BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION
IN THE MATTER OF EL PASO ) ELECTRIC COMPANY'S 2010 ) PROCUREMENT PLAN PURSUANT ) TO THE RENEWABLE ENERGY ACT ) CASE NO.to-OO -UT AND NMAC 17.9.572.16 ) )
DIRECT TESTIMONY
OF
RICARDO ACOSTA
JULY 1, 2010 TABLE OF CONTENTS
Subject
I. INTRODUCTION AND QUALIFICATIONS 1 II. PURPOSE OF TESTIMONy 2 III. SUMMARY OF EPE1s 2010 PLAN 4 IV. OVERVIEW OF EPE1S RPS REQUIREMENTS 5 V. ANNUAL PROCUREMENT PLAN REQUIREMENTS 7 VI. STATUS OF SUNTOWER PROJECT 12 VII. EPE1S PROPOSED 2010 PLAN 15 VIII. EPE1S DIVERSITY RFP PROCESS AND NEW RESOURCE SELECTION 18 IX. COST OF EPE'S 2010 PROCUREMENT PLAN 30 X. REQUEST FOR VARIANCE FROM DIVERSITY REQUIREMENTS 31 XI. CONCLUSION 35
EXHIBITS
Exhibit RA-1 EPE's New Mexico Jurisdictional Retail Energy Sales' Requirement
Exhibit RA-2 SPS REC Agreement
Exhibit RA-3 REC Purchases to Meet Renewable Portfolio Standard including NRG Alternative
Exhibit RA-4 Renewable Energy Percentages by Technology
Exhibit RA-5 2011 Solar Diversity Requirements Deferred to 2012 - 2014 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 I. INTRODUCTION AND QUALIFICATIONS
2 Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
3 A. My name is Ricardo Acosta, and my business address is 100 N. Stanton, EI Paso,
4 Texas 79901.
5
6 Q. HOW ARE YOU EMPLOYED?
7 A. I am employed by EI Paso Electric Company as Director of the Resource and
8 Delivery Planning Department.
9
10 Q. PLEASE SUMMARIZE YOUR EDUCATIONAL AND BUSINESS
11 BACKGROUND.
12 A. I graduated from The University of Texas at EI Paso with a Bachelor of Science
13 Degree in Mechanical Engineering in 1975 and a Master of Science Degree in
14 Mechanical Engineering in 1977. Upon graduation, I was employed by Rockwell
15 International in EI Segundo, California until January 1980.
16 In January 1980, I began working for EPE as a Planning Engineer with
17 duties including generation and fuels planning, regulatory compliance and
18 economic evaluation of generation and fuel alternatives. This activity included
19 forecasting fuel prices and the development of EPE's PROMOD base case for use
20 in Company planning activities and regulatory filings and proceedings. In
21 January 1989, I was promoted to Supervisor-Resource Planning. In October
22 2005, I was promoted to Manager-Resource Planning. In May 2010, I became
23 Director of Resource and Delivery Planning.
1 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 Q. PLEASE DESCRIBE YOUR CURRENT RESPONSIBILITIES WITH EPE.
2 A. My current duties include the management and supervision of the Company's
3 generation expansion planning and renewable energy procurement.
4
5 Q. HAVE YOU PREVIOUSLY PRESENTED TESTIMONY BEFORE
6 UTILITY REGULATORY BODIES?
7 A. Yes, I previously presented testimony before the City of EI Paso Public Utility
8 Regulatory Board, the Public Utility Commission of Texas, and the New Mexico
9 Public Regulation Commission ("NMPRC" or "Commission").
10
11 II. PURPOSE OF TESTIMONY
12 Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY?
13 A. The purpose of my testimony is to present EPE's 2010 Procurement Plan ("2010
14 Plan"). I calculate EPE's 2011 and 2012 renewable energy portfolio standard
15 ("RPS") requirements and set forth EPE's 2010 Plan to meet EPE's RPS
16 requirements for 2011 and 2012. I will explain how renewable energy resources
17 fit within EPE's overall resource portfolio.
18 I will address EPE's request for a variance to the 2011 solar diversity
19 requirements of the Commission's Renewable Energy Rule 17.9.572 NMAC
20 ("Rule 572"). A variance is required because of the default by a supplier in
21 performing, and the Commission's recent approval of termination of the PPA
22 previously approved in EPE's 2008 Procurement Plan for the solar concentrating
23 project known as the SunTower project. Because of the default and recent
2 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 termination of the PPA, the solar energy and Renewable Energy Certificates
2 (IRECs") that were counted on for 2011 will not materialize, and instead EPE
3 must purchase an alternative resource to ensure full compliance with the statutory
4 RPS. EPE proposes to purchase wind RECs from Southwestern Public Service
5 Company C'SPS") to enable EPE to meet the full RPS for 2011. However, there
6 are not adequate solar resources available to EPE in 2011, and EPE will be able to
7 meet only a portion of the solar diversity targets for 2011. For that reason, my
8 testimony supports EPE's request for a Variance for 2011 and approval of the
9 purchase of the alternative wind RECs from SPS to meet the statutory RPS
10 requirement. Iexplain that EPE will meet the diversity requirement in the years
11 2012-2014 through purchases of solar energy from an alternative project under
12 the Amended Agreement with the SunTower project supplier, approved by the
13 Commission, and other new solar projects proposed in the 2010 Plan. EPE will
14 voluntarily "make-up" in years 2012-2014 any shortfall in solar diversity levels
15 from 2011. Thus, EPE ultimately will comply with the amount of solar energy
16 targeted for 2011, but needs additional time to do so.
17 I address EPE's evaluation of new solar energy projects to replace or
18 augment the SunTower project. I explain the procurement actions EPE is
19 proposing to prepare for the 2011 and 2012 diversity targets.
20 I also provide the estimated costs of compliance to meet the RPS
21 requirements for 2011 and 2012, including diversity targets in 2011 and 2012. I
22 discuss and conclude that EPE's proposed 2010 Plan for 2011 and 2012 is
23 reasonable as to price, availability, dispatch flexibility, certificate values and
3 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 diversity.
2 In addition to my testimony, EPE Witness Carpenter addresses policy
3 matters and incorporates Commission action regarding substitution of a 20 MW
4 PV project for the originally-approved SunTower solar thermal project. EPE
5 Witness Evans will address EPE's Small and Medium System Renewable Energy
6 Certificate Purchase Programs, and estimate the number of RECs and costs
7 associated with those programs. Mr. Evans also evaluates whether EPE's
8 proposed Plan would require EPE to reduce its RPS requirement in order to stay
9 within the Commission's Reasonable Cost Threshold ("RCT") or the large
10 customer cap.
11
12 III. SUMMARY OF EPE'S 2010 PLAN
13 Q. BEFORE PROVIDING THE DETAILS, PLEASE SUMMARIZE EPE'S
14 2010 PROCUREMENT PLAN.
15 A. EPE's 2010 Plan will meet its RPS requirements for 2011 and 2012, as well as
16 most of its resource diversity targets in 2011 and all of its diversity targets for
17 2012. EPE's 2010 Plan is to meet its statutory RPS obligations through REC
18 acquisitions pursuant to previously approved agreements with Public Service
19 Company of New Mexico (ltpNMIt),Southwest Environmental Center ("SWEC"),
20 Camino Real Landfill Gas to Energy Facility ("CRLEF"), and SPS, as well as
21 through EPE's approved incentive programs for customer-installed Qualifying
22 Facility (rrQFrr)projects. As approved by the Commission on June 24,2010 in the
23 re-opened Case No. 08-00219-UT, EPE's 2010 Plan also includes the purchase of
4 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 solar energy under the Amended Agreement with NRG (SunTower) from a newly
2 constructed 20 MW solar PV facility. In addition, the 201 0 Plan also includes the
3 following new procurement actions that require Commission approval:
4 1) procurement of increased amounts of SPS wind REC purchases for 2011, to
5 ensure compliance with the overall 2011 RPS requirement to cover the
6 termination of the solar thermal project; 2) procurement of solar energy and RECs
7 by entering a new PPA with SunEdison for a 24 MW PV project; 3) procurement
8 of solar energy and RECs by entering a new PPA for a 5 MW PV project, located
9 in Hatch, New Mexico; and 4) receipt of a variance from the full solar diversity
10 requirements of Rule 572 for 2011.
11 EPE's 2010 Plan requires a variance from the Commission's Rule 572
12 solar diversity requirements for 2011 due to the unavailability of adequate solar
13 supplies in 2011. EPE is requesting that those portions of its 2011 diversity
14 requirements that cannot be met be deferred to the years 2012-2014. I will
15 address each element for approval of the Variance later in my testimony.
16
17 IV. OVERVIEW OF EPE'S RPS REQUIREMENTS
18 Q. PLEASE PROVIDE AN OVERVIEW OF THE RENEWABLE ENERGY
19 REQUIREMENTS EPE MUST MEET.
20 A. The New Mexico Renewable Energy Act ("Act" or "REA") and the Commission's
21 Rule require that a percentage of EPE's New Mexico retail jurisdictional energy
22 sales (stated as an energy requirement) be met by renewable energy resources.
23 The RPS requirement for 2010 is six percent and for the period 2011 through
5 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 2014, ten percent. Thereafter, EPE must meet an RPS requirement of 15 percent
2 in 2015 through 2019 and 20 percent beginning in 2020.
3
4 Q. HAS EPE CALCULATED ITS RENEWABLE ENERGY RESOURCE
5 REQUIREMENTS FOR 2011 AND 2012?
6 A. Yes. EPE calculated these requirements based on its latest Long-term Load
7 Forecast dated March 18,2010.
8 EPE's 2011 total New Mexico retail jurisdictional energy sales are
9 estimated to be 1,685,406 megawatt-hours ("MWh"), resulting in a RPS
10 requirement of 168,541 MWh; and the 2012 total jurisdictional sales are estimated
11 to be 1,757,908 MWh, and the RPS requirement is 175,791 MWh. Exhibit RA-1
12 calculates EPE's estimated renewable energy requirements for 2011 and 2012.
13
14 Q. CAN EPE MEET ALL OF ITS RPS REQUIREMENTS FROM A SINGLE
15 TYPE OF RENEWABLE ENERGY?
16 A. No. The REA encourages diversity of resource type and the Rule establishes a
17 specific diversity requirement for the RPS. Beginning in 2011, no less than
18 20 percent of the RPS must be met with wind energy, no less than 20 percent
19 must be met with solar energy and no less than ten percent must be met with other
20 renewable energy technologies such as biomass, geothermal or landfill gas. In
21 addition, the Rule requires renewable distributed generation in percentages of one
22 and one-half percent for the years 2011 through 2014 and three percent beginning
23 in 2015 and thereafter. However, variances from the diversity targets are
6 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 permitted in the Rule upon request by the utility.
2
3 Q. WHAT ARE THE MINIMUM AMOUNTS FOR EACH RESOURCE TYPE
4 THAT EPE WOULD NEED TO ACQUIRE TO MEET THE DIVERSITY
5 REQUIREMENTS?
6 A. In 2011 and 2012, EPE estimates its RPS would need to include the following
7 minimum amounts to meet the Rule's diversity requirements:
8 Resource 2011 2012
9 Solar: 33,708 MWh 35,158
10 Wind: 33,708 MWh 35,158
11 Biomass/Other: 16,854 MWh 17,579
12 Dist. Gen: 2,528 MWh 2,637
l3 Later in my testimony I will address EPE's request for a variance from Rule 572
14 regarding the solar diversity requirements in 2011 only, by deferring a portion of
15 its 2011 full solar diversity requirement to the years 2012-2014.
16
17 V. ANNUAL PROCUREMENT PLAN REQUIREMENTS
18 Q. PLEASE DESCRIBE THE ANNUAL PROCUREMENT PROCESS FOR
19 MEETING RPS REQUIREMENTS.
20 A. The Act and Rule require EPE to file an annual procurement plan that includes:
21 the cost of procurement in the next calendar year for any new renewable energy
22 resource required to comply with the renewable portfolio standard; the amount of
23 renewable energy the public utility plans to provide in the calendar year
7 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 commencing 18 months later, to satisfy the annual RPS percentage requirement,
2 less any necessary reductions; the reductions, if any, to the RPS for procurements
3 for large industrial nongovernmental customers and/or due to the reasonable cost
4 threshold; a demonstration that the proposed procurement is reasonable as to its
5 terms and conditions considering price, costs of interconnection and transmission,
6 availability, dispatchability, renewable energy certificate values and portfolio
7 diversification requirements, or is otherwise in the public interest.
8
9 Q. HOW IS RPS COMPLIANCE DEMONSTRATED UNDER THE ACT?
10 A. RECs are used to demonstrate compliance with the requirements of the Act. EPE
11 must acquire RECs, with or without physical delivery of the associated energy, in
12 amounts that meet or exceed the minimum RPS requirement for each year. RECs
13 represent the renewable energy attributes, on a per kilowatt-hour ("kWhtl) basis,
14 of the production of energy from generating facilities that utilize renewable
15 energy resources. The energy associated with the RECs must be contracted for
16 delivery into New Mexico unless the Commission determines that there is an
17 active regional market for trading renewable energy and RECs in any region in
18 which the public utility is located, or grants approval to a utility to meet some or
19 all of its RPS using RECs from a renewable resource within a regional renewable
20 energy market or trading system in any region where the public utility is located.
21 Concurrently with its Procurement Plan filing, EPE files it annual report each year
22 which demonstrates how EPE complies with the Act.
23
8 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 Q. DO EPE'S OWN GENERATING RESOURCES INCLUDE SUFFICIENT
2 RENEWABLE ENERGY RESOURCES TO MEET THE RPS
3 REQUIREMENTS?
4 A. No. EPE's generating stations are fueled primarily by natural gas, coa1, and
5 uranium. EPE meets the remainder of its customers' needs by purchasing power
6 from wholesa1e suppliers. In order to meet the RPS and diversity requirements,
7 EPE must acquire RECs, with or without the associated energy. EPE also owns
8 and operates a relatively small-sca1e commercia1 wind generation facility, and
9 very small, demonstration-sized solar PV facilities, which are used for EPE's
10 voluntary renewable energy customer program.
11
12 Q. HOW DOES EPE EVALUATE POTENTIAL RENEWABLE ENERGY
13 RESOURCES TO MEET ITS RPS OBLIGATIONS?
14 A. EPE evaluates potential renewable energy resources to acquire RECs, with or
15 without the renewable energy, and to pursue diversity of resource type given
16 market conditions, EPE's current resource mix and system constraints, and the
17 factors set out in the Act and Rule. The statutory factors include overall
18 reliability, availability, dispatch flexibility and cost. The Rule imposes an
19 additional diversity requirement. EPE's strategy is to maintain a reliable yet
20 economical and diverse energy supply to meet the needs of its customers while
21 fulfilling its requirements under the Act and Rule.
22
23
9 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 Q. PLEASE SUMMARIZE EPE'S PREVIOUSLY APPROVED
2 PROCUREMENT ACTIONS.
3 A. The Commission previously approved the following procurement actions that are
4 included in EPE's Procurement Plan to meet EPE's 2011 and 2012 RPS
5 requirements: wind REC purchases from PNM; energy and associated REC
6 purchases from the SWEC solar photovoltaic CPV") 6 kW project; energy and
7 REC purchases from the CRLEF Camino Real Landfill Gas to Energy Facility
n 8 CCRLEF ), a customer-owned large-scale renewable energy QF located in EPE's
9 service area; and REC purchases from customer-owned small and medium sized
10 QFs. In addition, in 2008 EPE entered into an agreement with eSolar for the
11 SunTower project for the purchase of solar energy and associated RECs
12 beginning 2011.
13 The Commission approved EPE's procurement actions relating to its
14 purchases from PNM, SWEC, CRLEF in EPE's prior Plans (NMPRC Case
15 No.05-355-UT, with cost recovery approved in NMPRC Case Nos. 05-00231-
16 UT, 06-00365-UT, 07-00360-UT, 08-00219-UT, and 09-00259-UT. EPE's
17 procurement actions and cost recovery relating to customer-owned QF facilities
18 and the SunTower Project were approved in NMPRC Case Nos. 08-00219-UT,
19 and 09-00259-UT.
20
21 Q. PLEASE GIVE A BRIEF DESCRIPTION OF THE PREVIOUSLY
22 APPROVED RESOURCES.
23 A. Beginning in 2006, EPE entered into a six-year contract to purchase RECs
10 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 associated with wind energy generated in New Mexico and delivered within
2 PNM's system. The contract provided EPE its full RPS requirements for 2006
3 and 2007. The remainder of the contract (2008 through 2011) provides for
4 substantially reduced REC purchases to allow EPE the ability to develop diversity
5 in its renewable resources.
6 In 2007, EPE entered into a 20-year PPA to purchase energy and weighted
7 value RECs from the SWEC solar PV project The SWEC project is a 6 kW solar
8 PV commercial project with an estimated capacity factor of 23 percent, located in
9 Las Cruces, New Mexico, which became operational in March 2008.
10 Also in 2007, EPE entered into a QF agreement with CRLEF, which
11 provides weighted value biomass RECs. The CRLEF project is a 1.5 MW bio-gas
12 QF that is designed to increase to 3 MW. CRLEF is located in Sunland Park,
13 New Mexico, and uses methane gas from the landfill to fuel its generating facility.
14 The first phase of this project became operational in June of 2008. Because EPE
15 is required, in the ordinary course of business, to purchase all energy produced
16 from a QF such as CRLEF at avoided cost rates, EPE does not include the cost of
17 the energy purchases as a cost of RPS compliance. As part of its approved 2009
18 Plan, EPE began paying CRLEF for the RECs generated by the project at a price
19 of $0.015!kWh in order to ensure the continued viability of the project, which
20 provides portfolio diversity along with economical two-for-one weighted biomass
21 RECs.
22 In 2008, EPE entered into an agreement to purchase wind RECs from SPS
23 under a three-year contract, with the RECs to be banked and used to meet
11 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 requirements in 2008, 2009, 2010 and 2011.
