AVOIDED GASSES IN PRC COST TEST

HB0254

HOUSE BILL 254

57th legislature - STATE OF NEW MEXICO - second session, 2026

INTRODUCED BY

Kristina Ortez

AN ACT

RELATING TO PUBLIC UTILITIES; PERMITTING THE INCORPORATION OF
THE VALUE OF AVOIDED GREENHOUSE GAS EMISSIONS IN THE PUBLIC
REGULATION COMMISSION'S UTILITY COST TEST.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1.
Section 62-17-4 NMSA 1978 (being Laws 2005,
Chapter 341, Section 4, as amended) is amended to read:

"62-17-4. DEFINITIONS.--As used in the Efficient Use of
Energy Act:

A. "achievable" means those energy efficiency or
load management resources available to the utility using its
best efforts;

B. "advanced conductor" means a conductor that has
a direct current electrical resistance at least ten percent
lower than existing conductors of a similar diameter while
simultaneously increasing the energy carrying capacity by at
least seventy-five percent;

C. "advanced grid technology" means hardware or
software technology that increases the efficiency, capacity or
reliability of existing or new electric transmission and
distribution systems, facilities and equipment and includes
advanced conductors, thermal ratings, [
grid enhancing
]
grid-enhancing
technology and technology determined by the
commission or the federal energy regulation commission to
increase the efficiency, capacity or reliability of an existing
or new transmission facility;

D. "advanced power flow controllers" means hardware
or software technology used to push or pull electric power in a
manner that balances overloaded lines and underused corridors
within a distribution or transmission system;

E. "commission" means the public regulation
commission;

F. "cost-effective" means that the energy
efficiency or load management program meets the utility cost
test;

G. "customer" means a utility customer at a single,
contiguous field, location or facility, regardless of the
number of meters at that field, location or facility;

H. "distribution cooperative utility" means a
utility with distribution facilities organized as a rural
electric cooperative pursuant to Laws 1937, Chapter 100 or the
Rural Electric Cooperative Act or similarly organized in other
states;

I. "dynamic line ratings" means hardware or
software technology used to appropriately update the calculated
thermal limits of existing distribution or transmission lines
based on real-time and forecasted weather conditions;

J. "energy efficiency" means measures, including
energy conservation measures, or programs that target consumer
behavior, equipment or devices to result in a decrease in
consumption of electricity and natural gas without reducing the
amount or quality of energy services;

K. "[
grid enhancing
]
grid-enhancing
technology"
means hardware or software technology that reduces congestion
or enhances the flexibility of electric transmission and
distribution systems by increasing the capacity of a line or
rerouting electricity from overloaded to uncongested lines
while maintaining industry safety standards and includes
dynamic line ratings, advanced power flow controllers and
topology optimization;

L. "large customer" means a customer with
electricity consumption greater than seven thousand megawatt-hours per year or natural gas use greater than three hundred
sixty thousand decatherms per year;

M. "load management" means measures or programs
that target equipment or devices to result in decreased peak
electricity demand or shift demand from peak to off-peak
periods;

N. "program costs" means the prudent and reasonable
costs of developing and implementing energy efficiency and load
management programs; [
but
] "program costs" does not include
charges for incentives or the removal of regulatory
disincentives;

O. "public utility" means a public utility that is
not also a distribution cooperative utility;

P. "topology optimization" means hardware or
software technology that identifies reconfigurations of the
distribution or transmission grid and can enable the routing of
power flows around congested or overloaded distribution or
transmission elements; and

Q. "utility cost test" means a standard that is met
if the monetary costs that are borne by the public utility and
that are incurred to develop, acquire and operate energy
efficiency or load management resources on a life-cycle basis
are less than the avoided monetary costs associated with
developing, acquiring and operating the associated supply-side
resources,
which for investor-owned electric utilities may
incorporate the value of avoided greenhouse gas emissions
."

SECTION 2.
Section 62-17-5 NMSA 1978 (being Laws 2005,
Chapter 341, Section 5, as amended) is amended to read:

"62-17-5. COMMISSION APPROVAL--ENERGY EFFICIENCY AND LOAD
MANAGEMENT PROGRAMS--DISINCENTIVES.--

A. Pursuant to the findings and purpose of the
Efficient Use of Energy Act, the commission shall consider
public utility acquisition of cost-effective energy efficiency
and load management resources to be in the public interest.

