The New Mexico Public Regulation Commission approved substantial changes Wednesday to the way utilities calculate costs for complying with the state’s renewable portfolio standard.
The commission voted 3-2 to retain diversity requirements that obligate utilities to include solar and other types of energy on their system in addition to less expensive wind generation.
But to make compliance easier, utilities now will receive double the credit for every kilowatt hour of solar they procure, and triple the credit for other types of energy, such as geothermal or biomass.
The commission also broadened the list of potential costs and savings that must be considered when calculating the price tag for renewable energy procurements to better determine if utilities are staying within a cost cap, or reasonable cost threshold, that aims to protect ratepayers.
Commissioners Patrick Lyons and Ben Hall, both Republicans, and Democrat Theresa Becenti-Aguilar, supported the changes. Commissioners Valerie Espinoza and Karen Montoya, both Democrats, opposed them.
The changes drew praise from some groups that energetically had pushed for reforms to ease the renewable portfolio standard’s impact on consumers.
But some environmentalists and clean-energy advocates said the changes will weaken the portfolio standard significantly by restricting diversity on the grid and by lowering the overall amount of clean electricity utilities will need to generate.
Under the RPS, public utilities must derive at least 10 percent of their total electricity from renewable sources this year, 15 percent by 2015 and 20 percent by 2020. In addition, under the PRC’s diversity rules, at least 30 percent of their renewable energy must come from wind generation, 20 percent from solar and 5 percent from “other” sources.
But by doubling the credits that utilities receive for solar and tripling what they earn for things like geothermal, companies now will need to add much less of those resources to their systems, and they will be held to a lower renewable standard overall, said Chuck Noble, attorney for the Coalition for Clean Affordable Energy.
“The commission essentially said that utilities now only have to generate half as much solar energy than they otherwise would, and one-third as much electricity from ‘other’ sources,” Noble told the Journal. “Apart from weakening diversity, that means reducing the amount of renewable energy utilities actually need to produce to meet the renewable portfolio standard.”
Camilla Feibelman, director of the Sierra Club Rio Grande Chapter, said the commission ignored public demands to leave the renewable cost rule intact. About 100 residents and small businesses participated in public hearings this year opposing proposed changes, and about 1,300 others submitted written comments to commissioners, she said.
“This was an end run around public opinion,” Feibelman told the Journal. “They will now give more credits to the utilities for less renewable energy. It will hurt the state’s solar industry in particular.”
Supporters, however, said the rule changes will help ratepayers, because utilities no longer will be forced to impose expensive resources on consumers.
“We’ve been fighting for this for the last four years,” said Peter Gould, general counsel for industrial consumers. “The changes in the diversity rules will allow the market to operate efficiently, because utilities can now make decisions based on economics rather than arbitrary formulas and quotas.”
Gould said the commission’s decision to expand the factors used to calculate the cost of renewables also will benefit consumers.
Until now, utilities were required to include savings from avoided purchases of fossil fuels, plus avoided costs of building new fossil fuel plants, when tabulating the end-cost of establishing a new renewable generation facility.
Now, however, they must consider both the savings and potential increased costs caused by changes to the entire system. That includes everything from existing generation, transmission and distribution to operation and maintenance expenses and costs of keeping backup energy available for when the wind and solar facilities aren’t producing electricity.
“It will now be more difficult to calculate, but I’m in favor of the new language so that we account for everything to know the full costs of renewable energy,” Gould said.
Feibelman and Noble said their organizations need to study the new cost-calculation language before analyzing its impact.