SB0535

SENATE BILL 535

50th legislature - STATE OF NEW MEXICO - first session, 2011

INTRODUCED BY

William H. Payne

AN ACT

RELATING TO UTILITIES; AMENDING SECTIONS OF THE RENEWABLE ENERGY ACT TO PROVIDE REASONABLE COST THRESHOLDS THAT ARE NO MORE THAN TWO PERCENT OF A CUSTOMER'S AGGREGATED UTILITY BILL; PROVIDING FOR A SCHEDULE FOR FILINGS OF RENEWABLE ENERGY PROCUREMENT PLANS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1. Section 62-16-2 NMSA 1978 (being Laws 2004, Chapter 65, Section 2, as amended) is amended to read:

"62-16-2. FINDINGS AND PURPOSES.--

A. The legislature finds that:

(1) the generation of electricity through the use of renewable energy presents opportunities to promote energy self-sufficiency, preserve the state's natural resources and pursue an improved environment in New Mexico;

(2) the use of renewable energy by public utilities subject to commission oversight in accordance with the Renewable Energy Act can bring significant economic benefits to New Mexico;

(3) public utilities should be required to include prescribed amounts of renewable energy in their electric energy supply portfolios for sales to retail customers in New Mexico by prescribed dates if those amounts can be procured within the limits imposed by the reasonable cost threshold;

(4) public utilities should be able to recover their reasonable costs incurred to procure or generate energy from renewable energy resources used to meet the requirements of the Renewable Energy Act;

(5) a public utility should have incentives to go beyond the minimum requirements of the renewable portfolio standard if those incentives can be provided within the limits imposed by the reasonable cost threshold;

(6) public utilities should not be required to acquire energy generated from renewable energy resources that could result in costs above a reasonable cost threshold; and

(7) it may serve the public interest for public utilities to participate in national or regional renewable energy trading.

B. The purposes of the Renewable Energy Act are to:

(1) prescribe the amounts of renewable energy resources that public utilities shall include in their electric energy supply portfolios for sales to retail customers in New Mexico by prescribed dates;

(2) allow public utilities to recover costs through the rate-making process incurred for procuring or generating renewable energy used to comply with the prescribed amount; and

(3) protect public utilities and their ratepayers from renewable energy costs that are above a reasonable cost threshold."

SECTION 2. Section 62-16-3 NMSA 1978 (being Laws 2004, Chapter 65, Section 3, as amended) is amended to read:

"62-16-3. DEFINITIONS.--As used in the Renewable Energy Act:

A. "commission" means the public regulation commission;

B. "municipality" means a municipal corporation, organized under the laws of the state, and H class counties;

C. "public utility" means an entity certified by the commission to provide retail electric service in New Mexico pursuant to the Public Utility Act but does not include rural electric cooperatives;

D. "reasonable cost threshold" means [the] a total cost [established by the commission above which a public utility shall not be required to add renewable energy to its electric energy supply portfolio pursuant to the renewable portfolio standard] for all renewable resources procured pursuant to the Renewable Energy Act that shall not exceed two percent of customers' bills, exclusive of franchise fees, taxes and any rate adders or riders;

E. "renewable energy" means electric energy:

(1) generated by use of low- or zero-emissions generation technology with substantial long-term production potential; and

(2) generated by use of renewable energy resources that may include:

(a) solar, wind and geothermal resources;

(b) hydropower facilities brought in service after July 1, 2007;

(d) biomass resources, such as agriculture or animal waste, small diameter timber, salt cedar and other phreatophyte or woody vegetation removed from river basins or watersheds in New Mexico, landfill gas and anaerobically digested waste biomass; but

(3) does not include electric energy generated by use of fossil fuel or nuclear energy;

F. "renewable energy certificate" means a certificate or other record, in a format approved by the commission, that represents all the environmental attributes from one kilowatt-hour of electricity generation from a renewable energy resource;

G. "renewable portfolio standard" means the percentage of retail sales by a public utility to electric consumers in New Mexico that is required by the Renewable Energy Act to be supplied by renewable energy; and

H. "renewable purchased power agreement" means an agreement that binds an entity generating power from renewable energy resources to provide power at a specified price and binds a public utility to purchase the power at that price."

