The New Mexico Public Regulation Commission ("PRC") recently adopted a renewable energy portfolio requirement for electric utilities. See In the Matter of an Inquiry into Renewable Energy as a Source of Electricity, Final Order Adopting 17.9.573 NMAC, Utility Case No. 3619 (December 17, 2002) (the "Order"). The PRC adopted New Mexico Administrative Code Section 17.9.573 (the "Rule") over the objections of some utilities that the PRC lacked authority to impose a mandatory renewable energy portfolio.
The Rule specifically favors some forms of renewable energy over others. Utilities can satisfy the portfolio requirement with tradable renewable energy certificates.
The Rule requires electric utilities to "develop an energy portfolio appropriate to its suppliers and customers" that includes "a progressively greater percentage of service from renewable sources." By 2006, at least 5% of the total energy "distributed by a public utility to its retail New Mexico customers," must be generated by "renewable energy."
This renewable energy standard increases by 1% each year until 2011, when the standard is fixed at 10%. "Renewable energy" is defined to include energy generated by solar, wind, hydroelectric, geothermal and fuel cell technology, and to specifically exclude fossil fuel or nuclear energy.
The renewable energy standard can be satisfied with tradable renewable energy certificates. All transactions between public utilities and suppliers of renewable energy are required to be documented by such certificates. The certificates belong to the producers of renewable energy until "transferred by sale" to a public utility. They may be transferred separately from the electric energy represented by the certificate as long as the electric energy is metered in New Mexico. The energy need not necessarily be generated in New Mexico, but "[o]ther factors being equal, preference [must] be given to renewable energy generated in New Mexico."
Certificates are assigned values that are weighted differently depending on the type of renewable energy used to generate the electricity represented by the certificate. Each kilowatt hour generated by wind or hydroelectric technology receives a value of one kilowatt hour, each kilowatt hour generated by biomass, geothermal, landfill gas or fuel cell technologies receives a value of two kilowatt hours, and each kilowatt hour generated by solar technology receives a value of three kilowatt hours. Thus, as compared to other forms of renewable energy, the Rule favors solar technology and disfavors wind and hydroelectric technology.
Based on the Order, the PRC’s decision to assign greater weight to some forms of renewable energy than others was motivated largely by a desire to encourage diversified sources of electric generation. The PRC reasoned that hydroelectric power represented an inexpensive, mature technology that already accounted for one percent of electric supply, and reliance on hydropower to satisfy the renewable energy requirement would impede the development of new sources of renewable power. The Order notes that wind power also enjoyed a cost advantage over other renewable sources. In addition, reliance on wind power was considered less desirable because of its intermittent availability and because the best wind power locations tend to be at a significant distance from population centers, requiring upgraded or new transmission facilities. Solar power, on the other hand, could be located near concentrations of customers and therefore was thought to warrant greater incentive.
The Rule takes effect on July 1, 2003, and by November 1, 2003, utilities are required to submit a renewable energy plan for satisfying the renewable energy standard. Annual portfolio summaries are required, beginning July 1, 2004.