2 In 2008, EPE also entered into an agreement to purchase 66 MW of solar
3 energy and associated RECs from eSolar to meet EPE's RPS requirements, which
4 was increased from 66 MW to 92 MW, to combat the rising costs of commodities
5 and capital, while maintaining the pricing offered to EPE.
6
7 Q. IN CALCULATING WHETHER EPE WILL MEET ITS RPS
8 REQUIREMENT, HOW DOES EPE WEIGHT THE RECS IT ACQUIRES
9 UNDER ITS PREVIOUSLY APPROVED PLANS?
10 A. EPE's purchases from SWEC and CRLEF are adjusted in accordance with a
11 weighting system previously implemented by the Commission in its Rule prior to
12 2008. In accordance with the prior Ru1e and Commission approvals, CRLEF's
13 RECs have a two-for-one value and SWEC's RECs have a three-for-one value.
14 None of the other RECs acquired by EPE have weighted values. In NMPRC
15 Case 07-001 57-UT, the Commission discontinued this weighting system, but
16 determined that utilities could continue to apply the prior REC weighting to
17 projects and renewable energy PPAs that had already been approved by the
18 Commission.
19
20 VI. STATUS OF SUNTOWER PROJECT
21 Q. PLEASE PROVIDE AN OVERVIEW OF THE STATUS OF THE
22 SUNTOWER PROJECT.
23 A. In February 2009, SunTower notified EPE that it wanted to assign the contract to
12 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 NRG, which required the consent of EPE. Because NRG was perceived to be a
2 potentially feasible source of financing for the project, and because the contract
3 required EPE not to "unreasonably" withhold its consent, EPE did not oppose the
4 assignment.
5
6 Q. PLEASE ADDRESS THE ISSUES WITH NRG REGARDING THE
7 TIMELY PERFORMANCE UNDER THE PPA FOR THE PREVIOUSLY
8 APPROVED SOLAR THERMAL TECHNOLOGY.
9 A. In mid-2009, the California test project continued to be behind its original test
10 schedule. In addition, in late-2009, NRG did not receive certain u.s. Department
11 of Energy ("DOE") loan guarantees, which they then considered important in
12 order to proceed. NRG told EPE that the SunTower Project would not be
13 completed in accordance with the project's contractual specifications and timeline
14 which were presented to the Commission and approved in 2008. On June 8,
15 2010, NRG testified to the Commission that it would not go forward with the
16 SunTower solar thermal project without DOE loan guarantees, and even then
17 would require amendments to the PPA to allow for further delays and to reduce
18 the existing contractual risks to NRG.
19
20 Q. WHAT IMPACT DID THIS HAVE ON EPE?
21 A. Without the previously approved project, EPE cannot fully meet its 2011 and
22 2012 solar diversity requirement under the Rule. EPE put NRG on notice of its
23 default of the PPA, and explored options, with both NRG and other suppliers, to
13 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 develop alternative solar resources.
2
3 Q. DID NRG PROPOSE AN ALTERNATIVE TO THE SUNTOWER
4 PROJECT?
5 A. Yes. NRG originally proposed unilaterally to deliver its contracted energy to be
6 produced from the SunTower project from an alternative facility that would use
7 solar PV technology in lieu of the originally approved eSolar concentrated
8 thermal technology.
9
10 Q. WAS A RESOLUTION REACHED WITH NRG?
11 A. Yes. As explained by EPE Witness Carpenter, EPE and NRG entered a Standstill
12 Agreement to defer litigation regarding NRG's default under the PPA, and the
13 parties executed an Amended Agreement, subject to approval by the Commission,
14 for purchase of solar energy and RECs from a 20 MW PV facility to be
15 constructed in southern New Mexico.
16
17 Q. WAS THIS PROCUREMENT ACTION PRESENTED TO THE
18 COMMISSION?
19 A. Yes. On June 8, 2010, at a hearing scheduled to review the status of the
20 SunTower project, EPE made a request for expedited approval of the Amended
21 Agreement. Although the Agreement itself was not admitted into evidence at the
22 hearing, the general tenus were discussed at hearing and EPE's witnesses
23 appeared and were cross-examined. An NRG witness was also available and
14 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 testified to NRG's commitment to the Amended Agreement. On June 24, 2010,
2 the Commission issued a Final Order approving EPE's procurement action to
3 enter the Amended Agreement. The Commission also approved termination of
4 the original PPA for the solar thermal facility from SunTower to EPE. Thus, the
5 Commission approved the alternative 20 MW solar PV procurement at the same
6 twenty-year fixed price of $127.45 per MWh for energy and RECs in lieu of the
7 previously approved 92 MW procurement from a solar thermal facility.
8
9 VII. EPE'S PROPOSED 2010 PLAN
10 Q. WHAT IS EPE'S 2010 PLAN TO MEET ITS RENEWABLE PORTFOLIO
11 REQIDREMENTS IN 2011 AND 2012?
12 A. EPE's 2010 Plan is to meet its RPS obligations through energy and REC
13 acquisitions pursuant to agreements with PNM, SWEC, CRLEF, and SPS that
14 were approved by the Commission in prior procurement plan cases, as well as
15 through EPE's approved incentive programs for customer-installed QF facilities.
16 In addition to previously approved procurement actions, EPE proposes to
17 increase its SPS wind REC purchases for 2011, to ensure compliance with the
18 overall 2011 RPS requirement, and EPE requests a variance from the 2011 full
19 solar diversity requirements of Rule 572 that 20 percent of the RPS be met
20 through solar energy resources. EPE also seeks approval of new solar resources
21 which will allow EPE to meet a portion of its solar diversity requirement for
22 2011, and full requirements thereafter.
23 EPE's 2010 Plan will add 49 MW of solar energy to the EPE system. Of
15 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 this, 20 MW will be supplied from NRGs alternative solar PV facility to meet
2 diversity requirements in 2012 as recently approved by the NMPRC. EPE also
3 proposes to utilize RECs from the new 5 MW Hatch Solar Energy Center
4 proposed for 2011 to meet a portion of its solar diversity requirements in 2011
5 and 2012. EPE also proposes to procure solar energy and RECs from the new
6 SunEdison solar project to meet its RPS and diversity requirements beginning in
7 2012. Under this plan, the SunEdison project is a 24 MW solar PV project. The
8 24 MW will be built as two (12 MW) projects on two sites in southern
9 New Mexico.
10 As explained in my testimony below supporting the Variance, EPE is
11 essentially requesting that its 2011 diversity requirements be deferred to the years
12 2012-2014 when they can be met with the NRG alternative project, the Hatch
13 project and the SunEdison project. EPE requests approval of its 2010 Plan,
14 including the Variance and including cost recovery for EPE's procurement
15 actions. EPE seeks a Final Order that will re-affirm the previous approval of the
16 alternative PV procurement with SunTower and will approve the other new
17 procurement actions to add solar resources and diversity to EPE's portfolio. It
18 will also include approval for procurement of the additional wind RECs to meet
19 the total RPS in 2011.
20
21 Q. IS IT NECESSARY FOR EPE TO ADD RESOURCES FOR 2011 TO
22 MEET ITS RPS REQUIREMENTS?
23 A. Yes. Because of the termination of the solar thermal project, EPE would be short
16 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 on meeting its total RPS requirements without adding a resource. EPE therefore
2 requests approval for the most cost-effective resource to meet the full RPS
3 requirements for 2011, which are wind RECs from SPS.
4
5 Q. WILL EPE'S PORTFOLIO BE DIVERSIFIED IF THE COMMISSION'S
6 APPROVES ADDITIONAL WIND RECS?
7 A. Yes. EPE will meet its diversity requirements for wind, biomass and distributed
8 generation in both years, and only a portion of its solar requirement in 2011 must
9 be deferred to be covered in later years. However, EPE's requested Variance to
10 defer the remaining amounts of solar diversity in 2011 into years 2012-2014
11 contemplates that EPE will fully meet the 2011 amounts over time, as well as the
12 additional amounts required under the Rule going forward.
13
14 Q. WHAT RESOURCES WILL EPE USE TO MEET THE NON-SOLAR
15 MINIMUM PERCENTAGE TARGETS IN 2011 AND 2012?
16 A. EPE will meet the wind diversity requirement through a wind REC contract in
17 place with PNM through 2011 and a new contract in place with SPS for wind
18 RECs. EPE has sufficient wind RECs to meet its minimum wind diversity
19 requirement through 2012.
20 EPE will meet the requirements of the "other renewable" category through
21 2015 by continuing to purchase biomass energy from CRLEF under its QF
22 Interconnection Agreement. If EPE does acquire additional biomass resources,
23 RECs from the CRLEF project instead could be used to meet distribution
17 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 generation requirements, because the QF is interconnected by a customer at the
2 distribution level of EPE's system. EPE will use surplus RECs from CRLEF
3 together with RECs from customer-installed QF projects to meet the distributed
4 generation category.
5 EPE will use RECs from SWEC to meet a small portion of the solar
6 diversity requirement. In addition, EPE anticipates it will begin to receive energy
7 and RECs from the new 5 MW solar project in Hatch during 2011. However,
8 EPE will not have the required minimum 20 percent from solar resources in its
9 2011 portfolio, which is the reason for the Variance requested below.
10
11 Q. HAS EPE INCLUDED RECS ASSOCIATED WITH THE CUSTOMER-
12 INSTALLED QF PROJECTS IN CALCULATING HOW IT WILL MEET
13 ITS RPS OBLIGATIONS?
14 A. Yes. As detailed in EPE Witness Evans' testimony, EPE is including RECs
15 obtained through its customer-installed QF programs to meet its diversity
16 requirements beginning in 2011. These RECs can be applied to meet either EPE's
17 distributed generation or solar requirements.
18
19 VIII. EPE'S DIVERSITY RFP PROCESS AND NEW RESOURCE SELECTION
20 Q. PLEASE DESCRIBE EPE'S DIVERSITY REQUEST FOR PROPOSALS
21 (ItRFplt).
22 A. EPE conducted a Diversity RFP process in the latter part of 2009 and early part of
23 2010 to position EPE to meet the diversity targets in 2011 and 2012, as well as to
18 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 address the deficiencies caused by NRG's possible default with the solar thermal
2 project. The RFP results, discussed in more detail below, provided EPE with a
3 number of viable bids from different renewable energy resource types, but
4 demonstrated that solar energy diversity of resource type beyond EPE's existing
5 diversity is not available until 2012.
6 Initially, the purpose of the RFP was to evaluate additional wind and
7 biomass projects to address the diversity requirements. EPE has a contract with
8 PNM for wind RECs that expires in December 2011, and EPE has another
9 contract with SPS for wind RECs that expires in 2010. Thus, EPE will need to
10 purchase additional wind energy andlor RECs to meet the diversity requirements
11 in 2012 and beyond. In addition, EPE wanted biomass proposals to determine
12 whether there are feasible, economical resources that could address future RPS
13 requirements.
14
15 Q. WHY DID EPE REQUEST SOLAR PROPOSALS IN THE RFP?
16 A. EPE decided it would be prudent to investigate whether there could be other solar
17 resource options available in the event NRG failed to build the solar project
18 proposed in the PPA. Recognizing the requirement for diversity under the Rule
19 beginning in 2011, EPE requested solar proposals in the RFP.
20
21 Q. WHAT WAS THE OUTCOME OF THE RFP PROCESS?
22 A. As a result of the RFP process, in 2010 EPE entered into an agreement to
23 purchase wind RECs from SPS based on EPE's evaluation of the proposals
19 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 submitted in response to the renewable energy RFP. The contract term is 2011 -
2 2015. Also, EPE selected a solar PV proposal from SunEdison to purchase solar
3 energy and associated RECs starting in 2012. The contract term is 25 years. The
4 contract with SunEdison provides energy and RECs to replace the SunTower
5 RECs or augment the SunTower energy and related RECs.
6
7 Q. IN THE RFP, WHAT REC REQUIREMENTS DID EPE SPECIFY WERE
8 NEEDED?
9 A. EPE'S RFP specifies EPE's REC requirements in the years 2010 through 2020,
10 and seeks diverse resources to meet the RPS deficiency for 2011 and 2012.
11 Beginning in 2011, the RFP specifies the wind, solar, other renewable (biomass,
12 geothermal, landfill, etc.) and distributed generation minimum resource l3 requirements resulting from the Rule's diversity percentage targets. The RFP
14 evaluation process was designed to ensure that EPE reasonably considered the
15 statutory factors for developing its RPS portfolio of price, costs of interconnection
16 and transmission, availability, dispatchability, REC values and portfolio
17 diversification requirements.
18
19 Q. PLEASE DESCRIBE HOW EPE INITIATED ITS DIVERSITY RFP
20 PROCESS.
21 A. EPE mailed its Diversity RFP to 128 renewable energy providers on
22 September 30, 2009 and posted its RFP on EPE's internet website. EPE also
23 posted its Diversity RFP on the DOE's "Green Power Network," a national
20 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 clearing house for renewable energy RFPs. In addition, EPE issued a nationwide
2 press release. EPE received 85 "intent to bid" notices.
3
4 Q. HOW MANY BID RESPONSES DID EPE ACTUALLY RECEIVE?
5 A. EPE received seventy-three proposals in response to the RFP.
6
7 Q. PLEASE DESCRIBE GENERALLY THE BID PROPOSALS RECEIVED
8 IN RESPONSE TO THE DIVERSITY RFP.
9 A. There were 54 solar proposals (from 39 companies), 14 wind proposals (from 10
10 companies), two bio-diesel project proposals and three solar/wind combination
11 proposals. Of the solar proposals, most were solar PV proposals. Four proposals
12 were solar thermal electric proposals and two were concentrated solar power. The
13 solar proposals offered different purchase arrangements such as PPAs for energy
14 and RECs, RECs only, or project ownership. The wind proposals offered similar
15 agreements. One bio-diesel proposal offered a PPA for energy and RECs and the
16 other bio-diesel proposal offered to sell bio-diesel for consumption at an EPE
17 power plant.
18
19 Q. WHAT WERE THE PROPOSED ONLINE DATES FOR THE
20 PROJECTS?
21 A. The proposed on-line dates for the projects ranged from 2011 through 2014. The
22 earliest on-line date for a solar project was Apri12011.
23
21 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 Q. DID EPE PURSUE ONLY THOSE PROJECTS THAT COULD BE ON-
2 LINE IN 2011 AND WHICH COULD ALLOW EPE TO MEET ITS
3 DIVERSITY REQUIREMENTS?
4 A. No. For the projects to be on-line in 2011 such that EPE could meet its diversity
5 requirements in 2011, construction would have had to begin in May/June 2010 -
6 prior to obtaining NMPRC approval to proceed with these projects. In addition,
7 the prices provided in the RFP process showed that lower prices could be
8 obtained with projects coming on-line in late 2011 or in 2012. EPE's
9 consideration of all of the bids allows EPE and its customers to benefit from
10 lower prices, and provides for a more adequate review and approval process by
11 the Commission that follows the statutory schedule for procurement filings.
12
13 Q. WERE ANY OF THE BIDDERS ELIMINATED AT THE OUTSET DUE
14 TO NON-RESPONSIVENESS?
15 A. Yes, three bidders were eliminated because they were not responsive to the RFP.
16
17 Q. WHAT WAS THE GOAL OF THE ECONOMIC EVALUATION THAT
18 WAS PERFORMED FOR THE REMAINING BIDS?
19 A. The goal of EPE's economic evaluation was to determine the present worth
20 levelized cost of each alternative in order to rank them from most economical to
21 least economical.
22
23
22 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 Q. WHAT DOES THE TERM "LEVELIZED" MEAN AND HOW ARE
2 LEVELIZED COSTS CALCULATED?
3 A. Levelized cost is the present value of the entire cost of the construction and
4 operation of a generating plant over its economic life, converted to equal annual
5 payments. Costs are levelized in real dollars by adjusting to eliminate the impact
6 of inflation. Levelized costs are calculated by getting the sum of annualized costs
7 divided by the sum of the annual quantity produced for the total duration of the
8 PPA, as proposed by each bidder. The annualized costs and the annual quantity
9 produced must be net present values. Annualized costs calculations may vary
10 depending on the bidder's proposal, since some include operating and
11 maintenance costs and/or fixed costs, along with energy costs.
12
13 Q. WHAT COSTS WERE INCLUDED IN THE ECONOMIC ANALYSIS?
14 A. All costs proposed by the bidders including energy costs, demand charges,
rr 15 transmission costs, and operating and maintenance C'O&M ) costs were included.
16
17 Q. AS A RESULT OF THE PRELIMINARY ECONOMIC ANALYSIS, DID
18 EPE SELECT CERTAIN BIDDERS FOR FURTHER EVALUATION?
19 A. Yes. Based upon a preliminary economic analysis that utilized the confidential
20 data provided by the bidders, EPE chose 10 bidders for further consideration. The
21 projects not selected for the short list were excluded based on costs, financial
22 capability or for non-responsiveness to EPE's RFP. EPE shortlisted seven solar
23 bidders, two wind bidders, and one bidder with a combination solar and wind bid.
23 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 Q. WHAT BIDS WERE RECOMMENDED FOR FURTHER EV ALUATION?
