalists and renewable advocates want the December rule to remain as is. Eliminating diversity mandates could lead to an overload of cheap resources such as wind on utility systems, they say. And ignoring avoided costs for plant and infrastructure construction makes renewables appear more expensive than they really are.

“These are really bad proposals that if adopted would set us back on renewable development in the state,” said Steve Michel, chief counsel for Western Resource Advocates. “I’d like the commission to simply scrap them and continue with the current rule.”

More than 600 members of the Sierra Club have filed comments with the PRC opposing the changes, Feibelman said.

Commissioner Espinoza said her office alone has received more than 300 emails.

“I’ll consider the public’s concerns very seriously,” Espinoza said. “There’s a lot of pressure to leave the rule as is, but I also have to look at the costs.”

The commission is scheduled to vote on the rule changes Sept. 10.

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