SECTION 3. Section 62-16-4 NMSA 1978 (being Laws 2004, Chapter 65, Section 4, as amended) is amended to read:

"62-16-4. RENEWABLE PORTFOLIO STANDARD.--

A. Subject to the limits imposed by the reasonable cost threshold, a public utility shall meet the renewable portfolio standard requirements, as provided in this section, to include renewable energy in its electric energy supply portfolio. Requirements of the renewable portfolio standard are:

(1) for public utilities other than rural electric cooperatives and municipalities:

(a) no later than January 1, 2006, renewable energy shall comprise no less than five percent of each public utility's total retail sales to New Mexico customers;

(b) no later than January 1, 2011, renewable energy shall comprise no less than ten percent of each public utility's total retail sales to New Mexico customers;

(c) no later than January 1, 2015, renewable energy shall comprise no less than fifteen percent of each public utility's total retail sales to New Mexico customers; and

(d) no later than January 1, 2020, renewable energy shall comprise no less than twenty percent of each public utility's total retail sales to New Mexico customers;

(2) the renewable portfolio standard established by this section shall be reduced, as necessary, to provide for the following specific procurement requirements for nongovernmental customers, local governmental customers and educational institutions at a single location [or facility], regardless of the number of meters at that location [or facility], with consumption exceeding ten million kilowatt-hours per year. For the purposes of this section, "location" means all of the contiguous property owned or leased by the customer, without regard to interruptions in contiguity caused by easements, public thoroughfares, transportation rights of way or utility rights of way. On and after January 1, 2006, the kilowatt-hours of renewable energy procured for these customers shall be limited so that the additional cost of the renewable portfolio standard to each customer does not exceed the lower of one percent of that customer's annual electric charges or forty-nine thousand dollars ($49,000). This procurement limit [criteria] criterion shall increase by one-fifth percent or ten thousand dollars ($10,000) per year until January 1, 2011, when the procurement limit [criteria] criterion shall remain fixed at the lower of two percent of that customer's annual electric charges or ninety-nine thousand dollars ($99,000). After January 1, 2012, the commission may adjust the ninety-nine-thousand-dollar ($99,000) limit for inflation. Nothing contained in this paragraph shall be construed as affecting a public utility's right to recover all reasonable costs of complying with the renewable portfolio standard, pursuant to Section 62-16-6 NMSA 1978. The commission may authorize deferred recovery of the costs of complying with the renewable portfolio standard, including carrying charges;

[(3) the renewable portfolio shall be diversified as to the type of renewable energy resource, taking into consideration the overall reliability, availability, dispatch flexibility and cost of the various renewable energy resources made available by suppliers and generators;

(4) upon a commission motion or application by a public utility, the commission shall open a docket to provide appropriate performance-based financial or other incentives to encourage public utilities to acquire renewable energy supplies that exceed the applicable annual renewable portfolio standard set forth in this section. The commission shall initiate rules by June 1, 2008 to implement this subsection]; and

[(5)] (3) renewable energy resources that are in a public utility's electric energy supply portfolio on July 1, 2004 shall be counted in determining compliance with this section.

B. If a public utility finds that, in any given year, the cost of renewable energy that would need to be procured or generated for purposes of compliance with the renewable portfolio standard would be greater than the reasonable cost threshold [as established by the commission pursuant to this section], the public utility shall not be required to incur that cost [provided that the existence of this condition excusing performance in any given year shall not operate to delay the annual increases in the renewable portfolio standard in subsequent years]. When a public utility can generate or procure renewable energy at or below the reasonable cost threshold, it shall be required to add renewable energy resources to meet the renewable portfolio standard applicable in the year when the renewable energy resources are being added.

[C. By December 31, 2004, the commission shall establish, after notice and hearing, the reasonable cost threshold above which level a public utility shall not be required to add renewable energy to its electric energy supply portfolio pursuant to the renewable portfolio standard. The commission may thereafter modify the reasonable cost threshold as changing circumstances warrant, after notice and hearing.

In establishing and modifying the reasonable cost threshold, the commission shall take into account:

(1) the price of renewable energy at the point of sale to the public utility;]

C. In its procurement plan filing, a public utility shall demonstrate that the total cost of all renewable resources included in its plan, together with the total cost of all previously approved renewable resources for which costs have not been actually recovered, does not exceed the reasonable cost threshold in any year in which the plan will be in effect. In calculating the reasonable cost threshold, the overall cost that will be recovered from the customer shall be included, including:

(1) the price of renewable energy and renewable energy certificates at the point of sale to the public utility;

(2) the transmission and interconnection costs required for the delivery of renewable energy to retail customers;

[(3) the impact of the cost for renewable energy on overall retail customer rates;

(4) the overall diversity, reliability, availability, dispatch flexibility, cost per kilowatt-hour and life-cycle cost on a net present value basis of renewable energy resources available from suppliers; and

(5) other factors, including public benefits, that the commission deems relevant; provided that nothing in the Renewable Energy Act shall be construed to permit regulation by the commission of the production or sale price at the point of production of the renewable energy.