2 A. Based on the results of the preliminary analysis, EPE selected the following
3 proposed projects for further evaluation:
4 1) Wind RECs, 2011-2015
5 2) Solar PV, lOMW.
6 3) Solar PV, 36MW and 10MW
7 4) Solar PV, 40MW
8 5) Solar PV, 50MW
9 6) Solar PV and Wind Combination, 50MW wind, 20MW solar
10 7) Solar PV, BMW, 15MW
11 8) Solar PV, 20MW
12 9) SolarPV,5MW
13 10) Wind 48MW
14
15 Q. DID EPE ANALYZE WHETHER THE BIDS WERE WITHIN THE
16 NMPRC'S RCT OVERALL CUSTOMER RATE CAP?
17 A. Not at this stage. EPE believed it was best to analyze all of the short-listed
18 Bidders' proposals.
19
20 Q. WHAT WAS EPE'S NEXT STEP IN THE PROCESS?
21 A. The short-listed Bidders were asked to provide a best and final price proposal by
22 March 3, 2010.
23
24 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 Q. PLEASE SUMMARIZE THE RESULTS OF THE BEST AND FINAL
2 PROPOSALS' ECONOMIC ANALYSIS.
3 A. As in the preliminary analysis, EPE ranked the bids from best to worst based on
4 economics. EPE did not receive a best and final response for the 48 MW wind
5 project, which was not as economically attractive as the wind REC proposal, and
6 therefore eliminated that bidder from further consideration.
7
8 Q. WHAT WAS EPE'S NEXT STEP IN THE PROCESS AFTER RECEIVING
9 THE BEST AND FINAL PROPOSALS?
10 A. After a review of the best and fmal proposals, EPE selected a winning wind
11 project (wind RECs for 2011-2015) and selected three solar Bidders as finalists.
12 SPS, the winning bidder, proposed to sell 50,000 RECs in 2011 and
13 40,000 RECs in 2012-2015 to EPE. The RECs in 2011 will allow EPE to meet its
14 total RPS requirement in 2011. The price of the RECs is $18.00IREC in 2011,
15 $19.00IREC in 2012 and $20.00IREC in 2013-2015. The RECs would come
16 from a wind farm that is already operating. The Agreement with SPS can be seen
17 in Exhibit RA-2.
18 EPE conducted meetings with the three final solar Bidders to address
19 questions on both sides to clarify and discuss some issues. At each individual
20 meeting, the following were discussed: (l) the Bidder's organizational chart; (2) a
21 description of the proposed technology; (3) construction schedules and
22 operational plans, including major contracts and risks associated with each plan;
23 (4) applicable interconnection requests and any identified transmission issues;
25 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 (5) the Bidder's financial capability; and (6) the Bidder's willingness to provide
2 financial assurances.
3
4 Q. WHAT WAS THE RESULT OF EPE'S BEST AND FINAL PROCESS
5 WITH THE SOLAR BIDDERS?
6 A. After meeting with the finalists and further reviewing their proposed projects and
7 additional information, EPE preliminarily selected SunEdison, a subsidiary of
8 MEMC Electronic Materials, a leading provider of silicon wafers to the
9 semiconductor and solar industries, as the winning solar Bidder. SunEdison has
10 installed 103 MW of solar PV representing more than 200 projects in 11 states,
11 and expects to have an additional 150 MW on-line by the end of 2010.
12 SunEdison built an 8.2 MW solar PV facility in Alamosa, Colorado for Xcel
13 energy. This facility was completed in December 2007. I visited this facility and
14 observed it in operation. SunEdison provided an overview of the design,
15 preconstruction, construction, operations and maintenance, and performance data
16 of the Xcel 8.2 MW solar project. SunEdison also gave me tour of two additional
17 solar sites built by them. I toured the Alamosa School District's 700 kW thin film
18 fixed tilt project and Alamosa's water plant's 600 kW thin film project. During
19 this trip, SunEdison demonstrated their ability to build and operate solar PV
20 facilities.
21 In its final proposal, SunEdison provided four proposals for projects of
22 different sizes - 24 MW, 40 MW, 60 MWor 80 MW. EPE seeks approval of a
23 24 MW SunEdison project. The price for the 24MW project is $104.39IMWh.
26 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 Each of Sunlidison's projects can be broken down into 1 to 3 sites with no impact
2 on price. The 24 MW will be built as two (12 MW) projects on two sites. The
3 primary land site proposed is the City of Las Cruces West Mesa Industrial Park;
4 other proposed sites include: land near Santa Teresa, New Mexico adjacent to the
5 proposed site of the SunTower Project, EPE-owned land; or New Mexico State
6 land. The estimated on-line date is December 31, 2011. EPE and SunEdison
7 have agreed on a term sheet and are working to finalize a PPA.
8
9 Q. IS EPE ALSO PROPOSING A SOLAR PROJECT DEVELOPED
10 OUTSIDE OF THE RFP PROCESS?
11 A. Yes. EPE was approached by the Village of Hatch, New Mexico to inquire if
12 EPE would be interested in purchasing energy from a 5 MW solar plant to be
13 located in Hatch, New Mexico. Although, it was not proposed in the RFP
14 process, EPE considered the project since they indicated it could be on-line as
15 early as the first quarter of 2011, and thus, could contribute to EPE's diversity
16 requirements in 2011. EPE has negotiated a term sheet with the Hatch Solar
17 Energy Center and are working on a PPA for a 5MW project to be online by
18 March 31, 2011. The price is $119/MWh. The project is contingent on NMPRC
19 approval.
20
21 Q. IS THE PRICE FOR THE HATCH PROJECT EQUIVALENT TO THE
22 PRICE NEGOTIATED WITH SUNEDISON THROUGH THE RFP
23 PROCESS?
27 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 A. No, however, it is a small project that allows EPE to meet a portion of its diversity
2 requirements in 2011. In addition, it helps the economic development in the
3 Hatch, New Mexico area. Exhibits RA-3, RA-4 and RA-5 include the impact of
4 the Hatch Project. The Hatch Project will allow EPE to meet approximately
5 25 percent of its solar diversity requirements in 2011. EPE is asking that any
6 remaining solar diversity requirements be deferred to the years 2012-2014 per the
7 Variance requested below.
8
9 Q. DO THE RESOURCES PROPOSED BY EPE MEET THE STATUTORY
10 CONSIDERATIONS OF PRICE, COST, AVAILABILITY, AND
11 DIVERSITY?
12 A. Yes. EPE has chosen projects that are reasonably priced and take into
13 consideration costs of interconnection and transmission. The projects will come
14 on-line within a reasonable amount of time and there are no other projects
15 immediately available. The fact that the solar projects are located throughout
16 EPE's New Mexico service territory will help with the availability of the
17 renewable energy. These projects provide reasonable renewable energy
18 certificate values and will help EPE achieve portfolio diversification
19 requirements.
20
21 Q. WHAT OTHER RENEWABLE PROJECTS ARE BEING
22 INVESTIGATED BY EPE?
23 A. On its own initiative, EPE built, and is operating 64 kW of solar PV at its
28 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 southern New Mexico Rio Grande power station. This specific facility was
2 pursued in order to expand the Company's renewable footprint and expand its
3 knowledge of solar energy operations.
4 EPE has been working with a solar developer to install solar PV systems
5 at local school districts in southern New Mexico. This might total as much as
6 6 MW and EPE would be interested in buying the RECs for its RPS obligations.
7 The projects are still preliminary and EPE will continue to evaluate these projects
8 for possible presentation to the Commission, as may be appropriate, in future
9 procurement proceedings.
10 EPE has also been working with the Elephant Butte Irrigation District
11 C'EBID1t) on a small micro turbine project. This project was mentioned in EPE's
12 2009 RPS filing. These micro turbines would be placed in irrigation canals in the
13 Las Cruces, New Mexico area and the turbines would be driven by the water flow
14 in the canals to generate electricity which would be purchased by EPE. EBID is
15 still proceeding with their test project. They are testing turbine and generator
16 combinations to determine how they can maximize the output of the micro
17 turbines. EBID is also investigating how many micro turbines are feasible at their
18 proposed sites. If these tests are successful, EPE will work with EBID to
19 implement these turbines and purchase the electricity generated through an
20 interconnection agreement. The possible total amount purchased is still to be
21 determined but could be anywhere from 10 kW to 100 kW. This project could
22 provide EPE with additional diversity and would be used to meet distributed
23 generation requirements. EPE will update the Commission in future proceedings.
29 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 IX. COST OF EPE'S 2010 PROCUREMENT PLAN
2 Q. WHAT IS THE ESTIMATED COST TO MEET EPE'S 2011 AND 2012 RPS
3 OBLIGATIONS?
4 A. The estimated cost to meet EPE's 2011 and 2012 is provided in Exhibit RA-3.
5 The costs associated with EPE's RPS obligations for 2011 are $3,475,586; and for
6 2012, the costs are $14,205,197.
7
8 Q. ARE THE ESTIMATED COSTS REASONABLE?
9 A. Yes. Based on the RPS obligations EPE is required to meet, and the overall
10 results of EPE's most recent and past Diversity RFP processes, EPE's estimated
11 costs to comply with the requirements of the Act and Rule are reasonable. EPE
12 has engaged in competitive bid processes to acquire RECs, with or without
13 associated energy, at the lowest reasonable costs that have been available in the
14 market.
15
16 Q. WHY DOES EPE CONSIDER OVERALL COSTS IN DEVELOPING ITS
17 MANDATORY PROCUREMENT PLAN?
18 A. Under the Act and Commission rules, if a public utility finds that the cost of
19 renewable energy for purposes of compliance with the RPS in any given year
20 would be greater than the RCT established by the Commission, the public utility
21 is not required to incur that cost or add the additional resource. EPE looked at the
22 overall rate effect for RCT purposes. As explained by EPE Witness Evans, these
23 costs fall within the ReT established by the Commission. Mr. Evans also
30 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 addresses how EPE proposes to recover these costs.
2
3 X. REQUEST FOR VARIANCE FROM DIVERSITY REQUIREMENTS
4 Q. PLEASE DISCUSS EPE'S REQUEST FOR A VARIANCE OF THE 2011
5 SOLAR DIVERSITY REQUIREMENT.
6 A. Pursuant to 17.9.572.B NMAC, EPE IS requesting a vanance from
7 Rule 17.9.572.14.A NMAC regarding its diversity requirements in 2011. The
8 Variance is necessary as a result of the Commission's approval of NRG's
9 alternative for the solar PV facility in lieu of the solar thermal facility previously
10 approved by the Commission. The newly constructed .PV facility will not be
11 commercially available until December 31, 2011 (and could be delayed forforce
12 majeur reasons until December 31, 2012). Section 14.A provides that
13 procurement plans shall be designed to achieve a fully diversified renewable
14 energy portfolio by 2011. Section 14.Bprovides, however, that a fully diversified
15 renewable portfolio shall not be required "when doing so would conflict with
16 reasonable cost thresholds established by the commission or when full
17 diversification is prevented by technical constraints or limitations ... [which]
18 include, but are not limited to, transmission constraints, limitations on system
19 integration, limited availability of particular renewable resources, and limitations
20 on system reliability, but shall not include constraints or limitations that the public
21 utility is capable of overcoming at reasonable cost or effort."
22
23
31 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 Q. DID THE COMMISSION RECOGNIZE THE REALITIES OF THIS
2 SITUATION NECESSITATING A VARIANCE?
3 A. Yes. The Commission recognized that the solar thermal project was not going
4 forward. The Commission was interested in fostering the benefits of proceeding
5 with a new project in southern New Mexico. Thus, the Commission approved
6 procurement under the Amended Agreement for EPE to purchase solar energy
7 and RECs from NRG's 20 MW PV facility, and the Commission approved
8 termination of the original PPA.
9
10 Q. ARE OTHER REASONABLE AL TERNATIVES AVAILABLE TO EPE?
11 A. There are no reasonable alternatives available to EPE that would allow EPE to
12 meet the full 2011 solar diversity requirements. The renewable RFP described
13 above determined that there were some projects that could be on-line in 2011;
14 however, in order for them to provide sufficient RECs in 2011, construction on
15 these projects would have had to begin by May/June 2010, which did not allow
16 adequate time to obtain NMPRC approval. Further, the prices provided in the
17 RFP process determined that lower prices could be obtained with projects coming
18 on-line in late 2011 or in 2012. In addition to the RFP process, EPE has pursued
19 and is entering into a PPA for energy and RECs with the Village of Hatch for a
20 5 MW solar PV facility that is anticipated to be on-line during 2011, but that
21 facility will not produce sufficient energy for EPE to meet its total 2011 solar
22 diversity requirement.
23
32 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 Q. WHAT IS THE EFFECT ON EPE AND ITS CUSTOMERS IF THE
2 VARIANCE IS NOT GRANTED?
3 A. The effect would be to subject EPE to Commission penalties for failure to comply
4 with the Rule's diversity requirement, even though the Rule provides that a fully
5 diversified portfolio shall not be required when full diversification is prevented by
6 technical constraints or limitations such as limited availability of particular
7 renewable resources. The Commission was aware that its action to approve
8 procurement through the Amended Agreement, and its approval for termination of
9 the previously-approval solar thermal facility PPA would result in a situation
10 where a variance was required. Because alternative suppliers are not able to
11 develop sufficient new solar facilities by 2011 for EPE to meet all of its solar
12 diversity requirement, it would be contrary to provisions of Rule 572 to consider
13 imposing sanctions on EPE as a result of the failure of the solar thermal facility to
14 be built and operating in 2011 as previously contemplated.
15
16 Q. WHAT WILL BE THE RESULT IF THE VARIANCE IS GRANTED?
17 A. The result will be that EPE meets the total RPS statutory requirements and most
18 of the Rule's minimum diversity requirements, even if the solar diversity
19 requirement is not fully met in 2011. EPE will still have a diversified portfolio
20 that includes solar, wind, biomass and distributed renewable generation and be
21 able to fully meet all diversity requirements in 2012. EPE also has agreed to
22 voluntarily "make up" any shortfall :from 2011 solar diversity in later years (2012-
23 2014), which in effect delays rather than waiving or excusing EPE's compliance
33 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 for 2011.
2
3 Q. HOW IS THE VARIANCE CONSISTENT WITH THE PURPOSES OF
4 THE RULE?
5 A. The requested Variance is consistent with NMAC Rule 17.9.572.19 which
6 conditions the requirement for full diversification on the reasonable availability
7 and cost of a given resource type (in accordance with the Act), while still
8 requiring that the overall RPS requirements of the Act be met. EPE has proposed
9 a Plan that meets the overall RPS requirements of the Act from a diverse portfolio
10 of renewable resources, and has committed to meet any solar diversity shortfall by
11 increasing the solar amounts used to meet its RPS requirements for 2012 through
12 2014.
13
14 Q. WHY IS IT IN THE PUBLIC INTEREST TO GRANT THE VARIANCE?
15 A. It is in the public interest to grant the Variance because customers will continue to
16 receive the overall benefits contemplated by the Act in having renewable energy
17 as part of EPE's resource portfolio and customers will not be subject to higher
18 costs that would likely result from attempting to expedite installation of new
19 facilities, even assuming such facilities could be completed by 2011.
20
21 Q. HOW WILL EPE ACHIEVE A FULLY DIVERSIFIED PORTFOLIO IN A
22 TIMELY MANNER?
34 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 A. EPE is requesting that a portion of its 2011 diversity requirement for solar
2 resources be deferred to the years 2012-2014. EPE's solar diversity requirement
3 for 2011 is 33,708 MWh. EPE will meet each year's solar diversity requirement
4 for 2012-2014, plus EPE will increase its minimum solar REC requirement by an
5 additional one-third of its 2011 solar MWh shortfall when meeting its annual RPS
6 requirements, to ensure that the actual number of solar MWh RECs required in
7 2011 will be delivered over the following three years. Exhibit RA-4 shows the
8 renewable energy percentages by technology for the years 2011 and 2012.
9 Exhibit RA-5 shows the total solar diversity requirements that will be met in the
10 years 2012 - 2014.
11
12 XI. CONCLUSION
13 Q. PLEASE SUMMARIZE THE APPROVALS THAT EPE IS REQUESTING.
14 A. EPE requests that the NMPRC approve its 2010 Procurement Plan and authorize
15 cost recovery for reasonable costs consistent with the approved Plan. EPE's 2010
16 Plan includes a Variance to defer its full solar diversity requirement in 2011, to be
17 thereafter made up during 2012-2014. EPE proposes to procure additional solar
18 energy and RECs through Commission-approved procurement under the terms of
19 the Amended Agreement with NRG/SunTower from the new 20 MW PV facility.
20 EPE requests approval to procure solar energy and RECs from SunEdison under a
21 PPA for a new 24 MW PV facility to be located in southern New Mexico; and
22 from a 5 MW PV project to be located near Hatch, New Mexico. EPE requests
23 specific approval to procure additional wind REC purchases from SPS in order to
35 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 enable EPE to meet its full RPS requirements in 2011. And finally, EPE will
2 continue procurement through previously approved purchase agreements for wind
3 REC purchases from PNM; EPE's purchase of energy and associated RECs from
4 SWEC; EPE's purchase of energy and RECs, pursuant to the modified QF
5 agreement with CRLEF and through the existing agreement to purchase wind
6 RECs from SPS, but with a new agreement for increased amounts to provide
7 cover for the approved termination of the solar thermal facility in 2011.
