The New Mexico Supreme Court heard arguments Monday in the investor-owned utilities’ appeal of the community solar rule adopted by state regulators in 2022.

The community solar rule came as a result of a law passed in 2021. Community solar allows people who are unable to install rooftop solar to purchase solar power from an array that is not owned by the utility. The electricity is then delivered to the customer using the utility’s infrastructure and the subscribers receive bill credits for the amount of their electrical usage that comes from the community solar array.

After the New Mexico Public Regulation Commission adopted the rule, Southwestern Public Service Company filed the appeal and was later joined by the other two investor-owned utilities.

The PRC argues that the appeal is based on misinterpretations of the Community Solar Act as well as misinterpretations and misrepresentations of the community solar rule.

Utilities say the rule could lead to people who choose not to subscribe to receive power from a community solar array subsidizing those who do and that it should be reworked to better protect consumers. 

One way that the utilities say the rule creates a subsidy is by preventing them from subtracting the cost of transmission from the bill credits. The PRC argues that this is a misinterpretation of the rule and that customers will still be paying the transmission costs through rates based on their usage. The state regulators say that if the transmission costs were subtracted from the credit, it would result in the customers paying twice for transmission.

The bill credit is based on the subscriber’s share of electricity generated, which is power that the utility does not have to produce itself or purchase for the customer, the PRC states 

The PRC argues that the credit is not based on consumption of electricity. By providing locally-generated power to customers, the PRC further states that the community solar arrays may actually lower the transmission costs that the utilities pay to move the electricity from power plants to customers. 

The utilities further oppose the use of a third-party contractor to administer the program, but the PRC argues that it is necessary to have the contractor involved because the agency does not have the capacity to manage such a program and says it is not uncommon for state agencies to contract with third-party administrators and that it did so in compliance with the state’s procurement code.

Additionally, SPS, which is leading the appeal effort, says that it was deprived of due process rights when the New Mexico Public Regulation Commission rejected an advice notice related to the program without allowing the utility an opportunity for a hearing. The PRC argued it was not required to grant that hearing because the rejection was a simple observation that the advice notices violated the community solar rule and that when a compliant advice notice was filed, state regulators approved it without a hearing.

Advocates say the appeal served as an expensive delay tactic.

Attorney Jason Marks represented several advocacy groups as well as the City of Las Cruces. He told the justices that the appeal has created significant delays in construction of community solar arrays despite the PRC denying a request by the utilities to delay implementation of the program until the court renders a decision.

That is because the companies that were given contracts to build and operate community solar arrays face a level of uncertainty as the case remains pending.

Marks said if the rule is overturned, the projects that were selected cannot move forward.

“If you were a financier, you wouldn’t put $20 or $50 million into one of these projects,” he said.

At the same time, the PRC is required under state law to present about the implementation of the community solar program to legislative committees in November. That presentation will help inform potential expansion of the program, which is currently capped at 200 megawatts statewide divided between the three investor-owned utilities.

“The legislature expected the program to be going by now and that the PRC would be able to report back to them in November about how it’s played out and what needs to be improved,” Marks said. “We’ll be lucky to be pouring foundations.”