D. By September 1, 2007 and July 1 of each year thereafter until 2022, and thereafter as determined necessary by the commission]

(3) the return on and return of the public utility's capital investment in renewable energy;

(4) the capital costs, maintenance costs and fuel expenses of those portions of existing and planned generation that will be used to balance intermittent renewable resources;

(5) the cost of power purchased to balance intermittent renewable resources;

(6) the cost of all incentives provided to a public utility pursuant to the Renewable Energy Act; and

(7) imputed debt, costs such as fuel and any other costs associated with the procurement of renewable energy.

D. In developing its procurement plan, a public utility shall evaluate all feasible renewable energy options on a net present value basis with the cost of each resource analyzed through its projected life using a life-cycle or similar analysis, provided that the cost of adding such resources does not exceed the reasonable cost threshold.

E. The reasonable cost threshold shall be two percent of the public utility's revenues from its customers, less revenue received from rate and tariff riders, fuel and purchased power cost adjustment clauses, gross receipts taxes and franchise fees, from the calendar year preceding the year in which the plan is filed. Costs shall not be offset by claimed savings unless the savings are reasonably determinable and will benefit customers during the plan period. The costs of adding renewable energy resources to a utility's supply portfolio shall not be subject to the reasonable cost threshold if the renewable energy resources:

(1) are identified as the least cost resource to meet customer needs in the utility's integrated resource planning process; and

(2) to the extent required by the Public Utility Act, have been granted a certificate of public convenience and necessity by the commission.

F. Every two years, a public utility shall file a report to the commission on its procurement and generation of renewable energy during the prior [calendar year] reporting period and a procurement plan that includes:

(1) the cost of procurement for any new renewable energy resource in the next [calendar year] plan period required to comply with the renewable portfolio standard; and

(2) testimony and exhibits that demonstrate that the proposed procurement is reasonable as to its terms and conditions considering [price, availability, dispatchability, any renewable energy certificate values and diversity of the renewable energy resource] relevant risk factors, such as financial, competitive, reliability, operational, fuel supply, price volatility and environmental regulation factors, and whether the procurement complies with the limits imposed by the reasonable cost threshold; or

(3) demonstration that the plan is otherwise in the public interest.

[E.] G. The commission shall establish a schedule for forthcoming filings of renewable procurement plans considering its own resources and the resources of the affected public utilities, customers and other interested parties.

H. A public utility shall not be required to file a procurement plan for any plan period for which it files a report with the commission showing that procurement plans previously approved by the commission cause the utility to exceed the reasonable cost threshold in the plan period.

I. The commission shall approve, reject or modify a public utility's [procurement or transitional] procurement plan within ninety days and may approve the plan without a hearing, unless a protest is filed that demonstrates to the commission's reasonable satisfaction that a hearing is necessary. The commission may modify a plan after notice and hearing. The commission may, for good cause, extend the time to approve a procurement plan for an additional ninety days. If the commission does not act within the [ninety-day period] total time period allowed in this section, the procurement plan is deemed approved.

[F.] J. The commission may reject a [procurement or transitional] procurement plan if it finds that the plan does not contain the required information and, upon the rejection, may suspend the public utility's obligation to procure additional resources for the time necessary to file a revised plan; provided that the total amount of renewable energy to be procured by the public utility shall not change.

[G. A public utility may file a transitional procurement plan requesting that the commission determine that the costs of renewable energy resources that the public utility has committed to, or may commit to, prior to the commission's establishing a reasonable cost threshold, are reasonable and recoverable pursuant to Section 62-16-6 NMSA 1978. The requirements of annual procurement plan filings shall be applicable to any transitional procurement plan filing pursuant to this section.

H.] K. The commission shall determine if it is in the public interest for the commission to provide appropriate performance-based financial or other incentives to encourage public utilities to acquire renewable energy supplies in amounts that exceed the requirements of the renewable portfolio standard only if the procurement does not cause the public utility to exceed the limits imposed by the reasonable cost threshold."

