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History and Perspectives on New Mexico's Renewable Energy Portfolio Standard

In 1998, the initial push for a Renewable Energy Portfolio Standard (RPS) was begun by CCAE founders Linda Taylor and Robert Haspel, in conjunction with the Legislature’s efforts to deregulate electricity in New Mexico. The final legislation granted the Public Regulation Commission authority to "explore" the possibility of an RPS under the deregulated market.

Following the Session, the CCAE then advocated at the Public Regulation Commission (PRC) for an RPS for the deregulated market, and the PRC passed such a rule in 2001, requiring that the "standard offer" for customers who choose not to choose a power supplier must contain at least 5% renewable energy. You can read this RPS rule here: Renewable Portfolio Standard for Standard Offer Service.

Electricity deregulation in New Mexico was then repealed, following the California dereg debacle, but the Public Regulation Commission, with the support of the CCAE, decided to pursue an RPS for the regulated market. On Tuesday, December 17, 2002, following several years of efforts by the Commission, the CCAE, and many other participants, the New Mexico Public Regulation Commission (PRC) unanimously passed a historic ruling – a Renewable Portfolio Standard, or “RPS” for short. Twelve other states already had RPS rules at the time (see www.dsireusa.org for info on other states), and New Mexico’s new rule is among the best of these.

The new rule required that:

• All investor-owned utilities in New Mexico (note that coops are exempt) must begin phasing renewable energy into their mix, such that 5% of the energy they deliver is generated by renewable sources by 2006, and 10% by 2011.
• Eligible sources include wind, hydro, solar, geothermal, and biomass.
• Under the rule, to help promote source diversity, different sources receive different amounts of credit: Each kilowatt hour (kwh) of wind or hydropower is credited at 1 kwh, whereas each kwh of geothermal and biomass gets 2 credits, and a kwh of solar gets 3.
• The power must be metered in New Mexico to be eligible.
• Note that although hydropower is eligible, it is strictly limited to new hydro sources under 5 megawatts, which eliminates power from distant, large dams.

Also included in the rule were requirements for utilities to offer renewable energy to all those who request it at a price which will be agreed to by the utilities and the PRC. The latter is usually called “voluntary green-pricing” (note that its voluntary only for the consumer, not the utility). CCAE feels green-pricing can in fact be helpful in increasing the use of renewable energy, but that a true RPS component is both needed and ultimately much more effective. We also feel that an RPS is intrinsically more fair: The benefits of renewable energy, i.e. cleaner air, less global warming, etc, accrue to all ratepayers, so all ratepayers should contribute to paying for it just as they do for all other parts of the electricity system.

Although there was a lot of media work by utilities warning the public that the RPS could raise rates, CCAE, with some very careful analysis which was submitted to the PRC, estimated that it will likely raise rates by at most 3%, and that this increase will only occur after several years and only temporarily. In some states, RPS standards have actually decreased rates, especially where a large percentage of the mix is natural gas fired electricity generation. Today, in fact, some new wind farms have been built, above and beyond the RPS, just to offset natural gas-fired generation.

In our view,, the ruling was a huge step forward for New Mexico, and indeed the world, in moving towards sustainability. The 10% requirement might seem modest to many, but from the standpoints of cost, technology, and the political realities of our fossil fuel exporting state, it’s a pretty big step. More specifically, New Mexico’s electricity consumption from investor owned utilities is equivalent to roughly 1000 (firm, i.e. 24/7 continuous) megawatts of generating capacity. Ten percent of this is roughly 100 firm megawatts, which is equivalent to roughly 300 megawatts of wind or solar (assuming a 33% “capacity factor” – the fraction of the time that sun or wind is available). In terms of today’s dollars and cost of technology, this is about $300 million worth of wind, or $2 billion worth of solar! From another standpoint, this is equivalent to installing 300,000 one kilowatt PV systems, or 30,000 systems per year – an increase of about 3 orders of magnitude in the rate at which systems have been going in, and only one order from going all the way in one decade.