8 EPE specifically requests that the Commission approve EPE's
9 procurement actions of entering into contracts with SunEdison, Hatch and SPS,
10 reaffirm its approval of procurement under the Amended Agreement with
11 SunTowerlNRG from the 20 MW PV facility to be constructed in southern
12 New Mexico, and that the Commission grant EPE's request for a variance to the
13 solar diversity requirement for 2011 such that EPE meets that requirement during
14 2012-2014. Because EPE has demonstrated that the estimated costs associated
15 with its procurement actions are reasonable, EPE also requests approval of the
16 costs consistent with its 2010 Procurement Plan.
17
18 Q. IS EPE'S PROPOSED 2010 PLAN REASONABLE AS TO ITS TERMS
19 AND CONDITIONS CONSIDERING PRICE, AVAILABILITY,
20 DISPATCH FLEXIBILITY, ANY RENEWABLE ENERGY
21 CERTIFICATE VALUES AND DIVERSITY OF THE RENEWABLE
22 ENERGY RESOURCE?
23 A. Yes. EPE's proposed 2010 Procurement Plan 1S reasonable taking into
36 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF RICARDO ACOSTA
1 consideration these factors. EPE's 2010 Procurement Plan consists of projects
2 which provide diversity of resource type from wind, biomass, and solar
3 technologies and meets the standards set forth in the REA and the Rule.
4 As discussed above, EPE chose projects that in combination are
5 reasonably priced, fit within EPE's dispatch flexibility parameters as applicable,
6 and add diversity to its portfolio.
7 EPE's 2010 Procurement Plan, including the costs associated with the
8 Plan, is reasonable and should be approved.
9
10 Q. DOES THIS CONCLUDE YOUR TESTIMONY?
11 A. Yes, it does.
37 BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION
IN THE MATTER OF EL PASO ) ELECTRIC COMPANY'S 2010 ) PROCUREMENT PLAN PURSUANT ) TO THE RENEWABLE ENERGY ACT ) CASE NO. 10-00 __ -UT AND NMAC 17.9.572.16 ) )
AFFIDAVIT
STATE OF TEXAS ) ) ss COUNTY OF EL PASO )
Ricardo Acosta hereby deposes and states under oath that the information contained in the foregoing Direct Testimony of Ricardo Acosta, together with the exhibits attached thereto, is true and accurate based on my personal knowledge and belief. SIGNED this3LJ';f;.y of June, 2010. f. ru~p-
Subscribed and sworn to before me this ;o~ day of June, 2010.
My Commission expires:
0\ ~( '2..0 \ l. TINA G. DENISON NOTARV PUBLIC In and for the Stale of Texas My commission ellpires 01-14-2012 EPE's NEW MEXICO JURISDICTIONAL RETAIL ENERGY SALES' REQUIREMENT
(a) (b) (c = a=b) (d) (f = c-d)
EPE's New EPE's Current Contracts in Place New Mexico's Mexico EPE's Annual EPE's RPS Jurisdictional Renewable Renewable Small and Requ irement Year Retail Energy Energy SWEC(3) CRLEF(3) Year Energy PNM Medium Total RECs for Deficiency Sales' NRG Requirement'i' Contract Contract Contract System REC RPS Requ ire ment (Solar PV) Projectlon'" (Wind) (Solar PV) (Biomass) Purchase Compliance Proaram (%) (MWh) (RECs) (RECs) (RECs) (RECs) (RECs) (RECs) (RECs) (RECs) 2011 10% ] 685406 16854] 105605 34 21 200 0 ] 082 127921 40620 2011 20]2 10% ] 757908 175 79] 0 34 24380 43800 1 508 69722 106069 2012
Note: 1.) EPE's New Mexico jurisdictional retail energy sales are based on EPE's Load Research Department's 2010 Load Forecast dated March 17,2010. 2.) Beginning 2011, of EPE's Renewable Energy Requirement, 20% must be met with solar, another 20% by wind, 10% by biomass, and 1.5% with distributed generation. 3.) Columns consider the application of the weighted values, of each renewable resource type, previously assessed by the Rule (Wind 1:1, Biomass 2:1, and Solar 3:1).
"'01'T1 jlJ X lC:::r I'D _. 0- ~ ....•_ . 0;:0...•..» ~ , Exhibit RA-2 Page 1 of3
Renewable Energy Certffleates CONFIRMATION AGREEMENT
This COrlfittrtation Agr~etiJ.ent describes the term,s ora-proposed transaction between Buyer and Seller for thesale,purchllSe and.delivery of Ren~wableEnergy Certificates ("RECs") pursuant to the terms of the Master Renewable Energy Certificate PUrchase. and Sale Agreement (the "Agreement") between them dated 24th day of October2008~ Capjtalized terms-used herein that are not otherwise defined herein shall have the meanings flS sucJ:iterm,s~re defined in the Agreement and Schedule P to the Agreement, which definitions •.·art:mcorporatedby reference herein.
Tram;,a¢tioI:JTradeDate A,c C"I ( 2J) :).0 i0 Seller: Satithwest~rrt·Public·Service Company, a New Mexico corporation Buyer: E1PasOElectricCompan:y.il TexasCorpbmtion
Type of Product: ( X) Standard ItECs (_}Generation Contingent
1., ¢9l!tra.ct..t\1110unt, Vintage and Price:
QUANTITY PRICE TOTAL 2011 50.000 $1 S.OOffi£C· 2012 40,000 $760,000.00 2013 $20.00IREC $~OO!OOO.OO 2014 40,000 $8.0.0•.000..00 2.015 40,.000 $2O,.00/REc $8.0.0,.0.00..00 TOTAL 210,00.0 $4~060,O.oO.OO
2. Delivery Date: No sooner than ninety (90) daysaTter theh¢gihning of the. applicable Vintage calendar year but no later than llinety(90) days after. the end of the applicable vintage calendar year; . 3. Method of Transfet:GIS RECtrackirtg'sY$tei'tl~ speCified as..WREGIS. 4. Renewable Enel'gy Pacility: Shall be eitheftheSan Juan Mesa Wind ProjeclLLCofthe Caprock~indi Limited Partnership. at ScHer's sole discretion. Renewable Etl~r&Y Source Wind generation. For purposes of this Confirmation Agreement,one(l) REC will be measuredas the Environmental Attributes associated with one (1) MWhof genetationfrom either the San Juan Me~Wind Project, LL,(J of the Captock Wind, LinUte.ti })~ership wind generation facmt.ies~.H?WeVer, lim th,efu1ureSeUer obtains R:ECsfrom a.renewable generation proj¢cto'1:h~rtha,t'lthoseli$\:edabove and that meets the standards stated in Paragraph 5 herein, Selfetmay use those RECs to satisfy the 'requirements ofthis·Confitlrlation Agreerr)e:rit. 5. Seller represents thatthese RECs are oompliantwiththe followingApplicable Programs: RECssha:Umeetthe-standard set forth inthe:NewMexico Administrative Code, Title 17. Chapter 9, Part 572 as of the Transaction Trade Date.
Page 10f3 Exhibit RA-2 Page 2 of3
6. Neither Party shall reference the other Party in any promotional or media activities regarding this Confirmation Agreement without prior written consent from the other Party. 7~ Approval by the New Mexico Public Re$:ulationCommissioh (l b. Providing Replacement .REC$ ..;t.!J .• R~llle~:yf9r $eU~,~~:Jfaill!reto deliver RE<:;s. Notwith$tanding ArticJ~ 5 ofth~;}\;gr(:em(:nt. if $¢ller fails to deliver RECs upon. the specified Ilelivery nate(~) for a given vintage calendar year, SelleI' shall be obligated to provide an eqWtlnumber Of Replacement RECs to atl~er.provided that Buyer submits a Replacement REC notice ("RR Notice") to Seller requesting the Replacement RECs within twenty (20) days after the Delivery Date. In such event, Seller shall be required to provide Buyer with the Replacement RECS within forty-five (45) da,ys of SeUet~sreceipt of the RR Notice. If Seller fails to. provide Re.plaCementRE€s tdBu),er for a given vintage calendar y¢~r within ...furtY-fiv~..(4Q·l days .~f reqeip't of such RR Notice, notwithstanding anyiliiI)g to the. c:9ntra,IY in the Agreement or in this Confirmatio:n.Agreement, aUY¢r's $oie:and:e,cclusjveremedy shall be that Seller Page 2 of) Exhibit RA-2 Page 3 of3 shall be Hable for the following direct damages aCtJ1aJlyIncurred by Buyer, if any, as a result of Seller's failure to perform its-obligations under the Agreement Such damages shall include (i) RECs acquired by Buyer at the then current commercially reasonable market unit price less the unit Price stated in this Confirmation Agreemel!t1l.~cessary to make up for arty shQt1faU in Vie R);Cs to be provided under thisConfirtnation A$teemenltQ comply with the NewMe>\ico Administrative Code, Title 17, Chaptef9~:Part 572 as.of1lteTtaiisaction Trade pa.te~for which such. shortfall:wAA:c~usecl~ySellef~·~il'a!tM~~.deliver RECs,(ii) RIlY commercially reasonableandll.e~esMI'Yjnc,reQl~ta14irect costs actually inctirted by Buyer to replace RECs ·Se:11er failed to deliver under this Confirmation Agreement. (iii) any direCt costsafidpenaItiesimposed by the New Mexico Public Regulation Commission, or by arty otherGovernmental Authority having jurisdiction over the subject matter described herein, actually paid or requited to be paidbyBuyer, and (iv) Buyer's commercially reasonable and n~essary expenses; incl1Jdjiigany reasonable-attorneys' fees s :incurredasaresult pfSeJl~r'sfailu~ te perfqrt}lllm:l€;rthts 11i¢parties/.igreetothe Transaction set forth herein, SQUTHWESTERN PUBLIC SERVICE COMPANY Signed:__ ~_--.!:.- _ ERfC W. PIERCE Managing Direotor Page 3 00 Exhib~RA-3 Page 1011 ...... 5yg~mf'UCllase SPS(3) SunEdison(6)Prdrams TOTAL ·1· iOTAl RECs COST vo~~~e~·o~~~l,;;:;;~~ECost "~ , '- \:::':.'.::;:::;/~\.,,:~;;/:\.\.~<:i .>: . (REGS) ($)(. ····XRf(:$Ji.:;;·... i{$l . ($) 20111105,60511,002,251111.48111,493110,6001159,000150,0001900,000110,74911,279,16210 I 0 101 0 11,0821133,6801178,04813,475,586 20t21 0 I 0 I 11.5971 1,508 I 12,190 1 182,850 1 40,000 I 760,000 I 13,721 11,632,7831 43,800 1 5,582,310 I 56,223 1 5,869,119 I 1,508 1 176,627 I 167,453 I 14,205,197 Notes: 1_)105,605 PNM RECsare purchased in 2011. The RECs not used to meet the 2011 NM requirement will be banked and used in 2012. 2_)Note that these columns do not include the application of the weighted values, of each renewable resource type, previously assessed by the Rule (Wind 1:1, Biomass 2:1, and Solar 3:1). 3.) 40,000 SPSRECsare purchased in 2012. The RECsthat are not used to meet the 2012 NM requirement wll be banked and used in 2013. 4.) Energy is based on 5 MW Hatch proposal (on-line date of March 31, 2011). 5_)Energy is. based on 20 MW NRG proposal (on-line date of December 31,2011). 6_)SunEdison represents the winning solar bidder (24 MW) for EPE's2009 renewable energy RFP(proposed on-line date is December 31, 2011). OJ::r""'~ I.C",0- _. ....• ;:::;. s,~ ~w Exhibit RA-4 Page 1 of 1 134,746 Percentage 79.95% 2012 36,124 113,779 23,251 2,637 Percentage 20.55% 64.72% 13.23% 1.50% Note: 1) Distributed Generation RECscome from SWEC, CRLEF,and Small and Medium System REC Purchase Programs. Exhibit RA-5 Page 1 of 1 New Me .," 'R~,,~:~,~ 33,708 35,158 37,277 38,787 10,749 42,811 44,930 46,440 Note: 1) Solar Requirement is calculated based on forecasted New Mexico Energy Sales from EPE's 2010 Long- Term and Budget Year Forecast (March 18, 2010). 2) Solar Requirement not met in 2011 is deferred to 2012 through 2014, evenly distributed each year. BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION IN THE MATTER OF EL PASO ) ELECTRIC COMPANY'S 2010 ) PROCUREMENT PLAN PURSUANT ) TO THE RENEWABLE ENERGY ACT) CASE NO. 10-00 -UT AND NMAC 17.9.572.16 ) ) DIRECT TESTIMONY OF EVAN D. EVANS JULY 1,2010 TABLE OF CONTENTS Subject I. INTRODUCTION AND QUALIFICATIONS 1 II. PURPOSE OF TESTIMONy 3 III. RENEWABLE ENERGY PORTFOLIO COSTS 4 IV. REASONABLE COST THRESHOLD IMPACTS 6 V. SMALL SYSTEM RENEWABLE ENERGY CERTIFICATE PURCHASE PROGRAM 11 VI. CONCLUSION 26 EXHIBITS Exhibit EDE-1 Estimated Costs of Renewable Resource Procurement Exhibit EDE-2 Estimated Total Billing Impact Exhibit EDE-3 Cost Impacts on Large Non-Governmental Customers Exhibit EDE-4 EPE's 2010 Loads and Resources Plan Exhibit EDE-5 Small System Renewable Energy Certificate Purchase Tariff Exhibit EDE-6 Payback Calculation for Small System REC Purchases - PV Generation Exhibit EDE-7 Sample Installed Costs of PV Systems Exhibit EDE-8 Index of Solar Module Prices Exhibit EDE-9 Payback Calculation for Small System REC Purchases - Wind Generation Exhibit EDE-10 Medium System Renewable Energy Certificate Purchase Tariff Exhibit EDE-11 Payback Calculation for Medium System REC Purchases - PV Generation Exhibit EDE-12 Payback Calculation for Medium System REC Purchases - Wind Generation EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 I. INTRODUCTION AND QUALIFICATIONS 2 Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. 3 A. My name is Evan D. Evans. My business address is 100 N. Stanton, El Paso, Texas 4 79901. 5 6 Q. HOW ARE YOU EMPLOYED? 7 A. I am employed by El Paso Electric Company CEPE" or "Company") as Assistant 8 Vice President - Regulatory Services and Rates. 9 10 Q. PLEASE SUMMARIZE YOUR EDUCATIONAL AND PROFESSIONAL 11 BACKGROUND AND EXPERIENCE. 12 A. I graduated from Texas Tech University with a Bachelor of Business Administration 13 Degree in Finance in May 1980. Upon graduation, I was employed as a Rate Analyst 14 at West Texas Utilities Company, a wholly-owned subsidiary of Central and South 15 West Corporation ("CSW"), which was acquired by American Electric Power 16 Company ("AEP") in June 2000. I was employed with various CSW subsidiaries and 17 later with AEP until September 2000. During my 20-year career with CSW and AEP, 18 I held a variety of professional analytical, consultant and management positions in the 19 rates, regulatory services and marketing and business development areas. 20 During my employment with CSW and AEP, I was heavily involved in the 21 areas of costing and pricing. I prepared numerous wholesale and retail cost-of- 22 service studies filed with the Federal Energy Regulatory Commission and the Public 1 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 Utility Commission of Texas ("PUCT"). I participated in the development of 2 marginal cost and avoided cost studies used for rate design, for determining payments 3 for power purchased from cogenerators and in analyzing marketing programs. I also 4 had extensive involvement in designing retail and wholesale rates and in performing 5 system loss analyses. 6 In October, 2000 I joined C.H. Guernsey & Company, which is an employee- 7 owned, professional consulting fum offering engineering, architectural, economic and 8 construction management services to utilities, industries and government agencies 9 throughout the United States and internationally. While employed with 10 C.H. Guernsey, I managed the firm's Dallas regional office and served as a consultant 11 to electric utility industry clients in a variety of areas, including regulatory 12 compliance, integrated resource planning, electric utility cost of service issues, rate 13 studies, financial analysis, economic feasibility analysis, retail electric choice and 14 wholesale power supply contract negotiations. 15 In September, 2006, I left C.H. Guernsey and accepted the position of 16 Director - Regulatory Services with EPE. I was promoted to Assistant Vice President 17 Regulatory Services and Rates in July, 2008. 18 19 Q. PLEASE DESCRIBE YOUR CURRENT RESPONSIBILITIES WITH EPE. 20 A. My primary responsibilities include coordination and management of regulatory 21 filings, management of regulatory accounting, and direction of the rate design, cost 22 analysis and energy efficiency activities for the Company. 2 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 Q. HAVE YOU PREVIOUSLY PRESENTED TESTIMONY BEFORE UTILITY 2 REGULATORY BODIES? 3 A. Yes, I have previously presented testimony before the New Mexico Public Regulation 4 Commission ("NMPRC" or "Commission"), Georgia Public Service Commission, the 5 Oklahoma Corporation Commission and the PUCT. 6 7 II. PURPOSE OF TESTIMONY 8 Q. WHAT ARE THE PURPOSES OF YOUR TESTIMONY? 9 A. The purposes of my testimony are to address portions of EPE's 2010 Procurement 10 Plan relating to the application of the Reasonable Cost Threshold ("RCT") and non- 11 governmental cap, and EPE's proposals for customer-installed distributed generation 12 ("DO") programs. The New Mexico Renewable Energy Act ("Act") requires EPE to 13 file annually a Procurement Plan that sets forth EPE's plan for compliance with the 14 Act. EPE's 2010 Procurement Plan is presented in EPE's Application and the Direct 15 Testimony of Ricardo Acosta. EPE Witness Acosta's testimony specifically 16 addresses EPE's purchases from selected projects to meet EPE's RPS requirements for 17 2011 and 2012. He also addresses EPE's plans for meeting the minimum percentage 18 requirements by resource type required by the Commission's Renewable Energy 19 Ru1e 17.9.572 NMAC ("Ru1e") beginning in 2011. 