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Wednesday, April 05, 2006 5:59 PM ET
New Mexico to hear why PNM rejected nonwind renewables proposals
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Public Service Co. of New MexicoAlbuquerque, New Mexico
PNM Resources Inc. (PNM-US)$ 49.41
(0.22%)
Last Updated: 9/17/2021

The New Mexico Public Regulation Commission is slated to hold a work session on April 6 to hear why Public Service Co. of New Mexico, a subsidiary of PNM Resources Inc., rejected all five nonwind renewable energy project proposals submitted in response to a request for proposals.

The meeting will give members of the public and the parties that submitted the rejected biomass and solar project proposals to PNM a chance to hear why the utility concluded that the projects would all be too costly to pursue, Doris Cherry, public information officer for the New Mexico PRC, said on April 5.

PNM will present an oral report about the reasons why it rejected the proposals, which the utility says is based on an inability to meet the financial guidelines, Cherry said.

The meeting comes in response to PNM's submission of an 84-page formal report to the commission in late March.

"There is no indication for action tomorrow," Cherry said of the PNM presentation, adding, "It's simply a report and work session."

PNM spokesman Jeff Buell said on April 5, "Our conclusion was that none of the projects were going to meet the reasonable cost threshold, or caps, above which we are not assured cost recovery by state rules."

Commenting on the commission work session, Buell said: "I have no sense that this is an extraordinary event. They're rightly desiring a comprehensive review."

The way the renewables cost threshold works in New Mexico, a project must meet two sets of requirements to be assured of cost recovery, Buell explained. The first, which is a cost per megawatt-hour cap, varies by fuel type, with the cap for large solar projects set at $100 per MWh and the cost cap for a biomass project set at $62.54 per MWh, he said. By contrast, the threshold for wind is $4.90 per MWh.

If a project is proposed that meets that threshold, there is another tier, which involves the total cost of a project and how that would impact the rates customers pay. "If we would have to increase rates more than 2% to recoup the costs, we're not guaranteed cost recovery," Buell said.

The PRC issued a renewable resources rule in 2002 which includes a provision requiring the use of a minimum of 5% renewable energy by Jan. 1, 2006. Investor-owned utilities are required to increase renewables by one percentage point per year for each year until Jan. 1, 2011, by which time renewable sources should provide 10% of the electricity needed to meet their retail sales. PRC Chairman Ben Lujan in March said the renewables target should be extended to 20% by 2020.

PNM has met its 2006 goal, but will need to add renewable sources in the next three years. "We're at 5% and a little bit more. We're comfortable where we are," Buell said, adding, "We'll have to find something additional by 2009."

Buell said that the state expresses a desire for a mix of renewables. Currently, PNM meets nearly all of its renewable energy requirement with wind, he said, noting that the utility purchases wind energy from a 200-MW wind farm outside the village of House, N.M., located in the eastern part of the state.

PNM issued a request for proposals in October 2005 to identify a feasible, nonwind renewable energy project that could be in service by 2009 to meet renewables requirements, favoring diversity of renewable resources.

"We're still evaluating our next steps, but we do know we will need additional renewables," Buell said.

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