On the other hand, its true that the RPS doesn’t get us 100% renewable energy: The renewable energy advocacy community, however, does not view an RPS mechanism as a means to do that. A full transition will ultimately require a combination of market forces, environmental pressure, and also the widespread introduction of energy storage (i.e. a hydrogen economy). A strong RPS is a good political compromise that (hopefully!) gets those market forces going. This first step is also arguably the biggest – it simultaneously gears up both industry and the public, overcomes certain political roadblocks, and demonstrates that renewables can work if sufficient economies of scale and long term contracts are implemented.

At the time, we expected that most of the power installed under this new RPS will be wind, and possibly some geothermal power, biomass, and solar. In the long run, however, New Mexico would need between 200% and 400% (depending on energy efficiency improvements) of its current firm generating capacity to replace all of its nonrenewable energy consumption (including gas and oil). New Mexico, fortunately, overwhelmingly blessed with renewable energy resources, especially solar, compared to most other states. Our state therefore could, and probably will, become a major exporter of renewable energy for the US as a whole. A lot more generating capacity than the RPS provides will therefore be needed.

We also expected that most of the power installed under the new RPS will also likely be large scale (although smaller sources could contribute as well in theory). Despite this, we strongly feel that residential scale renewable energy sources are just as needed and useful and that they could eventually provide most or all of our baseline electricity supply and free up the larger sources such as wind and large scale solar and geothermal for hydrogen production to power transportation and to provide heating fuel. Thus, although some may understandably worry about the entry of big utilities into renewables, CCAE personally feels that the incredible amount of fossil fuels we need to replace, plus the severity and urgency of the environmental problems we are presently facing, means that the world will benefit most if all societal sectors, both utilities and individuals alike, do everything possible to advance renewables. Since the adoption of the PRC, the CCAE has in fact negotiated agreements to extend the RPS to distributed renewables. See here for more info on this.

The RPS for the deregulated market was first introduced at the PRC by PRC Commissioner Tony Schaefer, who had a particularly strong interest in geothermal development in southeastern New Mexico. It ultimately was the result also of efforts by the other Commissioners to further refine the rule and arrive at a consensus on it: especially noteworthy were the efforts of Commissioners Rory McMinn and Linda Lovejoy. CCAE was the primary consumer and environmental interest group involved in promoting the rule. We provided extensive official public comment and technical support, lobbied the PRC extensively, and undertook extensive efforts to inspire public comment to the PRC from consumers and other groups. The efforts by CCAE involved literally thousands of hours of both volunteer time by CCAE members and the full time efforts of at least three young CCAE outreach workers (who were funded with money from a number of small hard won grants). These efforts appear to have succeeded, despite the fact that this task often seemed hopeless and endless.

The CCAE people who were primarily involved include outreach workers Amy Welch, Shannon Lumpkins, and Jeremey Mooneyham, CCAE co-chairs Ben Luce (New Mexico Solar Energy Association) and Gail Ryba (Rio Grande Chapter of the Sierra Club), CCAE outreach representative and energy advocate Charles Bensinger, CCAE attorney Letty Belin, and CCAE member organization representatives Susan Innis and David Berry (Land and Water Fund of the Rockies), Jean Bassette (NM Public Interest Research Group), John Bartlitt (NM Citizens for Clean Air and Water), and Don Hancock (Southwest Research and Information Center).

CCAE's first round comments on the proposed rule is here.

Summary of the Public Hearings: A first public hearing to receive oral comment took place on May 15, 2002, at the Commission Offices at Marian Hall, 224 East Palace Avenue, Santa Fe, NM. All utilities and coops that testified opposed the RPS component of the proposed rule, although some utilities such as PNM commented on how an RPS should be structured if it comes to pass. Most utilities supported the green pricing component. Many parties testified in favor of the RPS component. There was widespread criticism of the 50% from any one source component, which was eventually dropped. Several parties also challenged the jurisdiction of the PRC to impose an RPS.

A second public hearing took place on November 14, 2002 following a new round of comments on a second draft. The PRC then publicly discussed the rule at several meetings hence, allowing some limited commentary from observing parties. A primary object of contention at the end was a proposed credit weighting system only gave wind power 50% credit. The credits were rescaled to the values quoted above, and the final rule was adopted on December 17, 2002.