B. The commission shall direct public utilities to
evaluate and implement cost-effective programs that reduce
energy demand and consumption.

C. Before the commission approves an energy
efficiency and load management program for a public utility, it
shall find that the portfolio of programs is cost-effective and
designed to provide every affected customer class with the
opportunity to participate and benefit economically. The
commission shall determine the cost-effectiveness of energy
efficiency and load management measures using the utility cost
test,
which for investor-owned electric utilities may
incorporate the value of avoided greenhouse gas emissions
. In
determining life-cycle costs and benefits of energy efficiency
programs, the commission shall not adjust for taxes when
selecting a discount rate. In determining life-cycle costs and
benefits for energy efficiency and load management programs
directed to low-income customers, the commission shall either
quantify or assign a reasonable value to:

(1) reductions in working capital;

(2) reduced collection costs;

(3) lower bad-debt expense;

(4) improved customer service effectiveness;
and

(5) other appropriate factors as utility
system economic benefits.

D. The commission shall act expeditiously on public
utility requests for approval of energy efficiency or load
management programs.

E. Public utilities shall obtain commission
approval of energy efficiency and load management programs
before they are implemented. Public utilities proposing new
energy efficiency and load management programs shall, before
seeking commission approval, solicit nonbinding recommendations
on the design, implementation and use of third-party energy
service contractors through competitive bidding on the programs
from commission staff, the attorney general, the energy,
minerals and natural resources department and other interested
parties. The commission may for good cause require public
utilities to solicit competitive bids for energy efficiency and
load management resources.

F. The commission shall:

(1) upon petition or its own motion, identify
and remove regulatory disincentives or barriers for public
utility expenditures on energy efficiency and load management
measures in a manner that balances the public interest,
consumers' interests and investors' interests;

(2) upon petition by a public utility, remove
regulatory disincentives through the adoption of a rate
adjustment mechanism that ensures that the revenue per customer
approved by the commission in a general rate case proceeding is
recovered by the public utility without regard to the quantity
of electricity or natural gas actually sold by the public
utility subsequent to the date the rate took effect.
Regulatory disincentives removed through a rate adjustment
mechanism shall be separately calculated for the rate class or
classes to which the mechanism applies and collected or
refunded by the utility through a separately identified tariff
rider that shall not be used to collect commission-approved
energy efficiency and load management program costs and
incentives;

(3) provide public utilities an opportunity to
earn a profit on cost-effective energy efficiency and load
management resource development that, with satisfactory program
performance, is financially more attractive to the utility than
supply-side utility resources; and

(4) not reduce a utility's return on equity
based on approval of a disincentive removal mechanism or profit
incentives pursuant to the Efficient Use of Energy Act.

G. Public utilities providing electricity and
natural gas service to New Mexico customers shall, subject to
commission approval, acquire the cost-effective and achievable
energy efficiency and load management resources available in
their service territories. This requirement, however, for
public utilities providing electricity service, shall not be
less than savings of five percent of 2020 total retail
kilowatt-hour sales to New Mexico customer classes that have
the opportunity to participate in calendar year 2025 as a
result of energy efficiency and load management programs
implemented in years 2021 through 2025. No later than June 30,
2025, the commission shall adopt, through rulemaking, energy
savings targets for electric utilities for years 2026 through
2030 based on cost-effective and achievable energy savings and
provide utility incentives based on savings achieved.

H. A public utility that determines it cannot
achieve the minimum requirements established in Subsection G of
this section shall report to the commission on why it cannot
meet those requirements and shall propose alternative
requirements based on acquiring cost-effective and achievable
energy efficiency and load management resources. If the
commission determines, after hearing, that the minimum
requirements of Subsection G of this section exceed the
achievable amount of energy efficiency and load management
available to the public utility or that the program costs of
energy efficiency and load management to achieve the minimum
requirements of Subsection G of this section exceed the program
costs funding established in Subsection A of Section 62-17-6
NMSA 1978, the commission shall establish lower minimum energy
savings requirements for the utility based on the maximum
amount of energy efficiency and load management that it
determines can be achieved."

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