SECTION 4. Section 62-16-5 NMSA 1978 (being Laws 2004, Chapter 65, Section 5, as amended) is amended to read:

"62-16-5. RENEWABLE ENERGY CERTIFICATES--COMMISSION DUTIES.--The commission shall establish:

A. a system of renewable energy certificates that can be used by a public utility to establish compliance with the renewable portfolio standard and that may include certificates that are monitored, accounted for or transferred [by or through a regional system or trading program for any region in which a public utility is located] from any region or jurisdiction. The kilowatt-hour value of renewable energy certificates may be varied by renewable energy resource or technology; provided that each renewable energy certificate shall have a minimum value of one kilowatt-hour of renewable energy represented by the certificate for purposes of compliance with the renewable portfolio standard; and

B. requirements and procedures concerning renewable energy certificates that include the provisions that:

(1) renewable energy certificates:

(a) are owned by the generator of the renewable energy unless: 1) the renewable energy certificates are transferred to the purchaser of the energy through specific agreement with the generator; 2) the generator is a qualifying facility, as defined by the federal Public Utility Regulatory Policies Act of 1978, in which case the renewable energy certificates are owned by the public utility purchaser of the renewable energy unless retained by the generator through specific agreement with the public utility purchaser of the energy; or 3) a contract for the purchase of renewable energy is in effect prior to January 1, 2004, in which case the renewable energy certificates are owned by the purchaser of the energy for the term of such contract;

(b) may be traded, sold or otherwise transferred by their owner to any other party; [provided that the transfers and use of the certificate by a public utility for compliance with the renewable energy portfolio standard shall require the electric energy represented by the certificate to be contracted for delivery, or consumed or generated by an end-use customer of the public utility in New Mexico unless the commission determines that there is a national or regional market for exchanging renewable energy certificates]

(c) that are used for the purpose of meeting the renewable portfolio standard shall be registered [beginning January 1, 2009] with a renewable energy generation information system that is designed to create and track ownership of renewable energy certificates and that, through the use of independently audited generation data, verifies the generation and delivery of electricity associated with each renewable energy certificate and protects against multiple counting of the same renewable energy certificate;

(d) that are used once by a public utility to satisfy the renewable portfolio standard and are retired or that are traded, sold or otherwise transferred by the public utility shall not be further used by the public utility; and

(e) that are not used by a public utility to satisfy the renewable portfolio standard or that are not traded, sold or otherwise transferred by the public utility may be carried forward for [up to four years from the date of issuance] future use and, [if not] when used [by that time], shall be retired by the public utility; and

(2) a public utility shall be responsible for demonstrating that a renewable energy certificate used for compliance with the renewable portfolio standard is derived from eligible renewable energy resources and has not been retired, traded, sold or otherwise transferred to another party."

SECTION 5. Section 62-16-6 NMSA 1978 (being Laws 2004, Chapter 65, Section 6, as amended) is amended to read:

"62-16-6. COST RECOVERY FOR RENEWABLE ENERGY.--

A. A public utility that procures or generates renewable energy shall recover, through the rate-making process, the reasonable costs of complying with the renewable portfolio standard. Costs that are consistent with commission approval of procurement plans or transitional procurement plans shall be deemed to be reasonable. Nothing in this subsection is intended to affect a public utility's right to recover the costs associated with procurement plans that have been approved by the commission.

B. The commission shall not exclude from such recovery reasonable interconnection and transmission costs incurred by the public utility in order to deliver renewable energy to retail New Mexico customers.

C. Upon a commission motion or application by a public utility, the commission shall open a docket to provide appropriate performance-based financial or other incentives to encourage public utilities to acquire renewable energy supplies that exceed the applicable annual renewable portfolio standard pursuant to the Renewable Energy Act. The commission shall initiate rules by June 1, 2008 to implement this subsection."

SECTION 6. A new section of the Renewable Energy Act is enacted to read:

"[NEW MATERIAL] EFFECT ON PREVIOUSLY APPROVED PROCUREMENT PLANS.--Nothing in this 2011 act shall be interpreted as affecting procurement plans previously approved by the commission. A public utility shall have the right to recover the costs associated with previously approved procurement plans, even if such plans exceed the reasonable cost threshold established by the Renewable Energy Act."

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