More Detailed Summary of the First Public Hearing: Numerous parties attended an gave comment. Below is a very brief description of who testified and what they expressed, and this should serve as an introduction for those unfamiliar with who participates in these meetings. Disclaimer: Exact quotations are not given, and these description are nowhere near complete. These are just to give the reader a rough overview of who supports what. Those interested in an exact transcript or its contents should contact the PRC. A PRC stenographer was present at the hearing.

•  CCAE Groups: Gail Ryba (CCAE/Sierra Club) - General supportive stance for an RPS, introduction of other members. Ben Luce (CCAE/NMSEA) - Free Trade/Mandate issues, detailed stances of CCAE, Jeremey Mooneyham (CCAE) - Consumer Interest, David Berry (Law Fund) - CCAE cost estimates, Charles Bensinger (CCAE) - Wind Power Development Opportunities for New Mexico, Shannon Lumpkin (NMPIRG) - Domination of Conventional Sources and Opportunities for Wind, John Bartlit (NM Citizens for Clean Air and Water) - Advantages of a Diversity of Sources.
• Interfaith Climate Change and Energy Network: Deborah Friedmann. Supports the RPS.
• Texas-New Mexico Utility: Donald Salazar: Questions PRC authority to impose RPS.
• Sierra Club 7000 members support the proposed RPS.
• Southwestern Public Service Company: David Hudson. Opposed RPS and ten-year contract requirement. Cited their green power program.
• Robert Lumpkin: Rancher. Supports RPS, cited economic development opportunities.
• El Paso Electric: Stacy Goodwin. Challenged PRC authority to impose RPS. Suggested evidentiary hearings would be required.
• Boeing Corp: Dwight Odland. Supports RPS and 50% rule. Described how concentrating solar power technology might be useful for New Mexico due to high capacity factors and job creation.
• New Mexico Sustainable Energy Collaborative: Chris Wentz. Described support for green pricing programs by Collaborative, and Collaborative's neutral stance on RPS due to lack of consensus.
• Native American Development Group: Jean Keluchi. Supports RPS, and also suggested PRC should not take action that limits any one source.
• Southwest Resource Consultants: Jim Maynard. Supports 50% rule, and argued that this could help support biomass electricity that could help state remove excess juniper trees and salt cedar.
• Vulcan Power: Steve Munson. Cited success of 12 year old mandate for geothermal in Nevada, supports long term contracts.
• Catamount (wind company): (?). Supports RPS, cites Texas and other states. Opposes 50% provision. Stresses need to take into account decreases in fossil cost as well due to lowering of demand, and stresses benefits of long term contracts.
• Renewable Energy Partners: Richard Mason. Supports RPS, cites maturity of technology, dwindling natural gas reserves. Mentioned benefits of concentrating solar power as well, especially if integrated with conventional technologies. Believes Commission has authority to impose an RPS.
• Stirling Energy Systems: Lori Glouer. Supports RPS - need 15 year contracts or better. Notes that some states had workshops held after RPS was adopted to work out details.
• Sacred Power Corp: David Melton. Supports RPS. Cites success in other states.
• Utilities Shareholder Alliance: Bruce Barnaby. 69% of those responding to survey did support a renewable energy standard. 51% supported a mandatory standard, and 50% would be willing to pay $1 more per month.
• Enxco: Steve Yasco (sp?). Supports RPS - helps to bring about long term contracts (minimum of 20 years desired), give a strong negotiating position for renewable energy suppliers.
• New Mexico Industrial Energy Consumers (NMIEC): Steve Michael. Concerned about cost. Supports voluntary programs over RPS. Supportive of CCAE pricing recommendations.
• New Mexico Electric Coop Association: Kevin Groenwald. Supports voluntary programs over RPS.
• Sandia Labs: Roger Hill. Cites requirements for federal facilities to buy renewables, mentioned triggering second clovis turbine through purchase of wind by Carlsbad facility. Message: Sandia needs mechanisms that will enable federal facilities to satisfy renewable energy requirements at sufficient economies of scale.
• PNM: Blake Ridgeway. Supportive of renewable energy in general. Suggests that voluntary programs are more appropriate, and that 50% provision may reduce the economies of scale significantly.
• CEED (Center for Energy and Economic Development): Paul Seby. Stated that they were strongly committed to renewables, but then basically challenged the authority of the PRC to impose and RPS. Stated that a previous NM PUC had tried something like this  and that CEED challenged them and won.
• Florida Power and Light: Sudene Kelly. Opposes 50% provision, on basis that it prevent economies of scale. Asks Commission to eliminate any uncertainty as to whether projects currently under discussion and near finalizing will be eligible (they are likely developing a large project with a local utility).
• Attorney General's Office: Cost and impact on stranded costs should be a principle concern.
• New Mexico Energy Conservation and Management Division: Chris Wentz. Department strongly favors RPS. Suggests that consumer price impacts must be considered, but that these should also take into account economic development opportunities.
• Co-ops: Dan Mishare. Some coops are offering green power through green power tariffs.