20 My testimony presents the cost of procurement in the next two calendar years 21 for the renewable energy resources EPE is using to comply with its Renewable 22 Portfolio Standard ("RPS") obligations. I address whether EPE anticipates reducing 3 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 the RPS due to the RCT and how that determination was made. My testimony 2 provides estimates of the impact of the costs on all customers' aggregated overall 3 annual electric charges that EPE will incur to comply with the Act and the 4 Commission's Rule. I also address whether EPE anticipates reducing the amount of 5 renewable energy to be provided in calendar years 2011 and 2012 to account for 6 statutory caps associated with non-governmental customers with consumption 7 exceeding ten million kilowatt hours ("kWh") per year, and how that determination 8 has been made. 9 In addition, my testimony sets forth EPE's proposed changes to its Small 10 System Renewable Energy Certificate Purchase ("Small System REC") Program and 11 its Medium System Renewable Energy Certificate Purchase ("Medium System 12 REC") Program, which offers incentives to customers who install renewable energy 13 generating units of 10 kW AC or less and renewable energy generating units of 14 greater than 10 kW AC to 100 kW AC, respectively, that interconnect with EPE's 15 system at the distribution level. 16 17 III. RENEWABLE ENERGY PORTFOLIO COSTS 18 Q. PLEASE OUTLINE THE FILING REQUIREMENTS FOR EPE'S 19 ESTIMATED COSTS ASSOCIATED WITH ITS 2010 PLAN. 20 A. The Act and Rule require that EPE's 2010 Plan estimate procurement costs for 21 renewable energy resources in the next calendar year needed to comply with the RPS. 22 The Act and Rule also require that EPE determine whether the RCT will be exceeded 4 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 III 2011 and 2012; and whether the cap for individual large, nongovernmental 2 customers requires that the RPS obligation for 2011 and 2012 be reduced. 3 4 Q. HAS EPE ESTIMATED THE COSTS ASSOCIATED WITH MEETING THE 5 RENEWABLE ENERGY PORTFOLIO REQUIREMENTS? 6 A. Yes. EPE has calculated the estimated overall net cost of meeting the RPS 7 requirements for 2011 and 2012 based on EPE's 2010 Procurement Plan. In 8 calculating the impacts to customers for 2011 and 2012, I have used the total 9 estimated costs for REC procurement and the net cost of the purchased energy and 10 renewable energy certificates (RECs) from the renewable resources discussed by EPE 11 Witness Acosta. Mr. Acosta developed costs for energy from each project as part of 12 his evaluation of the already approved REC purchases, as well as additional 13 renewable resource projects. EPE's costs include RECs from Public Service 14 Company of New Mexico ("PNM") at the previously approved contractual levels, the 15 previously approved purchase of energy and RECs from the Southwest 16 Environmental Center ("SWEC"), the previously approved and proposed new 17 purchases of wind RECs from Southwestern Public Service Company ("SPS"), the 18 purchase of energy and RECs from New Mexico SunTower, LLC, ("SunTower") 19 beginning in 2011 and through RECs purchased pursuant to EPE' s Small System 20 REC and Medium System REC programs. However, under certain conditions, the in- 21 service date for the SunTower project can be extended to 2012. 22 EPE has included in its 2010 Plan costs associated with the additional price of 5 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 $0.015 per kWh EPE is paying to Camino Real Landfill Gas to Energy Facility 2 ("CRLEF") for RECs pursuant to the amended contract, which was approved in 3 NMPRC Case No. 09-00259-UT. However, EPE is not including any other costs 4 associated with the energy purchase ofNMPRC Rule 570 renewable energy from the 5 CRLEF, which is a renewable Qualifying Facility ("QF"). EPE is required to 6 purchase energy from a QF under EPE's avoided cost rates, in the ordinary course of 7 business. 8 The calculation of the total net cost of the Company's 2010 Procurement Plan 9 and the total net cost impact applicable to all kWh sales are shown in Exhibit EDE-l. 10 11 Q. HOW WILL THE COSTS TO PROCURE RECS UNDER EPE'S 2010 PLAN 12 BE RECOVERED? 13 A. EPE will recover the costs of RECs acquired with the purchase of renewable energy 14 through its monthly FPPCAC calculation. EPE will defer, with carrying costs, all 15 other costs associated with its Procurement Plan for recovery in a general rate 16 proceeding. 17 18 IV. REASONABLE COST THRESHOLD IMPACTS 19 Q. DID EPE COMPARE ITS PROCUREMENT COSTS WITH THE RATE 20 CLASS CALCULATIONS TO EVALUATE THE COST THRESHOLD 21 IMPACT TO CUSTOMERS? 22 A. Yes. The total incremental cost (in $IkWh) of EPE's 2010 Plan is added to total 6 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 billing for New Mexico retail customers for 2011 and 2012, and compared to 2 calculated billing prior to the inclusion of the renewable resource acquisition costs. 3 This is shown is Exhibit EDE-2. The same process was applied to evaluate the 4 impact to large, nongovernmental customers. Exhibit EDE-3 shows the percentage 5 impact to those customers' charges. As stated below, Exhibits EDE-2 and EDE-3 6 demonstrate that EPE's Procurement Plan costs are well within the statutory and 7 Commission-established limits. 8 9 Q. HOW DID EPE CALCULATE THE INCREMENTAL COSTS OF THE 10 RENEWABLE RESOURCES? 11 A. The incremental cost included the entire cost of the unbundled RECs plus the 12 incremental cost of the bundled renewable resources. The incremental cost of the 13 bundled renewable resources was calculated as the levelized cost of the renewable 14 resource less the levelized capacity cost of a comparable non-renewable technology, 15 less associated non-fuel fixed and variable costs, and less the levelized fuel-related 16 cost for the non-renewable technology. This calculation was performed consistent 17 with the consensus language from the workshops in NMPRC Case No. 08-00198-UT, 18 Inquiry into a Standard Methodology for Determining Renewable Energy Costs for 19 the Purpose of 17.9.572.11 NMAC. 20 21 Q. PLEASE DESCRIBE THE COSTS OF THE NON-RENEWABLE 22 TECHNOLOGY ALTERNATIVES THAT WERE USED IN THE 7 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 CALCULATION. 2 A. The calculation of the costs for non-renewable technology alternatives for biomass 3 generation applications was based on the costs and operating characteristics for a 4 2-on-l combined cycle from the EPRI Technical Assessment Guide and the Energy 5 Information Administration's ("EIA") March 2010 Annual Energy Outlook price 6 forecast for natural gas delivered to electric generation facilities. The forecasted 7 leve1izedcost of this generation is $91.123 per MWh. 8 The calculation of the costs for non-renewable technology alternatives for 9 solar generation applications was based on the costs and operating characteristics for 10 aGE LMSlOOgas turbine from the EPRI Technical Assessment Guide and the EIA's 11 March 2010 Annual Energy Outlook price forecast for natural gas delivered to 12 electric generation facilities. The forecasted levelized cost of this generation is 13 $159.93 per MWh. In addition, due to a variety of factors, including the inability to 14 dispatch the generation and the fact that solar generation'S full capacity is not 15 available all hours of the day, EPE credits solar generation with 85 percent of its rated 16 capacity for resource planning purposes. Consequently, the forecasted levelized cost 17 of a gas turbine is multiplied by 85 percent. 18 19 Q. WILL EPE'S PROCUREMENT COSTS FOR 2011 AND 2012 EXCEED THE 20 RCT? 21 A. No. As shown in Exhibit EDE-2, EPE's estimated costs of its 2010 Plan to meet the 22 2011 and 2012 RPS requirements will not exceed the ReT standard for those years. 8 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAND.EVANS 1 2 Q. HAVE YOU EVALUATED THE RCT ANALYSIS THAT STAFF 3 DEVELOPED AND PROPOSED IN NMPRC CASE NOS. 10-0001S-UT AND 4 10-00037-UT? 5 A. Yes. In those cases the Staff recommended the rejection of the RCT analysis 6 approach developed in the levelized/avoided cost methodology proposed in Case 7 No. 08-00198-UT and proposed an ReT analysis that calculated the RCT based upon 8 bill impacts. In their analysis the Staff did not credit the renewable resource additions 9 with any capacity value, but only credited them with offsets for fuel or purchased 10 power costs. 11 12 Q. IS THE APPROACH PROPOSED BY THE STAFF IN NMPRC CASE 13 NOS. 10-0001S-UT AND 10-00037-UT REASONABLE FOR EPE IN TIDS 14 CASE? 15 A. No, it is not. EPE is currently constructing additional generation capacity and is 16 purchasing capacity to meet its growing loads. EPE will rely on the capacity from the 17 renewable resources to meet a portion of its resource planning needs. This is 18 reflected in EPE's NMPRC-approved Integrated Resource Plan, which was filed with 19 the NMPRC on July 16,2009, and in EPE's latest Loads and Resource Plan, which is 20 attached as Exhibit EDE-4. 21 Therefore, it is appropriate to use the cost methodology proposed in Case 22 No. 08-00198-VT, which includes the capacity and energy cost of new generation. In 9 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 EPE's RCT analysis, as the basis for its evaluation of the RCT, EPE used the EPR! 2 TAG costs for a combustion turbine, an 87 MWGE LMSI00, and a 288 MW 3 combined cycle that were included in EPE's approved Integrated Resource Plan. 4 5 Q. DOES THE ACT AND RULE REQUIRE EPE TO REDUCE ITS RPS 6 REQUIREMENTS IF THE COSTS EXCEED A CERTAIN DOLLAR OR 7 PERCENTAGE AMOUNT FOR LARGE NONGOVERNMENTAL 8 CUSTOMERS? 9 A. Yes. The Act and Rule require EPE to reduce, as necessary, the kWh of renewable 10 energy procured for large, nongovernmental customers if the additional cost of the 11 RPS obligation, inclusive of all interconnection and transmission costs, exceeds the 12 lower of 2.0 percent or $99,000 for 2011, and the lower of 2.25 percent or $101,079 13 for 2012. The limit of $101,079 for 2012 reflects the application of NMPRC 14 Rule 17.9.572.10 (C) NMAC and applying a forecasted change in the consumer price 15 index, urban (CPI-U) of2.10 percent to the 2011 value of $99,000. 16 17 Q. IS EPE PROPOSING TO REDUCE ITS RENEWABLE ENERGY 18 REQUIREMENTS IN 2011 OR 2012 FOR LARGE, NONGOVERNMENTAL 19 CUSTOMERS? 20 A. No. Based on EPE1s forecasted customer energy consumption and the estimated 21 procurement price of renewable resources for 2011 and 2012, as provided by EPE 22 Witness Acosta, EPE will not need to reduce its renewable energy requirements in 10 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 2011 or 2012 to limit procurement for large, nongovernmental customers. The 2 additional cost of the RPS will not cause the individual annual charges to these 3 customers to exceed the statutory limitations. Exhibit EDE-3 demonstrates that EPE's 4 large, nongovernmental customers will not reach the cap established in the Act and 5 Rule. 6 7 Q. HOW DID EPE DETERMINE THAT THE RPS REQUIREMENTS NEED 8 NOT BE REDUCED? 9 A. To determine whether a reduction would be necessary, either for the overall RCT or 10 for individual nongovernmental customers, EPE has assumed that base rates in effect 11 on the day of the procurement plan filing will be in effect for 2011 and 2012, as 12 required by NMPRC Rule 572. For the purposes of EPE's 2010 Procurement Plan, 13 EPE's evaluation is based on EPE's current rates that went into effect in January, 14 2010, together with the Fuel and Purchased Power Adjustment Clause ("FPPCAC") 15 charges that were charged during 2009, as required by the Rule, but adjusted for 16 changes to the fuel component of base rates in EPE's new rates. 17 18 V. SMALL SYSTEM REC PURCHASE PROGRAM 19 Q. PLEASE DISCUSS EPE'S PROPOSED MODIFICATIONS TO THE SMALL 20 SYSTEM REC PROGRAM. 21 A. Pursuant to the Final Order approving EPE's 2009 Plan in NMPRC Case No. 09- 22 00259-UT, the Commission expanded participation in the Company's Small System 11 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 REC program from only solar renewable generation rated 10 kW or less to also 2 include wind generation rated 10 kWor less. The Company does not believe it is 3 necessary to make any changes to the structure or the applicability of this program at 4 this time. Therefore, the only changes to the Small System REC Purchase Program 5 from that which was approved in NMPRC Case No. 09-00259-UT is to update the 6 price paid to solar and wind facilities to reflect the results of a payback calculation 7 based on current costs for small PV facilities and small wind facilities and based upon 8 current retail rates and other information. The proposed revised tariff for the Small 9 System REC Purchase Program is provided in Exhibit EDE-5. Upon approval by the 10 Commission of the updated prices, EPE will file the revised tariff as a compliance 11 advice notice filing. 12 13 Q. PLEASE DISCUSS THE SMALL RENEWABLE DG FACILITIES 14 CURRENTLY CONNECTED TO EPE'S SYSTEM AND THE 15 PARTICIPATION IN EPE'S CURRENT SMALL SYSTEM REC PROGRAM. 16 A. Currently, 132 customer-owned small renewable DG facilities are connected to EPE's 17 system and participating in the Small System REC Program. Of these facilities, 129 18 are solar generation QFs and three of these systems are wind generation QFs. 19 In addition, another 34 small solar QFs are under construction or otherwise in 20 the process of completing the steps necessary to participate in the program. The 21 construction on all 34 systems and the completion of the process to participate in the 22 program should be completed this summer. Furthermore, the Company is regularly 12 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 responding to inquiries from additional customers interested in installing small PV or 2 wind generation systems. 3 The total peak capacity for all the currently installed and participating systems 4 is 438.4 kW and the total peak capacity for the systems under construction is 5 97.7 kW. The increase in small DG renewable systems connected to EPE's system 6 has been significant since EPE's program became effective as of March 1, 2009. At 7 the time EPE filed its 2008 Plan, the Company had 23 customer-installed systems, 8 including two wind generation systems, in New Mexico. At the time EPE filed its 9 2009 Plan, the number of customer-installed systems in New Mexico had increased to 10 45. Therefore, 87 new customer-installed facilities have connected to EPE's system in 11 the last 12 months, which reflects a 193% increase. 12 13 Q. WHAT IS EPE'S PROJECTED PARTICIPATION IN THE SMALL SYSTEM 14 REC PROGRAM AND THE PROJECTED NUMBER OF RECS PROVIDED 15 BY THE PROGRAM? 16 A. EPE projects it will have at least 166 systems participating in the Small System REC 17 Program by the end of 2010. In addition, EPE expects the number of participants to 18 increase by 60 systems per year, or an average of 5 new systems per month, in 2011 19 and 2012. 20 21 Q. PLEASE EXPLAIN YOUR PROPOSED UPDATE TO THE INCENTIVE 22 PRICE FOR SOLAR GENERATION FACILITIES PARTICIPATING IN THE 13 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 PROGRAM. 2 A. The proposed incentive price for small solar generation facilities is $0.098 per kWh 3 for a guaranteed period of 12 years. The proposed incentive price calculation is 4 provided on Exhibit EDE-6. The Company calculated the incentive price to reflect 5 the payback calculation for the average size facility currently connected to EPE' s 6 system, the estimated current costs for small PV facilities installed, current federal 7 and state tax incentives, and the fact that the vast majority of current facilities are 8 owned by and connected to Residential Service customers. 