jason marks, esq. new mexico public regulation commission february 7, 2008 cost recovery for...
TRANSCRIPT
Jason Marks, Esq. New Mexico Public Regulation Commission
February 7, 2008
Cost Recovery for Renewable Energy & DSM: A New Mexico Regulatory Perspective
Outline
• Renewable Energy Opportunities– Technology– Economics
• Policy
• Cost Recovery for RE
• Cost Recovery for DSM
Wind Energy – Prime Mover in R.E.
• Approx 15,000 MW installed capacity (2007)• 2,500+ MW added/year 2005-2007• Utility ownership has begun
• Cost $23 - $60/mwh after PTC• PTC = $18/mwh• Prices increasing due to materials, demand, Exchange Rate
Wind with Gas Backup: Good for Utilities, Good for Ratepayers
Model of Revenue StreamsGas CC Alone vs. Wind w/ Gas Bkup
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
Gas Only Wind/Gas Gas Only Wind/Gas
To
tal C
os
t to
Ra
tes
Depreciation
ROE (Profit)
Interest
Fuel Cost
200 MW Gas CC, 70% Cap, $7 gas + 4%/yr
200 MW Wind, 32% Cap. + Gas Backup
2010 (year 1) 2015 (year 5)
Wind with Gas Backup – Capacity + Reduced exposure to Gas Pricing Pressure
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180Y
ear
2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
Co
st p
er M
wH
GasWind+Gas
Wind Typically Distant from Load
High PlainsExpress
ARIZONA
EnergyResource
Zones
Tucson
Phoenix
HolcombNEW MEXICO
COLORADO
WYOMING
DaveJohnston
LRS
Albuquerque
Limon
ComancheLamar
Pawnee/Story
Socorro
Gladstone
Midway
SunZia
HIGH PLAINS EXPRESS
7
Solar Technologies
Concentrated Solar Power (CSP)
• 10-15¢/kwh for 100MW+ projects• Thermal Storage/Backup Possible• Kramer Junction (1980s) 350 MW,
Nevada Solar One (2007) 64 MW, Spain
Photovoltaic (PV) Panels: • 1 – 3 kw home systems common (~$18,000 installed home system = 25¢/kwh)
• Commercial (10 – 100 kw)
• Major projects (4 – 8 MW)
CSP Revenue Stream w/ Utility Ownership
Model of Revenue StreamsGas CC vs. CSP
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
Gas Solar Gas Solar
Depreciation
ROE (Profit)
Interest
Fuel Cost
180 MW Gas CC, 55% Cap, $7 gas + 4%/yr
165 MW CSP, 35% Cap.
2010 (year 1) 2015 (year 5)
Total Cost to Rates
State Renewable Portfolio Standards
State Goal
☼ PA: 18%¹ by 2020
☼ NJ: 22.5% by 2021
CT: 23% by 2020
MA: 4% by 2009 + 1% annual increase
WI: requirement varies by utility; 10% by 2015 goal
IA: 105 MW
MN: 25% by 2025(Xcel: 30% by 2020)
TX: 5,880 MW by 2015
☼ AZ: 15% by 2025
CA: 20% by 2010
☼ *NV: 20% by 2015
ME: 30% by 200010% by 2017 - new RE
State RPSHI: 20% by 2020
RI: 16% by 2020
☼ CO: 20% by 2020 (IOUs)
*10% by 2020 (co-ops & large munis)
☼ DC: 11% by 2022
☼ NY: 24% by 2013
MT: 15% by 2015
IL: 25% by 2025
VT: RE meets load growth by 2012
Solar water heating eligible
*WA: 15% by 2020
☼ MD: 9.5% in 2022
☼ NH: 23.8% in 2025
OR: 25% by 2025 (large utilities)5% - 10% by 2025 (smaller utilities)
*VA: 12% by 2022
MO: 11% by 2020
☼ *DE: 20% by 2019
☼ NM: 20% by 2020 (IOUs) 10% by 2020 (co-ops)
☼ NC: 12.5% by 2021 (IOUs)10% by 2018 (co-ops & munis)
ND: 10% by 2015
Source: dsireusa.org/Sept 2007
New Mexico Renewable Energy Act: NMSA § 62-16-1
• R.E.: solar, wind, biomass, geothermal• Scope: IOUs • RPS 5% of retail sales in 2006
10% of retail sales in 2011• Large Customer Limits,
Commission Sets RCT• Annual Procurement Plans
• Diversity
2004 Legislature, Replaced RPS by Rule2004 Legislature, Replaced RPS by Rule
SB 418 (2007) RPS Amendments:15% by 2015, 20% by 2020, Co-ops 5% by 2015
SB 418 (2007) RPS Amendments:15% by 2015, 20% by 2020, Co-ops 5% by 2015
Utilities Respond to N.M. Renewable Portfolio Standard
0
50
100
150
200
250
300
350
400
450
2002 2003 2004 2005 2006 2007
Ins
talle
d G
en
era
tio
n (
MW
)
Solar
Wind
2007 RPS Diversity Rules
• R.E. Act requires portfolio diversity; new admin rule at NMAC 17.9.572.7 & 572.14 provides specific guidance
• Technology weighting (ineffective) eliminated• Portfolio Diversity Targets for 2011
– At least 20% from Solar, 20% from Wind, 20% from Biomass/Geothermal
– 1.5 % from Distributed Generation, increasing to 3% in 2015
Utility Cost Recovery for Renewable Energy Projects
• Generally, per statute– E.g., New Mexico Renewable Energy Act § 62-16-6
NMSA
– In re Application of Detroit Edison Company, 740 N.W.2d 685, 696 (Mich. App. 2007) (Comm’n exceed statutory authority in allowing utility to impose renewable energy fee on all customers, when legislature only authorized voluntary programs)
– N.R.S. 704.7821.7(B) provides for recovery indirect costs of imputed debt due to R.E. PPAs.
Issues for Cost Recovery for R.E. in New Mexico
• Reasonable costs shall be recovered “through the rate making process”Rate case
• Requires valuation of Renewable Energy Attribute (REC) – unrecovered historical costs treated as regulatory asset
? Fuel Clause for RE acquired via PPA
x Fuel clause for stand-alone RECs
NMIEC v. NMPRC, 142 N.M. 533, 168 P.3d 105, 2007 -NMSC- 053
• El Paso Electric met RPS with REC purchase (no energy) from PNM
– Sought to recover costs through fuel and purchased power adjustment clause (rider)
– Least costly for customers b/c no carrying costs
• NMSC: “ratemaking process” includes both rate cases and automatic adjustment clauses, depending on type of cost– But FPPAC statute only allows for recovery of fuel or actual
purchased power costs, and Comm’n erred in determining RECs to be “closely related to purchased power.”
Cost Recovery for DSM
• Program costs shall be recovered through tariff riders – NM Efficiency Use of Energy Act § 62-17-6 NMSA– Costs guaranteed to be recovered timely, but no
opportunity for return– Decreased throughput threatens recovery of
fixed costs– Aggressive EE programs pose challenge of rate
rider “sticker shock” and pushback
Cost recovery for DSM
• Removing barriers to utility “investment” in DSM
• 2007: NMPRC Rejects PNM gas decoupling proposal as too broad
• 2008: EUE Act Amendments