ALL of the investor owned utilities and several other groups associated with shipping coal or using large amounts of electricity consistently opposed the RPS part of the new rule, and favored only the voluntary component.

Immediately after adoption in December 2002, some of the utilities stated publicly that they “can work with the rule”, which we found very encouraging.  Unfortunately, a few months later, some of them attacked the ruling both publicly and in court. CCAE responded to the public attacks with editorials rebutting the utility attacks. The newspaper editors then echoed some of CCAE's comments in their own editorials, questioning why people should support PNM's green power programs if there was going to be an RPS that would serve all interests equally.

Midway through the New Mexico 2003 Legislative Session (Jan 21-Mar 22, 2003) Senator Michael Sanchez and House Speaker Ben Lujan introduced identical (non-binding) memorials (SJM 51 and HJM 97) that urged the Public Regulation Commission to suspend the Renewable energy rule and directed the Legislature to study the matter more.  SJM 51 passed the Senate (30-9), but died in the House Energy and Natural Resources Committee. The language to suspend the rule in HJM 97 was removed, and the date for a final report was moved from January 2005 to January 2004.

Senator Richard Romero introduced a countering bill, SB 836, which would have given the PRC authority to adopt an RPS and a number of other renewable energy related policies. This was tabled in the Senate Conservation Committee as well, but it helped to counter the anti-RPS bills.

On Thursday, February 27, 2003, in the midst of these legislative events, CCAE released the results of a scientific, statewide poll that found an astounding 85% of New Mexican's support the RPS rule. The Poll was funded by the National Resources Defense Council (NRDC), and conducted by GQR Research, the same firm that conducts polls for Bill Richardson, Bill Clinton, and many other prominent politicians. This is largest and most comprehensive poll on interest in renewable energy in New Mexico conducted to date.  Results of the poll, which also covered the use of dry-cooling technology for power plants and global warming, can be found at: http://www.sric.org/NRDCNM022503m2.pdf

Following the successful defense of the RPS at the Legislature, the CCAE proceeded to (successfully) negotiate terms for a green power program with PNM, which included an understanding that PNM would not continue to publicly attack the RPS. CCAE also rallied community groups from across the state to urge the Governor to support the RPS.

Following these efforts and the great Northeast blackout in 2003, Governor Bill Richardson endorsed the RPS. PNM then immediately announced plans to attempt to “codify” the RPS at the Legislature, seeking to strengthen certain cost recovery requirements and fix the percentages. Following PNM’s announcement of their intention to have the RPS codified in statute, the Supreme Court and El Paso Electric agreed to delay hearing El Paso’s suit until after the Legislature considers an RPS bill, and negotiations began between CCAE, the utilities, the Richardson Administration, the New Mexico Attorney General's Office (AG), the Public Regulatory Commission (PRC), David Cohen (a bioenergy developer), and the New Mexico Industrial Energy Consumers (NMIEC). Initially, the PRC, AG, NMIEC, and Cohen strongly opposed the bill (up to an including the first two Senate Committee hearings). Finally, however, after an intense period of negotiations between the parties, a consensus bill was crafted, and this bill was passed in the 2004 session. In the end, Public Service Company of New Mexico (PNM), Southwestern Public Service Company of New Mexico (SPS), and El Paso Electric, all publicly supported the legislation.