9 10 Q. WHAT IS THE BASIS OF THE ESTIMATED CURRENT INSTALLED 11 COSTS FOR SMALL PV FACILITIES USED IN THE INCENTIVE PRICE 12 CALCULATION FOR SOLAR GENERATION QFs PARTICIPATING IN 13 THE SMALL SYSTEM REC PROGRAM? 14 A. EPE surveyed customers currently participating in the Small System REC Program 15 and obtained information on the installed cost of 15 systems that have connected to 16 EPE in the last 12 months. Exhibit EDE-7 provides the installed cost information of 17 the 15 respondents that connected to EPE since June 2009 and indicates that the 18 median installed cost of the systems was $7.28 per Watt. The lowest installed cost 19 was $6.52 per Watt and the highest installed cost was $8.14 per Watt. 20 In EPE's incentive price calculation, EPE used an installed cost of $6.95 per 21 Watt, which reflects the installed cost per kW at the breakpoint between the lowest 22 priced quartile of the sample. This reflects the fact that the installed cost for PV 14 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 systems has declined significantly since the Small System REC Program was initially 2 approved in December 2008 and the costs are generally expected to continue to 3 decline. This declining cost trend is reflected in Exhibit EDE-8, which contains a 4 graph of the combined retail cost of solar modules and inverters by month in the U.S. 5 for the period of January 2009 through June 2010. 6 7 Q. WHY DID EPE DEVELOP ITS PROPOSED INCENTIVE PRICE FOR 8 SOLAR GENERATION TO NOT PROVIDE 100% PAYBACK OF THE 9 SYSTEM COSTS OVER THE PROPOSED CONTRACT TERM? 10 A. The Company does not believe it is appropriate to require non-participating 11 customers who either cannot afford to purchase or lease a system or elect to not do so 12 to guarantee that participants will receive 100% payback of the system costs over the 13 contract term, particularly when the expected average service life of these systems are 14 significantly longer than the term under which the price is guaranteed. Therefore, it is 15 reasonable for those who can afford to purchase or lease solar generating systems to 16 be required to recover some portion of their investment from economic benefits 17 received after the guaranteed incentives have ended. Nevertheless, as noted on 18 Exhibit EDE-6, customers should fully recover their investment in only 2.4 years 19 after the end of their contract term, but with more than 15 years of average remaining 20 service life for their systems. Consequently, although the participants should have 21 fully recovered their investment, they will continue to receive economic benefits on 22 their investment for several more years. 15 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 2 Q. PLEASE EXPLAIN YOUR PROPOSED UPDATE TO THE INCENTIVE 3 PRICE FOR WIND GENERATION FACILITIES PARTICIPATING IN THE 4 PROGRAM. 5 A. The incentive pnce calculation is provided on Exhibit EDE-9. The Company 6 calculated the incentive price to reflect the payback calculation for the average size 7 wind turbine currently connected to EPE's system, the estimated current costs for 8 small wind generation facilities, current federal and state tax incentives, and the fact 9 that most currently connected facilities are owned by and connected to Residential 10 Service customers. 11 The cost for small wind generation facilities was based upon the quoted 12 package price for a 2.0 kW wind turbine, which is approximately equal to the size of 13 the average customer-owned wind turbine currently connected to EPE's system in 14 New Mexico. In addition, the calculation reflects the 30 percent federal tax credit 15 available to wind turbines pursuant to the Energy Improvement and Extension Act of 16 2008 and that there is no state income tax credit offered to small wind generation 17 facilities. The calculation resulted in a proposed guaranteed incentive price for small 18 wind generation facilities of $0.076 per kWh fixed for a period of 12 years. 19 20 Q. IS EPE REQUESTING THE RIGHT TO LIMIT THE NUMBER OF 21 CUSTOMERS ALLOWED TO PARTICIPATE IN THE SMALL SYSTEM 22 REC PURCHASE PROGRAM AT THIS TIME? 16 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 A. No, not at this time. 2 3 Q. WHAT ARE SOME OF THE BENEFITS OF EPE'S SMALL SYSTEM REC 4 PURCHASE PROGRAM? 5 A. A primary benefit of the Purchase Program is that it has increased the total amount of 6 renewable energy produced on or delivered to EPEts system by encouraging retail 7 customers to install renewable energy systems and to maintain existing systems. 8 Another important benefit is that it helps develop distributed generation to comply 9 with the current requirements of the Rule and to provide operational benefits for 10 EPE's system. Another benefit of this program is that through encouraging the 11 installation of small DG systems, it can reduce EPE's forecasted annual system peak 12 load requirements. 13 14 Q. HOW WILL THE PURCHASE PROGRAM ENCOURAGE CUSTOMERS TO 15 INSTALL AND MAINTAIN RENEWABLE ENERGY SYSTEMS? 16 A. Participating customers will be able to sell to EPE the RECs created when their small 17 system produces energy. This will help the customers defray some of the costs of 18 installing and maintaining the system and will reduce the expected payback period for 19 customers' investment in systems. The combination of the Purchase Program and the 20 benefits derived from net metering should provide customers with incentives to 21 ensure their systems are properly maintained and producing the maximum energy 22 possible. 17 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 2 Q. WHAT IS THE AMOUNT EPE PROJECTS TO PAY PROGRAM 3 PARTICIP ANTS FOR REC PURCHASES? 4 A. Based upon the average size of the systems currently connected to EPE and the 5 expected capacity factors for the applications, it is estimated that EPE will pay the 6 typical small PV participant approximately $618 per year and will pay the typical 7 small wind generation participant approximately $333 per year. 8 9 Q. WHAT ARE THE FINANCIAL BENEFITS CUSTOMERS WILL RECEIVE 10 FOR PARTICIPATING IN THE SMALL SYSTEM REC PURCHASE 11 PROGRAM? 12 A. The value obtained by a customer under net metering is based on EPE's retail rate 13 tariff. Currently, for a Residential Service customer, the value of net metering is 14 $0.11672 per kWh of a customer's generation that offsets the customer's 15 consumption during a given month and the value for a non-demand metered Small 16 Commercial Service customer is $.14657 per kWh. In addition, these customers 17 receive an incentive price per kWh that EPE pays the customer for RECs purchased 18 from the customer. 19 20 Q. HOW DOES EPE COMPENSATE PROGRAM PARTICIPANTS FOR THEIR 21 RECS? 22 A. RECs are purchased by EPE from each participant as part of the regular monthly 18 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 billing process. Participants receive a monthly statement documenting the number of 2 kWh produced by the system, the number of RECs purchased by EPE, the purchase 3 price per REC and the total price of RECs purchased from the participant by EPE 4 during that billing period. 5 REC purchase payments are applied as a credit to the participant's electric bill 6 on a monthly basis. If the amount paid for the RECs is greater than the total of the 7 customer's monthly electric service plus kWh charges, but less than $30, the balance 8 of the REC payment is carried forward as a credit for the following month's bill. If 9 the balance exceeds $30, EPE sends the customer a check for the entire balance. 10 11 Q. WHAT FEES AND CHARGES DOES EPE IMPOSE TO PARTICIPATE IN 12 THE PROGRAM? 13 A. Participants are charged in accordance with EPE's interconnection agreements. The 14 only other fee or charge to participants in the program is the $50 application fee 15 included in the program Application. This fee is intended to cover the cost of 16 processing the application and the cost of installing the second meter required for the 17 program. Currently interconnected customers only pay the one-time fee to join the 18 Purchase Program. 19 20 Q. DOES EPE REQUIRE THAT A SECOND METER BE INSTALLED? 21 A. Yes. A second meter is required because the total number of RECs created by the 22 customer-owned renewable system is counted by measuring the total kWh output of 19 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 the customer's system. To measure the total output ofthe system an additional meter 2 must be installed at the output ofthe customer-owned system. 3 4 Q. WHO IS RESPONSIBLE FOR PROVIDING THE METER SOCKET AND 5 WIRING FOR THE SECOND METER? 6 A. The Small PV Program participant is responsible for installing the meter socket and 7 all wiring for the second meter. EPE provides and installs the second meter. 8 9 Q. WHAT ARE THE PROPOSED COSTS FOR THE PURCHASE PROGRAM? 10 A. EPE estimates the cost of the program in 2011 to total approximately $126,285 and 11 the cost for the program in 2012 is estimated to be $163,316. 12 13 VI. MEDIUM SYSTEM REC PURCHASE PROGRAM 14 Q. PLEASE DESCRIBE THE COMPANY'S MEDIUM SYSTEM REC 15 PURCHASE PROGRAM. 16 A. The Medium System REC Purchase Program is similar to the Small System REC 17 Purchase program, except that it is available for systems with a maximum rated 18 output from 10 kW to 100 kW. 19 In addition, the proposed incentive prices for Medium System REC Purchase 20 Program systems differ from the prices for small systems because these prices were 21 developed based upon the costs for solar and wind facilities of that size. 22 EPE offers the program through the Commission-approved Medium System 20 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 Renewable Energy Certificate Purchase tariff. The updated tariff, which is attached 2 as Exhibit EDE-IO, is modified from the tariff approved in NMPRC Case 3 No. 09-00259-UT only to reflect updated prices. Upon approval by the Commission 4 of the updated prices, EPE will file the revised tariff as a compliance advice notice 5 filing. EPE offers the tariff in conjunction with the use of the approved Application 6 to Participate in Purchase Program for Medium System RECs ("Medium System 7 Application") between EPE and individual customers, which EPE is not proposing to 8 modify. The Medium System Application sets forth the terms of program 9 participation. Customers are also required to interconnect their facilities in 10 accordance with the Commission's QF interconnection rules and agreements. 11 12 Q. WHAT INCENTIVE PRICE PER KWH IS EPE PROPOSING TO PAY 13 PARTICIPANTS UNDER THE MEDIUM SYSTEM REC PROGRAM? 14 A. The Company proposes to pay solar generation participants $0.124 per kWh and wind 15 generation participants $0.024 per kWh. 16 17 Q. PLEASE EXPLAIN HOW THE PROPOSED INCENTIVE PRICE FOR 18 SOLAR GENERATION WAS DEVELOPED. 19 A. The incentive price for solar generation for the Medium System REC Purchase 20 Program was developed similar to the calculation for solar generation in the Small 21 System REC Purchase Program. The calculation is provided on Exhibit EDE-l1. 22 The Company calculated the incentive price to reflect the payback calculation based 21 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 upon the estimated current costs for a 50 kW AC PV facility, expected operating 2 characteristics for a PV system, current federal tax incentives, and the expectation 3 that these facilities will typically be owned by and connected to corporate customers 4 served under EPE's General Service rate. 5 6 Q. PLEASE EXPLAIN HOW THE PROPOSED INCENTIVE PRICE FOR WIND 7 GENERATION WAS DEVELOPED. 8 A. The incentive price for solar generation for the Medium System REC Purchase 9 Program was developed similar to the calculation for solar generation in the Small 10 System REC Purchase Program. The calculation is provided on Exhibit EDE-12. 11 The Company calculated the incentive price to reflect the payback calculation based 12 upon the quoted tum-key price for a 50 kW AC wind turbine, expected performance 13 characteristics for the wind turbine, current federal tax incentives, and the expectation 14 that these facilities will typically be owned by and connected to corporate customers 15 served under EPE's General Service rate. 16 17 Q. WHY IS THE PROPOSED INCENTIVE PRICE FOR WIND GENERATION 18 SIGNIFICANTLY LOWER THAN THE PRICE FOR SOLAR 19 GENERATION? 20 A. The primary factors that lead to the lower proposed incentive pnce for wind 21 generation are: 1) a significantly lower estimated after-tax installed cost of $4.50 per 22 Watt compared to $6.26 per Watt; 2) a higher assumed net capacity factor for wind 22 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 generation; and 3) no expected degradation in system efficiency over the 12-year 2 term, 3 4 Q. WHAT RENEWABLE SYSTEMS ARE ELIGIBLE TO PARTICIPATE IN 5 THE PURCHASE PROGRAM? 6 A. New and existing renewable energy systems utilizing solar or wind generation, rated 7 at 10 kW AC to 100 kW AC qualify to participate. To be eligible, these systems must 8 have an interconnection agreement with EPE in compliance with NMPRC Rule 568, 9 be interconnected with EPE, and have completed the Application to Participate in 10 Purchase Program for Medium System RECs. 11 12 Q. ARE CUSTOMERS REQUIRED TO PARTICIPATE IN THE PURCHASE 13 PROGRAM IN ORDER TO INTERCONNECT WITH EPE'S SYSTEM? 14 A. No. 15 16 Q. WHAT ARE THE BENEFITS TO A MEDIUM SYSTEM PROGRAM 17 PARTICIPANT, INCLUDING NET METERING OF THEIR ELECTRICITY 18 USAGE? 19 A. The value obtained by a customer under net metering is based on EPE's retail rate 20 tariff. It is expected that participating customers will be served under the Company's 21 Small Commercial, General Service, Large Power Service or City & County Service 22 rates. For an average General Service customer, the value of net metering for 2011 is 23 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 approximately $0.10597 per kWh of a customer's generation that offsets the 2 customer's consumption during a given month. The proposed incentive price for 3 participating customer-installed solar generation systems will be $0.124 and the 4 proposed incentive price for wind generation systems $0.024. Consequently, the 5 projected 2011 total value to a net metered customer of the RECs and energy 6 produced by a participating solar generation facility will be approximately $0.22997 7 per kWh and the total value to a participating wind generation facility is $0.12997. 8 9 Q. HOW DOES EPE COMPENSATE PROGRAM PARTICIPANTS FOR THEIR 10 RECS? 11 A. RECs are purchased by EPE from each participant as part of the regular monthly 12 billing process. Participants receive a monthly invoice documenting the number of 13 kWh produced by the system, the number of RECs purchased by EPE, the purchase 14 price per REC and the total price of RECs purchased from the participant by EPE that 15 billing period. 16 REC purchase payments are applied as credits to the participants' electric bills 17 on a monthly basis. If the amount paid for the RECs is greater than the total of the 18 customer's monthly electric service plus kWh charges, but less than $30, the balance 19 of the REC payment will be carried forward as a credit for the following month's bilL 20 If the balance exceeds $30, EPE will send the customer a check for the entire balance. 21 22 Q. WHAT FEES AND CHARGES DO EPE IMPOSE TO PARTICIPATE IN THE 24 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 PROGRAM? 2 A. Participants are charged in accordance with EPE's interconnection agreements. The 3 only other fee or charge to participants in the program will be the $50 application fee 4 included in the program Application. This fee is intended to cover the cost of 5 processing the application and the cost of installing the second meter required for the 6 program. Currently interconnected customers will pay the one-time fee to join the 7 Purchase Program. 