Solar rooftop and other distributed generation developers won a victory this month in New Mexico. There, the state regulatory commission (Commission) upheld a previous ruling by a hearing examiner that exempted certain electricity sales under third-party power purchase agreements (PPA) from state public utility regulation. The PPAs allow renewable energy developers that installed generation systems on customers’ properties to sell electricity directly to end-use customers. New Mexico public utilities opposed the change and argued that the decision could expose customers to extra risk and expense.

Renewable energy advocates argued that the third-party PPA model enabled entities without tax liabilities —such as municipal governments, schools, and other nonprofits —to partner with third parties to take advantage of state and federal tax credits. The Commission determined that regulating third-party arrangements as public utilities would unduly burden small-scale entities and discourage renewable energy development in the state. The Commission held that third-party PPAs are legal and service to a single customer does not create a state-regulated public utility.

The Public Service Company of New Mexico, the largest utility in the state, has indicated that it may appeal the decision.