On April 14, 2004, New Mexico Governor Bill Richardson issued Executive Order No. 2004-019, declaring New Mexico the “Clean Energy State” and creating a “Clean Energy Development Council” comprised of officials from various existing energy-related departments for the purpose of recommending “significant clean energy policy measures” to be presented to the legislature. The executive order came shortly after Governor Richardson signed Senate Bill 43 (the “Law”) into law on March 8, 2004, which established New Mexico’s renewable energy portfolio standard.

Under the Law, renewable energy must comprise no less than five percent of each public utility’s total retail sales to New Mexico customers by January 1, 2006. The renewable portfolio standard increases by one percent annually until January 1, 2011, at which time the renewable portfolio standard remains fixed at ten percent.

“Renewable energy” is defined to include electric energy generated by solar, wind, hydropower and geothermal resources, fuel cells that are not fossil fueled, and biomass resources such wood and landfill gas. “Renewable energy” specifically excludes electric energy generated by fossil fuel or nuclear energy.

Renewable energy resources that are already in a public utility’s electric energy supply portfolio are included in determining compliance with the renewable portfolio standard. Also, the Law directs the New Mexico Public Regulation Commission (the “Commission”) to establish a system of tradable renewable energy certificates (“REC”) representing the environmental attributes of electricity generated by renewable energy resources that can be used by a public utility to satisfy the renewable energy portfolio standard.

The requirements and procedures to be established concerning RECs must provide that RECs are owned by the generator of the renewable energy unless (1) the RECs are transferred to the purchaser of the energy by specific agreement with the generator, (2) the generator is a qualifying facility under the Public Utility Regulatory Policies Act of 1978, in which case the REC’s are owned by the public utility that purchased the renewable energy unless retained by the generator by specific agreement, or (3) the renewable energy was purchased under a contract that was in effect before January 1, 2004, in which case the RECs are owned by the purchaser for the term of the contract.

The Law recognizes an exception to the renewable portfolio standard. Public utilities are not required to incur costs for renewable energy above a “reasonable cost threshold” to be established by the Commission. In determining the reasonable cost threshold, the Commission is required to determine factors such as the price of renewable energy, the transmission and interconnection costs required to deliver renewable energy to retail customers, the impact of the cost of renewable energy on retail customer rates, and public benefits and other factors that the Commission deems relevant. The reasonable cost threshold may be modified by the Commission. The reasonable cost threshold does not operate to delay the annual increases in the renewable portfolio standard, and the public utility must meet the applicable renewable portfolio standard whenever it is able to do so at or below the reasonable cost threshold.

Robert A. Olson is a partner in the law firm of Brown, Olson & Gould P.C. which maintains a nationwide practice in energy law, public utility law and related commercial transactions. He can be reached at:

Brown, Olson & Gould, PC
2 Delta Drive, Suite 301
Concord, NH 03301

rolson@bowlaw.com | (603) 225-9716