8 9 Q. DOES EPE REQUIRE THAT A SECOND METER BE INSTALLED? 10 A. Yes. A second meter is required because the total number of RECs created by the 11 customer-owned renewable system is counted by measuring the total kWh output of 12 the customer's system. To measure the total output of the system an additional meter 13 must be installed at the output of the customer-owned system. 14 15 Q. WHO IS RESPONSIBLE FOR PROVIDING THE METER SOCKET AND 16 WIRING FOR THE SECOND METER? 17 A. The Medium System REC Program participant is responsible for installing the meter 18 socket and all wiring for the second meter. EPE will provide and install the second 19 meter. The cost ofthe meter is included in EPE's total program costs. 20 21 Q. WHAT IS EPE'S CURRENT PROJECTED PARTICIPATION IN THE 22 MEDIUM SYSTEM REC PROGRAM AND THE PROJECTED NUMBER OF 25 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAND.EVANS 1 RECS PROVIDED BY THE PROGRAM? 2 A. EPE does not currently have any facilities in New Mexico that are participating in the 3 Medium System REC program. However, EPE has received a nwnber of inquiries by 4 potential participants in the Medium System REC Purchase Program, EPE projects 5 that to add one participant in the Medium System REC Purchase Program per year 6 during 2010 and 2011. 7 8 Q. WHAT ARE THE PROPOSED COSTS FOR THE MEDIUM SYSTEM REC 9 PURCHASE PROGRAM? 10 A. EPE estimates the cost of the program in 2011 to total approximately $7,395 and the 11 cost for the program in 2012 is estimated to be $13,311. 12 13 VII. CONCLUSION 14 Q. PLEASE SUMMARIZE THE IMPACTS OF ESTIMATED COSTS 15 ASSOCIATED WITH EPE'S 2010 PROCUREMENT PLAN ON 16 CUSTOMERS. 17 A. EPE's estimated costs of meeting the Act's renewable energy requirements for 2011 18 and 2012 through the purchase of RECs with and without related energy will not 19 cause EPE to reduce kWh purchases for large, nongovernmental customers or to 20 exceed the reasonable cost threshold standard set by the Commission for those years. 21 EPE will recover the costs of renewable purchases that include energy and associated 22 RECs through its FPPCAC on a monthly basis; all other costs of EPE's Procurement 26 EL PASO ELECTRIC COMPANY DIRECT TESTIMONY OF EVAN D. EVANS 1 Plan, including RECs purchased without associated energy, will be deferred with 2 carrying costs for later recovery in a general rate proceeding. 3 4 Q. ARE EPE'S PROPOSED CHANGES TO THE SMALL SYSTEM REC 5 PURCHASE PROGRAM AND THE MEDIUM SYSTEM REC PURCHASE 6 PROGRAM REASONABLE AS TO THEIR TERMS AND COSTS, BASED ON 7 THE ACT AND RULE? 8 A. Yes. EPE's Small System REC Purchase Program and its Medium System REC 9 Purchase Program have already shown that they encourage the development of 10 distributed generation on EPE's system and are expected to continue to encourage 11 that development. In addition, these programs will provide EPE with reasonably- 12 priced RECs that will help EPE to meet minimum percentage targets established by 13 the Commission. 14 15 Q. DOES THIS CONCLUDE YOUR TESTIMONY? 16 A. Yes. 27 BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION IN THE MATTER OF EL PASO ) ELECTRIC COMPANY'S 2010 ) PROCUREMENT PLAN PURSUANT ) TO THE RENEW ABLE ENERGY ACT ) CASE NO. 10-00 -UT AND NMAC 17.9.572.16 ) ) AFFIDAVIT STATE OF TEXAS ) ) ss COUNTY OF EL PASO ) Evan D. Evans hereby deposes and states under oath that the information contained in the foregoing Direct Testimony of Evan D. Evans, together with the exhibits attached thereto, is true and accurate based on my personal knowledge and belief. ?l2-t;!t SIGNED this~_ day of June, 2010. , £oJ)ff~ EVAN D. EVANS Subscribed and sworn to before me this 12~ day of June, 2010. My Commission expires: 01 /14/101 2.. TINA G. DENISON NOTARY PUBLIC In and lor the Stale of Texas My dornmission expires 01~14-2012 NOTE: (1) Levelized Fixed Cost per MWh of 2X1 7EA Combined Cycle based on EPRI TAG calculation. (2) Levelized Cost per MWh of GE LMS1 00 Combustion Turbine based on EPRI TAG calculation and fuel cost projection from March 2010 EIA Annual Energy Outlook forecast of natural gas prices for delivery to electric generation (Released 12-2009). EXHIBIT EDE-1 PAGE 2 OF 2 EL PASO ELECTRIC COMPANY Calculated Incremental Cost and Factors for Renewable Resource Procurement for the 2011 and 2012 Procurement Years Line No. Descril2tion 2011 2012 1 Forecasted New Mexico Jurisdictional MWH Sales at Meter (1) 1,685,406 1,757,908 2 New Mexico System Loss Factor (2) 1.080062 1.080062 3 Forecasted New Mexico Jurisdictional MWH Sales at Supply 1,820,343 1,898,650 4 Total Annual Incremental Cost of Renewable Resource Purchases $ 1,320,885 $ (4,588,941) New Mexico System Incremental Cost Factor for Renewable Resource 5 Procurement Applicable to all kWh sales, $/kWh $ 0.00073 $ (0.00242) 6 Loss adjusted for secondary voltage delivery $ 0.00073 $ (0.00244) 7 Loss adjusted for primary voltage delivery $ 0.00072 $ (0.00238) 8 Loss adjusted for transmission voltage delivery $ 0.00068 $ (0.00228) Notes: (1) EPE's 2010 Forecast of New Mexico Jurisdiction kWh Sales (2) EPE's Filed Eighteenth Revised Rate No. 18, NMPRC Case No. 09-00171-UT EXHIBIT EDE-2 EL PASO ELECTRIC COMPANY PAGE 1 OF 1 Procurement Plan Pursuant to the Renewable Energy Act Estimated Total Billing Impact for 2011 and 2012 Procurement Years Projected Projected Adjusted Reasonable Amount in Annual Annual Procurement Annual % Cost Excess of Description kWh Revenues Plan Impact Revenues Increase Threshold RCT 2011 Total New Mexico Retail 1,685,405,729 $ 192,318,935 $ 1,320,885 $ 193,639,820 0.69% 2.00% 0% 2012 Total New Mexico Retail 1,757,908,188 $ 200,592,073 $ (4,588,941) $ 196,003,133 -2.29% 2.25% 0% EL PASO ELECTRIC COMPANY EXHIBIT EDE-3 Procurement Plan Pursuant to the Renewable Energy Act PAGE 1 OF 1 Estimated Customer Billing Impacts on Large Non-Governmental Customers for 2011 and 2012 Procurement Years 2011 Procurement Year Amount Percent Line Service 2009 2010 Annual Procurement Portfolio $ Above $ Portfolio % Above No. Customer Voltage Annual kWh Bill Year Billing Impact Threshold Impact %Threshold . 1$ 99,0001 1 2.00% I 1 Customer 1 Primary 18,607,762 $ 1,180,408 $ 1,193,728 $ 13,320 $ - 1.12% 0% 2 Customer2 Secondary 15,928,175 $ 1,402,106 $1,413,755 $ 11,649 $ - 0.82% 0% 3 Customer 3 Secondary 11,860,432 $ 1,150,962 $1,159,636 $ 8,674 $ - 0.75% 0% 4 Customer4 Secondary 10,466,893 $ 855,559 $ 863,214 $ 7,655 $ - 0.89% 0% 5 Customer 5 Secondary 9,701,871 $ 679,308 $ 686,403 $ 7,095 $ - 1.03% 0% 6 Total 5,268,343 $ 5,316,736 $ 48,392 $ 7 NM kWh Sales at Meter 2011 1,685,405,729 8 NM kWh Sales at Supply 2011 1,820,342,682 9 2011 RenewablePortfolio IncrementalCost $ 1,320,885 10 NM System IncrementalCharge for RenewableResources $ 0.00073 11 LossAdjusted for SecondaryVoltage Delivery $ 0.00073 12 LossAdjusted for PrimaryVoltage Delivery $ 0.00072 2012 Procurement Year Amount Percent Line Service 2009 2010Annual Procurement Portfolio $ Above $ Portfolio% Above No. Customer Voltage Annual kWh Bill Year Billing Impact Threshold Impact %Threshold 1$ 101,0791 1 2.25% 1 13 Customer 1 Primary 18,607,762 $ 1,180,408 $1,136,042 $ (44,366) $ - -3.76% 0% 14 Customer2 Secondary 15,928,175 $ 1,402,106 $ 1,363,306 $ (38,800) $ - -2.77% 0% 15 Customer3 Secondary 11,860,432 $ 1,150,962 $1,122,071 $ (28,891) $ - -2.51% 0% 16 Customer4 Secondary 10,466,893 $ 855,559 $ 830,062 $ (25,497) $ - -2.98% 0% 17 Customer 5 Secondary 9,701,871 $ 679,308 $ 655,675 $ (23,633) $ - -3.48% 0% 18 Total 5,268,343 $ 5,107,155 $(161,188) $ 19 NM kWh Sales at Meter 2012 1,757,908,188 20 NM kWh Sales at Supply 2012 1,898,649,833 21 2012 RenewablePortfolio IncrementalCost $ (4,588,941) 22 NM System Incremental Chargefor RenewableResources $ (0.00242) 23 Loss Adjusted for SecondaryVoltage Delivery $ (0.00244) 24 Loss Adjusted for PrimaryVoltage Delivery $ (0.00238) El.Paso Electric COmp~llY Loads &: Resources Sc~tlC1.tip5~11.10 2011 -2020 S12 solarLMS100 lNDF CC lMS100 CC lMS100 CC ·Vear·.I~201;1~0ilI~jj.f2a;1"2*,.zI~:!O;1:3~I~~~1~l.!6liW&lf1$kj:I~~'i20~~Y;d.·"'(2Q~:r~';'jl~;:t01a$!I:Q2jj~9:;ri1:;,1026:;;.: GeOOllIti6n.Addnbns 1,711 1;191 1,878". 1,$93 2,136 2,~ .2,o 2,0 RESOUR~E PURCliA$E$ .(9 83 100 134 134 134 '234 23.4 234 234 2;1 MARKETBl(lCK pURCHASe. 40 40 40 40 40 4() 40. 4() 40 46 UnitRetirements 2.2 RENEWABLEPURCHA&E'{~o!!lrPVProject) - 34 51 85 85 85 85" 85 85 8~ Rio.Gnanda6.(45MW)- December 2014 2.3 OltlERRENEWABlEPURCHASE 9 9 9 9 9 9 9. 9 9 9 Rj~Giarida.7 (46MW)- December 2017 2.4 SPPDISPATC.HABLEPURCHASE ------"!eWinan2 (7&1uIW)-Dacember2015 2.5 PURCHASE •. . . -- .- 10.0 100 100 100 Newlnan1 (74MW)- Decembar2019 ~M (227MW)- Oecember2(J17 .3.0 TOTALNE'rRESOURCESI1.O +2.0~ 1;840 1,874 1;9711' 2o.2?' 2.270 2,194 2itt., 2,297 2,384 :2;501 Newma!l3(971u1W)-December20t9 ~i) SY13TEMDE~ND (31 M~~ 1,630 1~66$- ',7"1;;1. 1,816 1,87$ 1;lI4o 1,994 2,049 2,104 4:1 NATllieSySlEMOEMAND 1:,682 1.745 1;1118 1;8~ 1,957 2~G26 2.@4 2.155 2~216 2.276 4;2 COGENERATION (16) (ii) (26) (3i) (36) (42) (48) (54) (60) (!>Ill 4.3 LINELOSSES ? 2 2' 2 2 2 2 2 2 2 4A NlERR.UpneLESALES (65) (65) (66) (66.) .(6t) (67) (6B) (69) (6!!} (70) 4;5 1..00DMANA.GEMENT(~l . (30) (40) (40) (40) (40) (40) (40) (40) (4Q) ~_O TOTALSYSTEM.DI:t.\AND(4.0) ··t~b) 1,6:$0 ,'1,686 j;7$f· ·1,816 1879 '1,940 1,994 2,04$ :z;,04 U MARGIN OVlaft TOTAl DEMAND (~.4)-M) ~~1 ~# 2~l :mr !'$f.• 31.!i. 337 34)3 335 397 7.11 PLANNINGRESERVEi5% 240 i45. 26'3 '2&3' 27'Z. 282: 291 2" 3011 316 s;o MARGINOVERRESERVE (6.0 -1.0) (3) (1) 3' 13- 182 33 46 4' '281 81 9.0 OEMAN[I.PLUS.Rji;SERVE (6-.0 +7.0) 1,8<13 1,875 1,939 2,014 . 2,088 2,161 2,231 2,2$31 ~,$$I 2,420 Noles: .1. Generation LBlitretiremelJlSare.bas.edonflndlogsin Bl.ms& ~oriiiell~\1.KIi~.fofRIQ.Graril;le arid Newmanunitsda«idApn1201 SMALL SYSTEM RENEWABLE ENERGY CERTIFICATE PURCHASE Page 1 of 3 APPLICABILITY: This Small System Renewable Energy Certificate ("REC") Purchase Rate is available to customers owning renewable generation rated 10 kW or less pursuant to NMPRC Rule 570. Participation by type of renewable energy facility is subject to approvals of the NMPRC. Service under this schedule requires an executed Standard Interconnection Agreement for Qualifying Facilities 10 kW or Less and a completed Application to Participate in Purchase Program for Small System Renewable Energy Certificates. TERRITORY: Areas served by the Company in Dona Ana, Sierra, Otero and Luna Counties. DEFINITIONS: Small System Renewable Energy Certificate, or Small System REC, is a document proving that the renewable energy, in kilowatt hours, has been generated from a renewable generating facility. Small System RECs are measured in the same units as the energy generated. A REC meter is a separate meter measuring the energy output of the Customer's renewable resource distributed generation. TERMS OF SERVICE: Small System RECs will be purchased by the Company on a monthly basis for energy generated by the Customer's renewable distributed generation facility and measured by a separate REC meter as recorded at the time of the monthly meter reading. Customer is responsible for installing the REC meter can/base, identified and labeled as "REC Meter". The REC meter base shall be physically located near the Company's billing meter. The Company will provide and install the metering for the REC socket/meter box. If the ownership of the property on which the system is located is transferred, the new owner of X the property may opt in under the same terms of the REC program as the original installation. X The term of the agreement shall expire 12 years after the original installation. X In order to qualify for participation in the current year incentive program, participants must meet X the following requirements before the end of the calendar year: X Advice Notice No. ---..:2=-1~8:....- _ SignaturelTitle -::---:-~~~_~ _ David G. Carpenter Senior Vice President-Chief Financial Officer EXHIBIT EDE-5 PAGE20F 3 EL PASO ELECTRIC COMPANY SECOND REVISED RATE NO. 33 x CANCELLING FIRST REVISED RATE NO. 33 X SMALL SYSTEM RENEWABLE ENERGY CERTIFICATE PURCHASE Page 2 of 3 1. Complete the Application for Sale of Small System Renewable Energy Certificates, X including submission of full payment of the application fee. X 2. Provide EPE a fully executed Interconnection Agreement. X 3. Provide EPE a copy of the qualifying facility self-certification form filed with the X FERC. X MONTHLY PURCHASE RATE: Small System Renewable Energy Certificate (REC) Purchase For contracts for solar systems (10 kW and less) effective on or after January 1, 2011: $0.098 per kilowatt hour X For contracts for wind turbine systems (10 kWand less) effective on or after January 1, 2011: X $0.076 per kilowatt hour X This rate will be applicable for a period of 12 years from the initiation of service pursuant to this rate for all contracts effective on or after January 1, 2011. X ACCESSIBILITY: Equipment used to meter Small System RECs must be physically accessible as specified by the Company. The meter socket/meter box shall be installed in accordance to the Company's Rules and Regulations, identified and labeled "REC Meter", and located near the Company's billing meter. TERMS OF PAYMENT: Small System REC payments to the Customer will commence in the billing period after the execution of a Standard Interconnection Agreement and after the process of the Application to Participate in Purchase Program for Small System Renewable Energy Certificates is completed. The Customer will receive monthly information on their monthly electric bill documenting the KWH generated by their renewable distributed generation system, the RECs purchased at the Purchase Rate and the payment for RECs during the billing period. Small System REC purchase payments will normally be applied as a credit to Customer Advice Notice No., ---'2=-1.:.,:8:...