Legislators push case for third-party power producers

Third-Party Solar PPAs in New Mexico enable renewable energy financing, letting developers own PV systems and sell power to customers under contracts, challenging PNM's monopoly, PRC rules, net metering, and state tax credits.

A bipartisan group of legislators has filed a brief with state regulators on an issue that will affect who provides renewable energy in New Mexico.

The state legislators support allowing third parties — entities besides Public Service Company of New Mexico — to own and operate solar plants and other renewable energy systems under contract with the utility's customers, even as some lawmakers mull nuclear as renewable in related debates.

PNM, the state's largest utility, which recently asked for a rate hike amid other proceedings, contends such third-party arrangements within its exclusive service area are illegal.

It is the first time in recent memory, and perhaps the first time ever, that legislators have filed a brief with the state Public Regulation Commission in their official capacities as elected lawmakers. "It is unusual," PRC member Jason Marks said.

Rep. Brian Egolf Jr., D-Santa Fe, said 26 legislators so far have signed on to the brief he wrote, from House Speaker Ben Luján, D-Nambé, to the other side of the political spectrum, Sen. Clinton Harden, R-Clovis. "Renewable energy is important enough that legislators were willing to put their names on this," Egolf said.

Gov. Bill Richardson also supports third-party agreements for renewable energy and has backed a smart grid case to modernize distribution.

A third-party power purchase agreement is a long-term contract that allows an energy developer to install, own and operate a solar photovoltaic system — for example, on rooftops belonging to another utility's customer such as a city or business. The energy developer charges the customer for kilowatt hours produced and in return benefits from federal and state tax credits.

The Public Regulation Commission is conducting a hearing on third-party providers to decide whether third-party energy developers are public utilities and whether they can own and operate solar energy systems that serve another utility's customers.

Renewable-energy advocates and the legislators say the third-party arrangement is a critical financing method to help boost renewable energy use among municipalities and nonprofits such as schools and hospitals, amid ongoing solar wars over rooftop markets that are reshaping the industry.

The city of Santa Fe and energy developer SunEdison are working on the kind of third-party arrangement, similar to public solar deals in Oregon that regulators have approved, that's brought the debate to the fore. The city of Santa Fe is a PNM customer. Santa Fe's City Council approved a 20-year power agreement June 24 with SunEdison to place solar photovoltaic systems on eight city-owned properties that will be tied into the electric grid serviced by PNM.

SunEdison will sell the generated solar power at a fixed rate to the city and can benefit from state and federal tax credits. SunEdison applied to PNM for a 15-cent per kilowatt hour renewable energy credit. PNM is required to provide a certain amount of renewable power.

Egolf said the third-party question is critical to helping hospitals, churches, schools, cities and nonprofits benefit from renewable energy. "They don't qualify for the tax rebates and credits," Egolf said. "When you lose the third party, you lose one of the most successful financing mechanisms."

But Don Brown, a PNM spokesman, said, "We think the deal Santa Fe is trying to do is actually not legal under state law. When you have a third party producing power and selling it to a PNM customer, that represents deregulation."

Marks said if the PRC rules third-party arrangement are illegal, state legislators can change the law as the state wants to oversee renewable policy more directly.

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