New Mexico Electricity Transmission Planning Report - Recommendation that the State Consider a Regional Transmission Organization

Background for the introduction of SM 54, the Memorial requesting formation of a technical committee to consider functionality of a Regional Transmission Organization (RTO) or like structure for New Mexico, can be found in New Mexico's Electricity Transmission Planning Report (Report) issued by the Energy, Minerals and Natural Resources Department on November 1, 2010. The Report provided a number of recommendations from the "Governor's Task Force on Statewide Electricity Planning" which was created by Executive Order of the Governor. The Task Force was charged with preparing recommendations regarding opportunities and steps to enhance the statewide electricity transmission grid, including any appropriate collector systems and financing and cost-recovery options, on a 5-year, 10-year and 20-year planning horizon."

The Report highlights New Mexico's strategic positioning in the Nation:

The United States has three transmission interconnection systems serving the nation: the Eastern Interconnect, the Western Interconnect (Western Electric Coordinating Council – WECC), and the Texas Interconnect (Electric Reliability Council of Texas – ERCOT). For the most part, these interconnections operate separately. New Mexico happens to "straddle" both the Eastern and Western interconnects affording it the opportunity to export power both eastward and westward. The state is also adjacent to ERCOT. Thus far, the majority of the focus on exporting New Mexico's renewable energy out-of-state has been on western markets like Phoenix, San Diego and Los Angeles. However, there are significant opportunities to export power to eastern markets particularly as more and more states adopt renewable portfolio standards.

The Report recommends that the New Mexico Governor's Office organize a transmission summit of southwestern states to "facilitate the development of transmission lines across state borders and eliminate existing bureaucratic, economic and other barriers to interstate transmission lines."

The Report further introduces the concept of a regional transmission organization (RTO).

A multi-state RTO is common in the eastern United States, RTOs plan, finance and cost-allocate transmission lines that cross multiple state lines. A portion of eastern New Mexico, in Southwestern Public Service Company's service territory, is part of the Southwestern Power Pool RTO. In her presentation to the Task Force, former Federal Energy Regulatory Commissioner Suedeen Kelly emphasized that New Mexico should consider being part of a multi-state RTO. Some Task Force members strongly support the area of New Mexico not covered by the Southwestern Power Pool RTO be covered by a newly established southwestern states RTO, while other members felt the Federal Energy Regulatory Commission's (FERC) existing "Notice of Proposed Rulemaking" on cost-allocation for multi-state transmission lines is the preferred avenue to resolve this issue.

The Report recommends that New Mexico consider forming an RTO if FERC's proposed rule on cost recovery does not become a formal rule:

If FERC's proposed rule on interstate transmission line cost recovery does not become a formal rule then, yes, the state should consider establishing an RTO for the southwestern United States that addresses cost recovery on a broader, regional basis. The Southwestern Power Pool has been a very successful model for this. Note: Concerns were raised by the Task Force regarding the potential additional costs to the ratepayer that may occur under an RTO framework. This would need to be carefully evaluated and considered before moving forward with becoming part of an RTO.

SM 54 pending in the 2011 New Mexico legislative session provides the conceptual framework to address these, and other, concerns regarding a New Mexico RTO, New Mexico joining an existing RTO or New Mexico contracting for services of an RTO.