- _ SignaturelTitle -=---:--:-=--:: _ David G. Carpenter Senior Vice President-Chief Financial Officer EXHIBIT EDE-5 PAGE 3 OF 3 EL PASO ELECTRIC COMPANY SECOND REVISED RATE NO_33 x CANCELLING FIRST REVISED RATE NO. 33 X SMALL SYSTEM RENEWABLE ENERGY CERTIFICATE PURCHASE Page 3 of3 monthly bills. If the amount paid for the Small System RECs is more than the total of the Customer's monthly bill by up to $30.00, the resulting credit will be carried forward to be applied toward the following month's bill. If the Small System REC payment balance results in a customer credit above $30.00, that balance will be paid directly to the Customer. The Company's Rules and Regulations apply to service under this rate. Advice Notice NO. --=2:..:.1..:.8 _ Signature/Title - __ ------David G. Carpenter Senior Vice President-Chief Financial Officer Exhibit EOE-6 Page 1 of 1 EL PASO ELECTRIC COMPANY Payback Calculation for Small System REC Purchase Program - PV Generation (Residential and Small Commercial) IReguired Incentive Rate ~er kWh 1$ 0.0981 A B C D E F G H I J (S*C) (D*U) (0 + E) (K*O*P) PMT(W,X,Y) (H - G - F) (B*Z) Average Avoided Associated Total Inverter Annual Total Annual EPE Rates EPE Sales Taxes Electric Bill Replacement Investment Payback Incentive Year kWh ($/kWh) Charges and Fees Reductions Fund and O&M Recovery Requirements Payments 1 6,306 $ 0.12078 $ 762 $ 69 $ 830 $ (229) $ 1,549 $ 948 $ 618 2 6,275 $ 0.12440 $ 781 $ 70 $ 851 $ (229) $ 1,549 $ 928 $ 615 3 6,243 $ 0.12814 $ 800 $ 72 $ 872 $ (229) $ 1,549 $ 906 $ 612 4 6,212 $ 0.13198 $ 820 $ 74 $ 894 $ (229) $ 1,549 $ 885 $ 609 5 6,180 $ 0.13594 $ 840 $ 76 $ 916 $ (229) $ 1,549 $ 863 $ 606 6 6,149 $ 0.14002 $ 861 $ 77 $ 938 $ (229) $ 1,549 $ 840 $ 603 7 6,117 $ 0.14422 $ 882 $ 79 $ 962 $ (229) $ 1,549 $ 817 $ 599 8 6,086 $ 0.14855 $ 904 $ 81 $ 985 $ (229) $ 1,549 $ 793 $ 596 9 6,054 $ 0.15300 $ 926 $ 83 $ 1,010 $ (229) $ 1,549 $ 769 $ 593 10 6,022 $ 0.15759 $ 949 $ 85 $ 1,035 $ (229) $ 1,549 $ 744 $ 590 11 5,991 $ 0.16232 $ 972 $ 88 $ 1,060 $ (229) $ 1,549 $ 718 $ 587 12 5,959 $ 0.16719 $ 996 $ 90 $ 1,086 $ ~229l $ 1,549 $ 692 $ 584 73,594 $ 10,494 $ 944 $ 11,438 $ ~2,752l $ 18,589 $ 9,903 $ 7,212 NPV 1$ 8,3491 1 $ (2,037' $ 13,761 $ 7,4491 $ 5,355 Total Recovery $ 11,666 Amount to be recovered beyond 12-year contract life. $ 2,095 15%1 Expected rernaininq service life of system at 30-year average life of modules 18.0 Years to recover remaininq balance based on enerov savincs 2.4 Remaininq years of service life after balance is recovered 15.6 Calculation In(!uts and Assum(!tions: K Cost per Watt $ 6.95 (Breakpoint of lowest price quartile in EPE sample) L Federal Tax Incentive 30% M New Mexico Tax Incentive 10% N After-Tax Cost per Watt $ 4.17 0 Inverter Replacement Fund and O&M 1.00% p Average Size (Watts) 3,300 Q Efficiency Adjusted Capacity Factor 22% R Average Annual Hours 8,766 S Annual Module Degradation 0.50% T Current Average Rate per kWh $ 0.12078 (Avg Rate for Residential and Non-Demand Comm Service) U Sales Tax and Franchise Fee Rate 9.00% V Projected Rate Escalation 3.00% W Discount Rate 4.96% (Moody's May 2010 Corporate Aaa Bond Yield) X Guaranteed Contract Period (Years) 12 Y Net System Cost $ 13,761 Z REC Purchase Price $ 0.098 Exhibit EDE-7 Page 1 of 1 EL PASO ELECTRIC COMPANY Sample Installed Costs for Solar Photovoltaic Installations on EPE System Net Metering Application Line Contractor/Facility 10 Location Received kW Cost $lWatt Contractor 1 1 Solar Facility 1 EIPaso 26-May-10 2.00 $ 15,000 $ 7.50 2 Solar Facility 2 EIPaso 26-May-10 5.04 $ 33,667 $ 6.68 3 Solar Facility 3 EIPaso 30-Mar-10 2.07 $ 13,500 $ 6.52 4 Solar Facility 4 EIPaso 11-Feb-10 4.02 $ 31,000 $ 7.71 5 Solar Facility 5 EIPaso 24-Jul-09 3.87 $ 27,090 $ 7.00 Contractor 2 6 Solar Facility 6 Las Cruces 26-May-10 5.13 $ 40,000 $ 7.80 7 Solar Facility 7 Las Cruces 9-May-10 4.94 $ 40,000 $ 8.10 8 Solar Facility 8 Las Cruces 9-May-10 5.32 $ 37,000 $ 6.95 Contractor 3 9 Solar Facility 9 Las Cruces 15-0ec-09 1.94 $ 15,000 $ 7.73 10 Solar Facility 10 Las Cruces 21-May-10 1.72 $ 14,000 $ 8.14 Contractor 4 11 Solar Facility 11 EIPaso 7-Aug-09 1.47 $ 10,700 $ 7.28 12 Solar Facility 12 EIPaso 20-May-10 4.40 $ 35,000 $ 7.95 12 Solar Facility 13 EIPaso 20-May-10 4.84 $ 33,000 $ 6.82 13 Solar Facility 14 EIPaso 30-Mar-10 1.84 $ 13,000 $ 7.07 13 Solar Facility 15 EIPaso 20-May-10 3.96 $ 28,000 $ 7.07 14 Median Installed Cost per Watt $ 7.28 14 Minimum Installed Cost per Watt $ 6.52 15 Maximum Installed Cost per Watt $ 8.14 Exhibit EDE-8 Page 1 of 1 Solar Module Retail Price Index Module Size - 125 Watts and Higher Source:Solarbuzz.com- June2010 5.00 1 - 4.90 4.84 4.81 4.78 4.80 - 4.74 4.70 4.70 r- - 'iii 4.61 II) 0::: 4.60 - .~ .•..- I .liI: III II) Q. 4.50 .45 ~ 4.39 4.38 •.. 4.40 - II) Q., 4.34 ~ 4.31 4.30 4.30 A ')7 -..... 4.24 4.23 4.21 4.21 4.20 4.10 - I 4.00 c.. s: »- c.. c.. »- In o z c c.. 3: »- c.. IU ;r IU 'D ~ e 5. e CD n IU ;r IU 'D ~ C :l cr :l (Q 'D 51 ~ :l ? 6 ..•.7' rr..•. ..•.? ..•.? 1. ..•.I 6 6 '6 6 IReguired Incentive Rate ~er kWh 1$ 0.0761 A B C 0 E F G H I J (BwC) (O*U) (0 + E) (KwO*P) PMT(W,X,Y) (H - G - F) (B*Z) Average Avoided Associated Total Inverter Annual Total Annual EPE Rates EPE Sales Taxes Electric Bill Replacement Investment Payback Incentive Year kWh ($/kWh) Char~es and Fees Reductions Fund and O&M Recove!):: Requirements Pa~ments 1 4,383 $ 0.12078 $ 529 $ 48 $ 577 $ (130) $ 1,027 $ 580 $ 333 2 4,383 $ 0.12440 $ 545 $ 49 $ 594 $ (130) $ 1,027 $ 563 $ 333 3 4,383 $ 0.12814 $ 562 $ 51 $ 612 $ (130) $ 1,027 $ 545 $ 333 4 4,383 $ 0.13198 $ 578 $ 52 $ 631 $ (130) $ 1,027 $ 527 $ 333 5 4,383 $ 0.13594 $ 596 $ 54 $ 649 $ (130) $ 1,027 $ 508 $ 333 6 4,383 $ 0.14002 $ 614 $ 55 $ 669 $ (130) $ 1,027 $ 488 $ 333 7 4,383 $ 0.14422 $ 632 $ 57 $ 689 $ (130) $ 1,027 $ 468 $ 333 8 4,383 $ 0.14855 $ 651 $ 59 $ 710 $ (130) $ 1,027 $ 448 $ 333 9 4,383 $ 0.15300 $ 671 $ 60 $ 731 $ (130) $ 1,027 $ 426 $ 333 10 4,383 $ 0.15759 $ 691 $ 62 $ 753 $ (130) $ 1,027 $ 405 $ 333 11 4,383 $ 0.16232 $ 711 $ 64 $ 775 $ (130) $ 1,027 $ 382 $ 333 12 4,383 $ 0.16719 $ 733 $ 66 $ 799 $ (130} $ 1,027 $ 359 $ 333 52,596 $ 7,513 $ 676 $ 8,189 $ (1,564} $ 12,325 $ 5,700 $ 3,997 NPV 1$ 5,9601 1$ (1,158' $ 9,124 $ 4,3221 $ 2,959 Total Recovery $ 7,761 Amount to be recovered beyond 12-year contract life. $ 1,363 15%1 Expected remaininq service life of system at 30-year averaoe life of turbine 18.0 Years to recover rernainina balance based on enerqy savinqs 2.0 RemaininQ years of service life after balance is recovered 16.0 Calculation Ineuts and Assumetions: K Cost per Watt $ 6.52 (BergeyWindpower2 kW Home.SurePackagePrice) L Federal Tax Incentive 30% M New Mexico Tax Incentive 0% N After-Tax Cost per Watt $ 4.56 0 Inverter Replacement Fund and O&M 1.00% P Average Size (Watts) 2,000 Q Efficiency Adjusted Capacity Factor 25% R Average Annual Hours 8,766 S Annual Module Degradation 0.00% T Current Average Rate per kWh $ 0.12078 (Avg Rate for Residentialand Non-DemandCommService) U Sales Tax and Franchise Fee Rate 9.00% V Projected Rate Escalation 3.00% W Discount Rate 4.96% (Moody'sMay2010 CorporateAaa BondYield) X Guaranteed Contract Period (Years) 12 y Net System Cost $ 9,124 Z REC Purchase Price $ 0.076 EXHIBIT EDE-10 Page 1 of 3 EL PASO ELECTRIC COMPANY FIRST REVISED RATE NO. 34 X CANCELLING ORIGINAL RATE NO. 34 X MEDIUM SYSTEM RENEWABLE ENERGY CERTIFICATE PURCHASE Page 1 of 3 APPLICABILITY: This Medium System Renewable Energy Certificate ("REC") Purchase Rate is available to customers owning renewable generation rated more than 10 kW and up to 100 kW pursuant to NMPRC Rule 570. Participation by type of renewable energy facility is subject to approvals of the NMPRC. Service under this schedule requires an executed Interconnection Agreement for Generating Facilities with a Rated Capacity No Greater than 10 MW, and a completed Application to Participate in Purchase Program for Medium System Renewable Energy Certificates. TERRITORY: Areas served by the Company in Dona Ana, Sierra, Otero and Luna Counties. DEFINITIONS: Medium System Renewable Energy Certificate, or Medium System REC, is a document proving that the renewable energy, in kilowatt hours, has been generated from a renewable generating facility. Medium System RECs are measured in the same units as the energy generated. A REC meter is a separate meter measuring the energy output of the Customer's renewable resource distributed generation. TERMS OF SERVICE: Medium System RECs will be purchased by the Company on a monthly basis for energy generated by the Customer's renewable distributed generation facility and measured by a separate REC meter as recorded at the time of the monthly meter reading. Customer is responsible for installing the REC meter can/base, identified and labeled as "REC Meter". The REC meter base shall be physically located near the Company's billing meter. The Company will provide and install the metering for the REC socket/meter box. If the ownership of the property on which the system is located is transferred, the new owner of the property may opt in under the same terms of the REC program as the original installation. The term of the agreement shall expire 12 years after the original installation. Advice Notice NO., =-21.:...:8=-- _ SignaturelTitle ---:------David G. Carpenter Senior Vice President-chlef Financial Officer EXHIBIT EDE-10 Page 2 of 3 EL PASO ELECTRIC COMPANY FIRST REVISED RATE NO. 34 X CANCELLING ORIGINAL RATE NO. 34 X MEDIUM SYSTEM RENEWABLE ENERGY CERTIFICATE PURCHASE Page20f3 In order to qualify for participation in the current year incentive program, participants must meet the following requirements before the end of the calendar year: 1. Complete the Application for Sale of Medium System Renewable Energy Certificates, including submission of full payment of the application fee. 2. Provide EPE a fully executed Interconnection Agreement. 3. Provide EPE a copy of the qualifying facility self-certification form filed with the FERC. MONTHLY PURCHASE RATE: Medium System Renewable Energy Certificate (REC) Purchase For contracts for solar systems (over 10 kWand up to 100 kW) effective on or after January 1, 2011: X $0.124 per kilowatt hour X For contracts for wind turbine systems (over 10 kW and up to 100 kW) effective on or after January 1, 2011: X $0.024 per kilowatt hour X The Monthly Purchase Rate will not be paid for renewable energy generated in any month that is in excess of the amount of kWh consumed by the participating customer in that month. This rate will be applicable for a period of 12 years from the initiation of service pursuant to this rate for all contracts effective on or after January 1, 2011. X ACCESSIBILITY: Equipment used to meter Medium System RECs must be physically accessible as specified by the Company. The meter socket/meter box shall be installed in accordance to the Company's Rules and Regulations, identified and labeled "REC Meter", and located near the Company's billing meter. TERMS OF PAYMENT: Medium System REC payments to the Customer will commence in the billing period after the Advice Notice No. 2=-1~8::..- _ SignaturelTitle ~ _ David G. Carpenter Senior Vice President-Chief Financial Officer EXHIBIT EDE-10 Page 3 of 3 EL PASO ELECTRIC COMPANY FIRST REVISED RATE NO. 34 X CANCELLING ORIGINAL RATE NO. 34 X MEDIUM SYSTEM RENEWABLE ENERGY CERTIFICATE PURCHASE Page 3 of 3 execution of a Standard Interconnection Agreement and after the process of the Application to Participate in Purchase Program for Medium System Renewable Energy Certificates is completed. The Customer will receive monthly information on their monthly electric bill documenting the KWH generated by their renewable distributed generation system, the RECs purchased at the Purchase Rate and the payment for RECs during the billing period. Medium System REC purchase payments will normally be applied as a credit to Customer monthly bills. If the amount paid for the Medium System RECs is more than the total of the Customer's monthly bill by up to $30.00, the resulting credit will be carried forward to be applied toward the following month's bill. If the Medium System REC payment balance results in a customer credit above $30.00, that balance will be paid directly to the Customer. The Company's Rules and Regulations apply to service under this rate. Advice Notice No. --=2:....:1;.:::8 _ SignaturelTitle ------David G. Carpenter Senior Vice President-Chief Financial Officer Exhibit EDE-11 Page 1 of 1 EL PASO ELECTRIC COMPANY Payback Calculation for Medium System REC Purchase Program - PV Generation (Commercial and Industrial) IReguired Incentive Rate E!erkWh 1$ 0.1241 AB C D E F G H I J (8*e) (D*U) (D + E) (K*O*P) PMT(W,X,Y) (H - G - F) (8*Z) Average Avoided Associated Total Inverter Annual Total Annual EPE Rates EPE Sales Taxes Electric Bill Replacement Investment Payback Incentive Year kWh !$/kWh~ Charses and Fees Reductions Fund and O&M Recove~ Reguirements Palments 1 47,775 $ 0.10597 $ 5,063 $ 456 $ 5,518 $ (1,564) $ 12,322 $ 8,368 $ 5,924 2 47,536 $ 0.10915 $ 5,188 $ 467 $ 5,655 $ (1,564) $ 12,322 $ 8,231 $ 5,894 3 47,297 $ 0.11242 $ 5,317 $ 479 $ 5,796 $ (1,564) $ 12,322 $ 8,090 $ 5,865 4 47,058 $ 0.11580 $ 5,449 $ 490 $ 5,940 $ (1,564) $ 12,322 $ 7,946 $ 5,835 5 46,819 $ 0.11927 $ 5,584 $ 503 $ 6,087 $ (1,564) $ 12,322 $ 7,799 $ 5,806 6 46,580 $ 0.12285 $ 5,722 $ 515 $ 6,237 $ (1,564) $ 12,322 $ 7,649 $ 5,776 7 46,341 $ 0.12653 $ 5,864 $ 528 $ 6,391 $ (1,564) $ 12,322 $ 7,495 $ 5,746 8 46,103 $ 0.13033 $ 6,009 $ 541 $ 6,549 $ (1,564) $ 12,322 $ 7,337 $ 5,717 9 45,864 $ 0.13424 $ 6,157 $ 554 $ 6,711 $ (1,564) $ 12,322 $ 7,175 $ 5,687 10 45,625 $ 0.13827 $ 6,308 $ 568 $ 6,876 $ (1,564) $ 12,322 $ 7,010 $ 5,657 11 45,386 $ 0.14241 $ 6,464 $ 582 $ 7,045 $ (1,564) $ 12,322 $ 6,841 $ 5,628 12 45,147 $ 0.14669 $ 6,623 $ 596 $ 7,219 $ (1,564~ $ 12,322 $ 6,668 $ 5,598 557,531 $ 69,748 $ 6,277 $ 76,025 $ (18,765} $ 147,868 $ 90,608 $ 69,134 NPV 1$ 55,494 I 1$ (13,891) $ 109,463 $ 67,859 I $ 51,329 Total Recovery $ 92,932 Amount to be recovered beyond 12-year contract life. $ 16,531 15%1 Expected remaining service life of system at 30-year average service life of modules 18.0 Years to recover remaining balance based on energy savings 2.9 Remainina vears of service life after balance is recovered 15.1 Calculation Inl!uts and Assuml!tions: K Cost per Watt $ 6.26 90%of SmallSystemCost L Federal Tax Incentive 30% M New Mexico Tax Incentive 0% N After-Tax Cost per Watt $ 4.38 0 Inverter Replacement Fund and O&M 1.00% P Average Size (Watts) 25,000 Q Efficiency Adjusted Capacity Factor 22% R Average Annual Hours 8,766 S Annual Module Degradation 0.50% T Current Average Rate per kWh $ 0.10597 (AverageRate$/kWhfor GeneralService) U Sales Tax and Franchise Fee Rate 9.00% V Projected Rate Escalation 3.00% W Discount Rate 4.96% (Moody'sMay2010CorporateAaa BondYield) X Guaranteed Contract Period (Years) 12 y Net System Cost $ 109,463 Z REG Purchase Price $ 0.124 Exhibit EDE-12 Page 1 of 1 EL PASO ELECTRIC COMPANY Payback Calculation for Medium System REC Purchase Program - Wind Generation (Commercial and Industrial) IReguired Incentive Rate ~er kWh 1$ 0.0241 A B C D E F G H I J (S*C) (D*U) (D + E) (K*Q*P) PMT(W,X,y) (H - G - F) (S*Z) Average Avoided Associated Total Inverter Annual Total Annual EPE Rates EPE Sales Taxes Electric Sill Replacement Investment Payback Incentive Year kWh ($/kWh} Charges and Fees Reductions Fund and O&M Recove~ Reguirements Palments 1 109,575 $ 0.10597 $ 11,612 $ 1,045 $ 12,657 $ (2,250) $ 17,730 $ 7,323 $ 2,630 2 109,575 $ 0.10915 $ 11,960 $ 1,076 $ 13,036 $ (2,250) $ 17,730 $ 6,944 $ 2,630 3 109,575 $ 0.11242 $ 12,319 $ 1,109 $ 13,428 $ (2,250) $ 17,730 $ 6,552 $ 2,630 4 109,575 $ 0.11580 $ 12,688 $ 1,142 $ 13,830 $ (2,250) $ 17,730 $ 6,150 $ 2,630 5 109,575 $ 0.11927 $ 13,069 $ 1,176 $ 14,245 $ (2,250) $ 17,730 $ 5,735 $ 2,630 6 109,575 $ 0.12285 $ 13,461 $ 1,211 $ 14,673 $ (2,250) $ 17,730 $ 5,307 $ 2,630 7 109,575 $ 0.12653 $ 13,865 $ 1,248 $ 15,113 $ (2,250) $ 17,730 $ 4,867 $ 2,630 8 109,575 $ 0.13033 $ 14,281 $ 1,285 $ 15,566 $ (2,250) $ 17,730 $ 4,414 $ 2,630 9 109,575 $ 0.13424 $ 14,709 $ 1,324 $ 16,033 $ (2,250) $ 17,730 $ 3,947 $ 2,630 10 109,575 $ 0.13827 $ 15,151 $ 1,364 $ 16,514 $ (2,250) $ 17,730 $ 3,466 $ 2,630 11 109,575 $ 0.14241 $ 15,605 $ 1,404 $ 17,010 $ (2,250) $ 17,730 $ 2,970 $ 2,630 12 109,575 $ 0.14669 $ 16,073 $ 1,447 $ 17,520 $ (2,250} $ 17,730 $ 2,460 $ 2,630 1,314,900 $164,793 $ 14,831 $ 179,624 $ (27,000} $ 212,759 $ 60,135 $ 31,558 NPV 1$ 130,7291 1$ (19,987\ $ 157,500 $ 46,759 I $ 23,361 Total Recovery $ 134,103 Amount to be recovered beyond 12-vear contract life. $ 23,397 15%1 Expected remainino service life of svstern at 30-vear average service life of modules 18.0 Years to recover remainino balance based on enerov savinos 1.5 RemaininQ vears of service life after balance is recovered 16.5 Calculation lnlluts and Assumlltions: K Cost per Watt $ 4.50 (EntegrityWind Systems,EW50,120'Tower+ Install) L Federal Tax Incentive 30% M New Mexico Tax Incentive 0% N After-Tax Cost per Watt $ 3.15 0 Inverter Replacement Fund and O&M 1.00% P Average Size (Watts) 50,000 Q Efficiency Adjusted Capacity Factor 25% R Average Annual Hours 8,766 S Annual Module Degradation 0.00% T Current Average Rate per kWh $ 0.10597 (AverageRate$/kWhfor GeneralService) U Sales Tax and Franchise Fee Rate 9.00% V Projected Rate Escalation 3.00% W Discount Rate 4.96% (Moody'sMay2010CorporateAaa BondYield) X Guaranteed Contract Period (Years) 12 y Net System Cost $ 157,500 Z REC Purchase Price $ 0.024~tirmati?~ t\.greeplelJt' ..uyeI'sha:U have·theobligation·to·u$eitsbesteffortstoroitig(ltedlUhages~ .