Thursday, November 05, 2009 at 9:28:21 AM - by Nate Lew

The dispute over power purchase agreements in Santa Fe, New Mexico is heating up, with the state’s Public Regulation Commission (PRC) examiner, Carolyn R. Glick, ruling that third-party contracts are legal and Public Service Company of New Mexico (PNM) insisting that they are not.

Glick’s Oct. 23 ruling, that third-party contracts are legal – and that energy developers are not a public utility – has PNM facing down the city of Santa Fe, a PNM customer that wants to contract with Maryland-based SunEdison to install a solar photovoltaic system, which SunEdison would own, and from which the city would buy the electricity generated.

The PRC has yet to confirm or overrule Glick’s decision, and while it considers PNM insists that such independent power producer system should be PRC regulated, just like the state’s public utilities.

Santa Fe wants to install solar panels on at least eight city-owned buildings, with the city buying the electricity produced at “competitive” rates, while SunEdison captures any tax credits and renewable energy credits available to offset the costs of installation.

Glick bases her opinion on the fact that it is legal for a public utility customer, like a hospital, to lease a generator (or other “distributed generation” system) from a company other than PNM, for example. Additionally, Glick said that is illegal for an energy developer to move power from one location to another using a public utility’s power lines. This practice, called “retail wheeling”, prevents those distributed generation companies who install many solar arrays, some larger than necessary for an individual building’s needs, from selling excess power from one building to another.

PNM plans to challenge the ruling before the entire PRC commission, based on its belief that the legal analysis is flawed, and notes that Glick’s decision is more a recommendation than a ruling.

One wonders why, since all of New Mexico’s publicly-owned utilities, rural electric cooperative and PRC staff were parties to the case, if not the decision, which also saw entities like the cities of Santa Fe and Las Cruces, as well as SunEdison, the Renewable Energy Industries Association of New Mexico, and a dozen other groups and individuals participating. In addition, more than 450 people wrote to the PRC expressing their support for such third-party power purchase agreements.

In July, PNM advocated scaling back incentives for installing solar photovoltaic systems on homes and businesses, saying the program was growing too fast. The initiative was launched in 2006 as part of PNM’s effort to meet the state’s renewable portfolio standard, or RPS, which mandates 6 percent of their power from renewable sources now, rising to 10 percent in 2011, 15 percent in 2015 and 20 percent in 2020.

The PRC has also mandated renewable diversification, with 20 percent coming from solar, 20 percent from wind, and 10 percent from a third source, such as geothermal or biofuels. The distributed generation mandate, of which this ruling is a reflection, demands 1.5 percent now, rising to 3 percent in 2015.