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 BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSIONIN THE MATTER OF A )DECLARATORY ORDER REGARDING )THIRD-PARTY ARRANGEMENTS ) Case No. 09-00217-UTFOR RENEWABLE ENERGY GENERATION ))
BRIEF OF THE NEW MEXICOENERGY, MINERALS, & NATURAL RESOURCES DEPARTMENT JOANNA PRUKOP, SECRETARY
I.
 
INTRODUCTION
The New Mexico Energy, Minerals & Natural Resources Department (hereinafter
“EMNR
D
”
 
or the “Department”
) submits this Brief
as an “interested
person
”
in accordance
with the New Mexico Public Regulation Commission‟s
sua sponte
Initial Order dated June 16,2009, and its Supplemental Order of June 23, 2009, in the above-captioned matter.The development and expansion of consumer/customer based renewable energyproduction has been, and continues to be, a public policy priority with EMNRD, Governor BillRichardson
‟s
administration, and the New Mexico Legislature. Third-party financingarrangements have proven to enhance the expansion of distributed generation of renewableenergy. New Mexico law does not prohibit these kinds of arrangements, and in fact encouragestheir use to meet public policy objectives that are memorialized in statute and regulation.
 
2
II.
 
PROCEDURAL HISTORY AND THIRD-PARTY FINANCING ARRANGEMENTSA.
 
Procedural History
On December 23, 2008, the New Mexico Public Regulation Commission (hereinafter the
“PRC” or the “Commission”
) issued a Final Order in each of the following renewable portfoliostandards plans, collectively referred to as the 2008 RPS Plan cases:1.
 
Case No. 08-00219-UT,
In the Matter of El Paso Electric Company’s 2008 Procurement Plan
Pursuant to The Renewable Energy Act and NMAC 17.9.572.16
;2.
 
Case No. 08-000221-UT,
Public Service Company of New Mexico’s Notice of Filing of “Renewable
Energy Portfolio Procurement Plan For 2009
; and3.
 
Case No. 08-000222-UT,
In the Matter of Southwest Public Service Company’s Annual
Renewable Portfolio Report for 2007 and its Application for Approval of its 2008 AnnualRenewable Energy Portfolio Plan, Modifications to its Existing Rate Making Treatment for Renewable Energy Certificates and Modifications to the Windsource Program
.In each of these cases, a number of issues were raised that the PRC found were not appropriatefor ruling during the review of the portfolio plans. As a result, the PRC issued its Notice ofInquiry on January 8, 2009 (Case No. 08-00388-UT) enumerating those unresolved issues and
scheduling a workshop for January 28, 2009 “for the purpose of facilitating inf
ormal explorationof the
issues” arising out of the RPS Plan cases
. (See Page 4, ¶F, Notice of Inquiry, Case No. 08-00388-UT, January 8, 2009.)A number of renewable energy developers, along with the referenced utilities and their
representatives, attended the PRC‟s January 28, 2
009 workshop. Further questions arose duringthis workshop with respect to whether third-party arrangements for renewable energygeneration are prohibited by New Mexico law, specifically the Public Utilities Act, NMSA 1978,§62-3-1, et seq., The Renewable Energy Act, §62-16-1, et seq., and PRC Commission Rule 572,codified at 17.9.572 NMAC. This question remained open at the end of the workshop.
 
3As a result, the PRC issued its June 16, 2009
sua sponte
Initial Order (Case No. 09-00217-UT), in which the PRC initiated
a “declaratory proceeding”
to address the general question as towhether third-party arrangements for renewable energy generation are prohibited by NewMexico law. Included in this Order were two issues:1.
 
“The permissibility of arrangements that –
are entered into primarily as a financingmechanism for distributed renewable energy generation systems whereby a third partyowns the renewable generation equipment, which is installed on the utilit
y customer‟s
premises, there is a long-term contract with the customer to supply a portion of that
customer‟s electricity use, and payments are based on kilowatt
-hours (kWh);2.
 
Is the permissibility of such arrangements affected by whether (i) there is a singlerelationship between the third-party owner of the generation and a customer or (ii) there
are multiple customers taking power from the same third party?”
 On June 23, 2009, the PRC filed its Supplemental Order adding a third issue for briefing:3.
 
“The p
ermissibility of arrangements that involve leasing of distributed generationequipment from non-utility lessors to lessees that are also retail customers of utilities.(One example of such an arrangement would be on-site backup generation at a hospitaltha
t also buys power on a retail basis from a public utility.)”
 In order for any third-party arrangement to fall within the statutory and regulatoryframework of the PRC, the
“
third party
”
must
fall under the PRC‟s jurisdiction as a “publicutility.”
 Thus, the determinative question before the PRC is whether or not the generator inthird-party arrangements (also known as third party power purchase agreements, or PPAs), asdescribed in question number one above, constitutes a
“
public utility
” subject to
the regulatoryauthority of the PRC.The first step in answering this determinative question is to examine the nature andevolution of these third party agreements since they were initially introduced during the 1970sas a mechanism for public utilities to meet renewable energy mandates by purchasingrenewable energy from third-party generators. As discussed below, these agreements have
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