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Toughest mandate for renewables yet -- New Mexico set to adopt RPS

New Mexico could become the next US state to adopt a renewables portfolio standard (RPS) if the state's Public Regulation Commission approves a new renewable energy rule early this month. The rule would require electric utilities under the commission's jurisdiction to begin a phase-in of green credit trade in 2003 to facilitate the purchase of at least 2% of their energy from renewable resources. That proportion rises to 5% by 2005 and 10% by 2007, giving New Mexico one of the strongest minimum standards for renewables power in electricity portfolios in the entire country.

Not all 10% of renewables in a utility's energy portfolio would be from wind, however. Although the American Wind Energy Association places New Mexico at 12th in the nation in wind potential, the commission is just as "keen on biomass," says utility division director John Curl. It sees energy production from biomass as one way to eradicate the unwanted and non-native salt cedar. It was brought to the state long ago by federal agencies as a way to control erosion. Curl says the commission's intention in the new rule is to encourage a greater diversity of resources, a goal that also includes geothermal generation.

After California's experience with deregulation, New Mexico legislators last year postponed a utility restructuring plan passed in 1999, delaying its implementation by five years until 2006. The Public Regulation Commission (PRC) saw this as an opportunity to re-evaluate national and local markets to determine whether it would be appropriate to deregulate New Mexico's utilities. "California showed us what can go wrong if we don't have a good understanding of these markets and how they are evolving around the country," says PRC chair Tony Schaefer.

The state's restructuring act was mostly about establishing markets that would gravitate towards the lowest price, says Curl. In writing the renewables rule, the commission has given New Mexico a push in a direction different from that of the legislature. Its plan called for a systems benefit charge, with proceeds going to conservation and renewable energy development.

The PRC's renewables portfolio standard places a limit on any one type of renewable energy resource at 50% of a utility's portfolio. It also includes a price cap of sorts that allows a utility to opt out of buying a renewable resource if its purchase would raise the utility's average system cost by $0.0008/kWh or more. Curl could not say how expensive or what percentage of the total resource mix the generation would have to be to rise above the cap. Utilities must buy the required number of renewable energy credits to demonstrate they have met the targets specified by the RPS.

The rule also requires utilities to offer retail customers the option to buy electricity from renewable resources beyond the RPS requirement. "A lot of people want choice regardless of cost," Curl says.

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