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United States

New legislation lacks vital elements -- New Mexico and Arizona RPS laws

Two US states recently adopted measures to include fixed volumes of power from renewables in electricity portfolios, but both laws fall well short of the Renewables Portfolio Standard (RPS) being promoted by the American Wind Energy Association (Windpower Monthly, May 2000). Although New Mexico and Arizona are claiming to have adopted RPS laws, they lack vital legislative elements, says RPS expert Nancy Rader. John Nielsen of the Land and Water Fund in Colorado, a renewables advocacy group, agrees.

Under a ruling issued by New Mexico's Public Regulation Commission last month as part of its electricity market deregulation, 5% of the state's power must eventually come from renewables. But that requirement only applies to electricity sold by existing utilities and to electric service providers. Another shortcoming is that the final ruling, issued on May 2, does not require utilities to sell 5% renewables until the resources are available within the state -- a "Catch 22" situation which could allow utilities to shun the mandate. On the other hand, if utility customers want to buy more than 5% renewables, they must be given the option, says the New Mexico ruling. Customers of independent suppliers must also be offered the option, although exactly how that will be done has yet to be worked out.

Even though the law is far from perfect, John Nielsen says the New Mexico RPS, if restructuring legislation is passed, could lead to 60-120 MW of new renewables within a year or two. Also, the state's Systems Benefit Charge will provide up to $4,000,000 in extra funding for renewables annually. Eligible renewables must be generated within the state, including large hydro. Less than 1% of the electricity in the arid state comes from hydro.

Major stakeholders such as the state's big utilities are not expected to challenge the rulemaking. "It has a good chance of sticking," says Nielsen. But more rulemakings will also likely be needed to put flesh on the restructuring legislation, he says. "It's a first step for the state," he adds. Restructuring legislation is to take effect in New Mexico in January of next year, though it could be delayed as it has been in Nevada and Arizona.

Completely toothless

In Arizona the new "Solar and Environmentally Friendly Portfolio Standard," approved by regulators in late April, requires utilities to offer 0.2% of peak demand from renewable sources by 2001, 1% by 2005 and 1.1% by 2007. For the state's largest utility, Arizona Public Service Co, the mandate is expected to lead to about 70 MW of renewables -- solar and others such as wind or landfill gas -- by 2007.

Rader is unimpressed, however. "It's a systems benefits charge with a goal and some voluntary trimmings," she comments, after a brief review of the final decision, issued by the Arizona Corporation Commission. "It looks completely toothless," she continues. "It's the worst use of the term RPS that I've ever seen."

At least one half of the green electricity would have to come from solar, down from a proposal that 75% would have to be solar. New independent electricity suppliers, however, such as Enron or \Utility.com are completely exempt from the requirement until 2004.

Also weakening the legislation is that utilities are able to help pay for the new renewables plants by diverting funds from consumer education required under state law. They will also be able to charge residential users a surcharge of up to $0.035/month, depending upon usage or $13/month for commercial users.

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