The bill passed, and was signed into law on March 4, 2004. It can be found here:

Changes to the original RPS were as follows:

Tradable Credits: As with the original RPS, the new version allows credits to be traded among utilities to satisfy the RPS requirements, a mechanism intended to keep costs low for consumers and to make it easier for utilities (especially those that have little access to cheaper sources such as wind power) to comply. And as in the original, the renewable power associated with these credits must be delivered in-state, so that in-state development of renewables is emphasized.

Under the new legislation, however, the PRC may open up these credits to regional credit trading systems if the Commission deems that this is in New Mexico's interest. This change came in light of the fact that the California Energy Commission is developing a Western Regional system, and also because of the growing recognition that New Mexico can be a major renewable energy exporter. The credits can be weighted to promote diversity: The weighting of the original RPS will likely remain - wind and hydro get 1 credit per megawatt-hour, biomass and geothermal get two, and solar gets three.

Reasonable Cost Threshold: The new legislation requires, as a new consumer protection mechanism, that the PRC to establish a reasonable cost threshold, above which costs for renewables will not be passed onto consumers, and which will limit the amount of renewables a utility must provide if it finds it cannot procure renewables at prices below the threshold.

Cost Cap for Large Industrials: Another consumer protection mechanism is a new provision in the legislation that protects large industrial consumers with loads at a single service location exceeding 10 million kWhs (which corresponds to average loads of a little more than one megawatt - enough power for 1000 homes). These (large) consumers of electricity are protected from being charged more than $100,000 per year extra for renewables, or no more than a 2% increase in electricity charges, whichever is lower.

The idea behind this cap is that such users, unlike most smaller users, are much more likely to move to other states or overseas if their electricity rates become uncompetitive (i.e. they play in an inter-state market).  The cap of $100,000 per year, however, still translates into a significant amount of support for renewables - for example, it translates into buying the total output of 2.6 megawatts of wind generation when one assumes a capacity factor of 33% and an extra cost of 1.3 cents per kWh. At the same time, this cap precludes large industry from claiming that it was severely harmed by introduction of renewables - so some protection is afforded to the renewable energy proponents as well. Based on some information from PNM, CCAE estimates that this cap will effectively reduce the RPS target of 10% to approximately 9% with a renewables premium of about 1.3 cents/kWh. As renewables become cheaper, the effect of the cap on the actual amount of renewable power disappears (a crucial feature of a cost cap as opposed to a kWh cap that was identified during negotiations).

Legislative History: On the way, The RPS passed two Senate Committees Committee, Senate Conservation, Senate Corporations and Transportation, and then the Senate (35-4), where a new version with some friendly amendments was introduced on the Senate Floor. It then passed House Energy and then the House (56-1).

The CCAE has since participated in the implementation of the RPS, including its extension to distributed solar sources. These proceedings covered several topics - a rulemaking to conform the PRC's rule with the new law, and proceedings to determine a "reasonable cost threshold" for different renewable sources, as required by the new law.

Impact of the RPS: CCAE estimates that the RPS will ultimately result in between 500 to 600 megawatts of renewable energy generation to be built in New Mexico, enough to power roughly 200,000 homes on average. This will probably consist mostly of wind power, bringing hundreds of millions of dollars in economic development to the Eastern Plain’s area, with some solar, geothermal, and biomass based generation. This generation will offset approximately 1.5 million tons of carbon dioxide pollution per year (pollution that causes global warming), and significantly decrease water use by power plants. Besides promoting utility scale renewable energy generation, the RPS will also directly benefit residential scale solar and biomass power generation.

Progress: New Mexico now has approximately 400+ megawatts of wind power operating or nearly completed, a distributed solar program, and two biomass projects are in planning stages.