New Mexico's largest electric utility is asking state regulators for approval to join a wholesale trading market that allows participants in several western states to buy and sell energy to better balance supply and demand.
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The Los Angeles Department of Water and Power is among those expected to join the energy imbalance market by 2020 while large utilities in Arizona, Nevada and Utah already are on board.
Public Service Co. of New Mexico wants to join by 2021, saying the move could save an estimated $17 million annually for its customers and ensure more efficient use of the electricity generated by solar, wind and other renewable resources throughout the region.
"Having cost-effective electricity available to immediately back up intermitted renewable energy in real time supports reliability and also ensures our renewables are used to their fullest potential," said Tom Fallgren, vice president of generation for the New Mexico utility.
Public Service Co. of New Mexico has invested millions of dollars in building solar farms in recent years and already has scaled back operations at its coal-fired power plant in northwestern New Mexico as part of a federal mandate to reduce haze-causing pollution.
The utility is preparing for the closure of the power plant in a few years as part of a national shift toward natural gas and renewable sources that has been spurred by government regulations and economic forces.
Noah Long, a senior attorney with the Natural Resources Defense Council, said the energy imbalance market allows utilities to move excess renewable energy around to those who need it within the hour that it is produced, meaning generating stations don't have to be curtailed.
According to the market, its participants absorbed nearly 130,000 megawatt-hours of excess renewable energy during the second quarter, helping to reduce carbon emissions from other sources that would have otherwise been tapped to meet demand.
The California Independent Operator system launched the market in 2014, with Oregon-based PacifiCorp and Las Vegas-based NV Energy among the first to sign up. It now includes utilities in eight states.
Participating utilities have reported benefits of more than $400 million over four years, with the market's most recent report showing record benefits of more than $71 million during the second quarter.
If New Mexico regulators approve, it would cost Public Service Co. of New Mexico an initial $28 million to join. Annual expenses would be roughly $3 million a year to pay for extra employees and software that would be needed to coordinate with the market.
Tom Fallgren, the utility's vice president for generation, said the utility would seek to recover those costs from customers through its rates. He also said the savings that the utility would see from buying electricity through the market would offset the costs and be passed back to customers.