New Mexico Issues New Rules for Cogeneration and Small Power Production Interconnection--Includes Capacity Payments
The New Mexico Public Public Regulation Commission (Utility Division) issued new regulations governing the purchase of power from small power producers. The regulations require that a public utility must purchase power from a qualifying facility at the utility's avoided costs. Avoided costs are the costs that the utility would have paid for the electricity had the utility generated the electricity itself or purchased the electricity from a third party.
The power producer is being given 3 choices for receiving payments. First, if the project owner is primarily serving the load at the premises, the power producer can simply have a single meter with the meter being reversible. The power producer will pay the utility for any power purchased from the utility. However, the utility will not be required to make any payments to the power producer for the electricity (this is known as the Load Displacement Option).
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The second option (called the Net Metering Option) allows the utility to install a meter that determines the net energy delivered from the power producer to the utility at time of use rates. If the net energy flowing to the utility exceeds the energy flowing from the utility, the utility shall pay the power producer for the excess energy at the utility's avoided costs based on time of use. The utility, however, shall be allowed to bill the facility for demand charges, backup charges etc.
The third option (called the Simultaneous Buy/Sell Option) requires that separate meters measure the electricity flowing to the utility from the power producer and to the power producer from the utility. In this scenario, the power producer must purchase all of the power for the site from the utility at normal tariffed rates and the utility must purchase all of the power produced by the power producer at avoided costs based on time of use rates.
In addition to the purchase and sale of electricity, power producers will also qualify for capacity payments from the utility. Capacity payments will be paid to a power producer when the utility avoids procurement of new capacity because of the power producer's electric production. The capacity payment is currently not tariffed by the utilities and must be developed and approved by the Utilities Division.
The addition of capacity payments to the net metering payments is another significant step forward in net metering regulations. Although not yet quantified, capacity payments can become significant given the amount of resources needed by utilities to maintain adequate peak load supply. It is yet to be seen whether New Mexico will make this payment a large financial benefit, but the idea of a capacity payment to small power producers is a good step in the right direction.
