Published June 1, 2010

The New Mexico utility company PNM has filed a proposal to raise its electric rates an average of 21.2 percent in 2011.

“A rate request is unavoidable,” said Patricia Vincent-Collawn, the company's president and chief executive. “Knowing these are difficult times, we will stay focused on balancing the need for reliability and affordability, in part through programs to help customers manage energy bills.”

For some New Mexico residents with ideal sites to install solar photovoltaic systems, the long-term electricity price may be competitive with or less than the local utility's price, even before any rate increase is considered.

The company said it expects to invest more than $575 million in the expansion of substations and power lines in Rio Rancho, Santa Fe, Alamogordo and other areas, as well as necessary upgrades to five power plants.

PNM said its rate-increase request, filed with the New Mexico Public Regulation Commission, is not part of the company's proposal to add more renewable energy resources to meet the state's renewable energy standard. The standard calls for it to generate 10 percent of its electricity from renewable sources in 2011, up from 6 percent now.

The proposed average rate increase of 21.2 percent, if approved by the commission, would be carried out in two phases in 2011 to ease the impact on customers. Bills for customers would still be 25 percent below the national average even with the increase, PNM said, and for some of its customers, the increase would be the first in five years.

The company said in a news release that its request also includes increases not related to the capital investments, including the need to cover fuel costs and higher employee-benefit costs.  

Ms. Vincent-Collawn said that the company took  steps to reduce costs before the rate request. Since 2007, PNM and its holding company, PNM Resources, have reduced the number of employees by 15 percent, and the number of officers, the highest-paid employees, by 39 percent. Increases in core operating expenses have been held to half the rate of inflation since that time, she said.

“Energy costs are rising, but there is a lot we are doing to help our customers,” said Ms. Vincent-Collawn. The utility offers a "good neighbors" program to which customers can donate to help those with fewer resources cover their bills.

Although PNM's news release did not mention it, the company offers an incentive for the purchase of solar PV systems.

Electricity customers who buy solar electric systems in PNM's service area may apply for a program under which the company buys renewable energy credits. These credits are used to help PNM meet its requirements under the renewable portfolio standard.

The company pays owners of solar systems with 10 kilowatts of capacity or less 13 cents per kilowatt-hour for the energy their systems generate, for 12 years. An ideally situated, south-facing 5-kw array in New Mexico might generate as much as 8,000 or more kwh the first year, according to production estimates from In My Backyard, a calculator offered by the National Renewable Energy Laboratory.

Factoring in gradual output decline, production may amount to roughly 90,000 kwh over 12 years. At 13 cents per kwh, the PNM solar incentive for 90,000 kwh of electricity generation would total $11,700.

At a gross installation price of $6 per watt, a 5-kw system would initially cost $30,000. A 30 percent federal tax credit could reduce the price to $21,000. Subtracting the $11,700 in PNM payments for renewable energy credits yields a 12-year cost of about $9,300. If the system produced 90,000 kwh in that period, the cost of the electricity would be about 10.3 cents per kwh. The average residential customer in New Mexico now pays about 10 cents per kwh.

The solar owner's costs would be expected to decline over time. The typical lifetime of a solar photovoltaic array is considered to be 25 years, although inverter lifetimes are generally shorter. Adding in the possible future cost of a 5-kw inverter at today's average price, the net 25-year cost of a 5-kw array could be about $12,800.

If the system produced 175,000 kwh over 25 years at a net cost of $12,800, the net electricity cost per kwh would be about 7.3 cents.

These figures are rough estimates only, and every solar installation is unique. A qualified solar installer should be consulted for cost and production estimates for a specific location.