New Mexico’s new community solar program is moving forward, despite pending issues with the state’s regulated electric utilities, plus a Supreme Court challenge by one utility against program rules and regulations.
New Mexico is now the 21st state to join the nation’s emerging community solar market, after Gov. Michelle Lujan Grisham signed enabling legislation in 2021 to allow independent developers to generate electricity for sale to local consumers within the service territories of New Mexico’s three regulated utilities — Public Service Co. of New Mexico, El Paso Electric and Southwestern Public Service.
The law required the Public Regulation Commission to establish rules and regulations to govern the new program, and the PRC’s new rules took effect last July, following a year of public hearings.
But the commission is now struggling to address a myriad of issues raised by all three utilities as PRC staff work out the financial and administrative mechanics of integrating community solar projects into the utilities’ grids.
That’s a complicated process, because community solar developers won’t sell electricity directly to consumers. Rather, all generation is sent to the utilities, which then credit the value of that electricity on the monthly bills of consumers who “subscribe” as participants in community solar projects and pay a monthly fee to the developers for a portion of the energy produced.
But the utilities must also be compensated for electric distribution costs when managing the additional solar power on their grids, and for administering the billing-and-crediting process for solar project subscribers. The companies and PRC staff are now haggling over adequate compensation, including what utility charges are permissible.
The PRC’s rules, for example, prohibit the utilities from charging transmission costs to solar subscribers above and beyond general transmission costs paid by all utility customers connected to their grids.
That’s because the utilities will be compensated for any additional, direct electricity distribution costs incurred as consumers subscribe to community solar projects, according to the PRC. And, since the solar facilities will generally be located near customers, any rise in general transmission costs will be marginal.
But the utilities are wary of non-community solar customers potentially subsidizing solar subscribers through increased transmission or other grid-related expenses.
Southwestern Public Service directly appealed the PRC’s rules at the state Supreme Court last year in part because of the dispute over transmission costs.
El Paso Electric and PNM have filed amicus briefs in that case. But rather than legally dispute the PRC’s new rules, they are seeking commission clarification through additional hearings to clearly identify permissible charges, establish adequate compensation, and resolve other technical issues.
“We need better clarification,” PNM regulatory affairs officer Adam Alvarez told the Journal. “We’re not fighting this. We support community solar.”
Working out the pending issues is critical, because dozens of community solar projects could eventually be built in all three utility service territories, with many thousands of consumers participating as subscribers.
The first tranche of community solar development is limited to a cumulative total of 200 megawatts through year-end 2024. That includes 125 MW to start in PNM territory, 45 MW under SPS, and 30 MW in EPE’s service area.
But in program administrator InClime Inc.’s first request for proposals, which closed in February, energy developers submitted bids to build 1.7 gigawatts of capacity through 404 different projects spread throughout all three utility territories. That includes:
• 219 project bids for 926 MW in PNM’s area
• 136 bids for 598 MW under SPS
• 49 bids for 222 MW in EPE’s territory
If only a fraction of those projects ever get built, it could potentially draw hundreds of thousands of New Mexicans into the community solar program.
One MW equals 1,000 kilowatts, and, according to the World Resources Institute — a global research firm focused on energy — the average residential community solar subscription in the U.S. is about three kilowatts in size, saving residential customers about 10% in electricity costs over the life of the subscription.
Using that average subscription size, even with the initial 200 MW program cap, nearly 67,000 potential subscriptions could become available for New Mexico consumers, according to the PRC.