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Cost Recovery for Renewable Energy & DSM: A New Mexico Regulatory Perspective

Cost Recovery for Renewable Energy & DSM: A New Mexico Regulatory Perspective. Jason Marks, Esq. New Mexico Public Regulation Commission February 7, 2008. Outline. Renewable Energy Opportunities Technology Economics Policy Cost Recovery for RE Cost Recovery for DSM.

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Cost Recovery for Renewable Energy & DSM: A New Mexico Regulatory Perspective

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  1. Cost Recovery for Renewable Energy & DSM: A New Mexico Regulatory Perspective Jason Marks, Esq. New Mexico Public Regulation Commission February 7, 2008

  2. Outline • Renewable Energy Opportunities • Technology • Economics • Policy • Cost Recovery for RE • Cost Recovery for DSM

  3. Wind Energy – Prime Mover in R.E. • Approx 15,000 MW installed capacity (2007) • 2,500+ MW added/year 2005-2007 • Utility ownership has begun • Cost $23 - $60/mwh after PTC • PTC = $18/mwh • Prices increasing due to materials, demand, • Exchange Rate

  4. Wind with Gas Backup: Good for Utilities, Good for Ratepayers

  5. Wind with Gas Backup – Capacity + Reduced exposure to Gas Pricing Pressure

  6. Wind Typically Distant from Load

  7. Albuquerque HIGH PLAINS EXPRESS SunZia WYOMING High PlainsExpress Energy Resource Zones Dave Johnston LRS Pawnee/ Story COLORADO Limon Midway Comanche Lamar Holcomb NEW MEXICO ARIZONA Gladstone Phoenix Socorro Tucson 7

  8. Solar Technologies • Photovoltaic (PV) Panels: • 1 – 3 kw home systems common (~$18,000 installed home system = 25¢/kwh) • Commercial (10 – 100 kw) • Major projects (4 – 8 MW) Concentrated Solar Power (CSP) • 10-15¢/kwh for 100MW+ projects • Thermal Storage/Backup Possible • Kramer Junction (1980s) 350 MW, Nevada Solar One (2007) 64 MW, Spain

  9. CSP Revenue Stream w/ Utility Ownership

  10. State Renewable Portfolio Standards Source: dsireusa.org/Sept 2007 MN: 25% by 2025 (Xcel: 30% by 2020) ME: 30% by 2000 10% by 2017 - new RE VT: RE meets load growth by 2012 *WA: 15% by 2020 ND: 10% by 2015 • NH: 23.8% in 2025 WI: requirement varies by utility; 10% by 2015 goal MA: 4% by 2009 + 1% annual increase MT: 15% by 2015 OR: 25% by 2025(large utilities) 5% - 10% by 2025 (smaller utilities) RI: 16% by 2020 CT: 23% by 2020 • *NV: 20% by 2015 IA: 105 MW • NY: 24% by 2013 • CO: 20% by 2020(IOUs) *10% by 2020 (co-ops & large munis) IL: 25% by 2025 • NJ: 22.5% by 2021 CA: 20% by 2010 • PA: 18%¹ by 2020 MO: 11% by 2020 • MD: 9.5% in 2022 • NC: 12.5% by 2021(IOUs) 10% by 2018 (co-ops & munis) • AZ: 15% by 2025 • *DE: 20% by 2019 • DC: 11% by 2022 • NM: 20% by 2020(IOUs) • 10% by 2020 (co-ops) *VA: 12% by 2022 TX: 5,880 MW by 2015 HI: 20% by 2020 State RPS State Goal Solar water heating eligible

  11. New Mexico Renewable Energy Act: NMSA § 62-16-1 2004 Legislature, Replaced RPS by Rule • R.E.: solar, wind, biomass, geothermal • Scope: IOUs • RPS 5% of retail sales in 2006 10% of retail sales in 2011 • Large Customer Limits, Commission Sets RCT • Annual Procurement Plans • Diversity SB 418 (2007) RPS Amendments: 15% by 2015, 20% by 2020, Co-ops 5% by 2015

  12. Utilities Respond to N.M. Renewable Portfolio Standard

  13. 2007 RPS Diversity Rules • R.E. Act requires portfolio diversity; new admin rule at NMAC 17.9.572.7 & 572.14 provides specific guidance • Technology weighting (ineffective) eliminated • Portfolio Diversity Targets for 2011 • At least 20% from Solar, 20% from Wind, 20% from Biomass/Geothermal • 1.5 % from Distributed Generation, increasing to 3% in 2015

  14. Utility Cost Recovery for Renewable Energy Projects • Generally, per statute • E.g., New Mexico Renewable Energy Act § 62-16-6 NMSA • In re Application of Detroit Edison Company, 740 N.W.2d 685, 696 (Mich. App. 2007) (Comm’n exceed statutory authority in allowing utility to impose renewable energy fee on all customers, when legislature only authorized voluntary programs) • N.R.S. 704.7821.7(B) provides for recovery indirect costs of imputed debt due to R.E. PPAs.

  15. Issues for Cost Recovery for R.E. in New Mexico • Reasonable costs shall be recovered “through the rate making process” Rate case • Requires valuation of Renewable Energy Attribute (REC) – unrecovered historical costs treated as regulatory asset ? Fuel Clause for RE acquired via PPA x Fuel clause for stand-alone RECs

  16. NMIEC v. NMPRC, 142 N.M. 533, 168 P.3d 105, 2007 -NMSC- 053 • El Paso Electric met RPS with REC purchase (no energy) from PNM • Sought to recover costs through fuel and purchased power adjustment clause (rider) • Least costly for customers b/c no carrying costs • NMSC: “ratemaking process” includes both rate cases and automatic adjustment clauses, depending on type of cost • But FPPAC statute only allows for recovery of fuel or actual purchased power costs, and Comm’n erred in determining RECs to be “closely related to purchased power.”

  17. Cost Recovery for DSM • Program costs shall be recovered through tariff riders – NM Efficiency Use of Energy Act § 62-17-6 NMSA • Costs guaranteed to be recovered timely, but no opportunity for return • Decreased throughput threatens recovery of fixed costs • Aggressive EE programs pose challenge of rate rider “sticker shock” and pushback

  18. Cost recovery for DSM • Removing barriers to utility “investment” in DSM • 2007: NMPRC Rejects PNM gas decoupling proposal as too broad • 2008: EUE Act Amendments

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