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. 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.
History: Laws 2005, ch. 341, § 5; 2007, ch. 4, § 13; 2008, ch. 24, § 6; 2013, ch. 124, § 2; 2013, ch. 220, § 2; 2019, ch. 202, § 2; 2020, ch. 17, § 1.
ANNOTATIONSThe 2020 amendment, effective May 20, 2020, clarified that a rate adjustment mechanism may be adopted to ensure that revenue per customer in a rate case remains constant without regard to the quantity of either electricity or natural gas sold; and in Subsection F, Paragraph F(2), after "quantity of electricity", added "or natural gas".
The 2019 amendment, effective June 14, 2019, prohibited the commission from adjusting the discount rate for taxes when considering the life-cycle costs and benefits of energy and efficiency and load management programs; in Subsection C, added "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", and added Paragraphs C(1) through C(5); in Subsection F, added new paragraph designation "(1)", in Paragraph F(1), after "identify", added "and remove", after "load management measures", deleted "and ensure that they are removed", and after "investors' interests", deleted "The commission shall also", added Paragraph F(2), new paragraph designation "(3)" and Paragraph F(4); and in Subsection G, after "five percent of", deleted "2005" and added "2020", after "sales to New Mexico", deleted "customers" and added "customer classes that have the opportunity to participate", after "calendar year", deleted "2014 and eight percent of 2005 total retail kilowatt-hour sales to New Mexico customers in 2020" and added "2025", and after "programs implemented", deleted "starting in 2007" and added "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".
The 2013 amendment, effective July 1, 2013, required public utilities to acquire available cost-effective and achievable energy efficiency and load management resources; in Subsection C, in the second sentence, after "measures using the", deleted "total resource" and added "utility"; in Subsection E, in the third sentence, after "for good cause require", added "public"; in Subsection G, in the second sentence, after "calendar year 2014 and" deleted "ten" and added "eight"; and in Subsection H, in the first sentence, after "A", added "public", and in the second sentence, after "load management available to the", added "public" and after "public utility", added "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 2008 amendment, effective May 14, 2008, authorized the commission to require competitive bids for procurement of energy efficiency and load management resources in Subsection E; required the commission to provide utilities an opportunity to earn a profit on cost-effective energy efficiency and load management resources that are more financially attractive than supply-side resources in Subsection F; and added Subsections G and H.
The 2007 amendment, effective July 1, 2007, in Subsection F, added the provision that the commission shall act upon petition or its own motion to open a docket; changed "load management" to "load management measures"; added the requirement that if disincentives or barriers are found that an appropriate rate making treatment and performance-based, financial or other incentives be considered; and adds Subsection G.
Expenses incurred for energy efficiency programs. — In determining public utility electricity rates, the public regulation commission has authority to consider expenses incurred by a public utility for energy efficiency programs and to permit public utilities to earn returns on the operating expenses incurred from energy efficiency programs. N.M. Atty. Gen. v. N.M. Pub. Regulation Comm'n, 2013-NMSC-042.
Where the public regulation commission approved the utility's adder rates to allow the utility to earn a profit on expenditures on energy efficiency and load management measures by using an operating ratio approach, rather than the traditional return-on-rate-base method, the commission did not exceed the scope of its authority because the commission has discretion to determine the appropriate method to apply in establishing just and reasonable utility rates and the authority to allow utilities to earn a profit on energy efficiency and load management resource development that is not tied to capital investments. N.M. Atty. Gen. v. N.M. Pub. Regulation Comm'n, 2013-NMSC-042.
Just and reasonable rates. — Rates created under the Efficient Use of Energy Act must be determined by the same ratemaking principles that apply to determine just and reasonable rates under the Public Utility Act, Sections 62-3-1 NMSA 1978 et seq. N.M. Att'y Gen. v. N.M. Pub. Regulation Comm'n, 2011-NMSC-034, 150 N.M. 174, 258 P.3d 453.
Where the public regulation commission issued a rule that permitted utilities to recover an adder rate for kilo-watt hours saved and reduced from annual demand due to energy efficiency programs; and the commission determined that the adder rate did not need to be cost-based, did not inquire into the utilities' revenue requirements or other traditional elements of the ratemaking process, and the utilities presented evidence only on the impact that the rule would have, because the adder rates were not evidence-based, cost-based or utility specific, there was no lawful basis for determining that the adder rates were just and reasonable. N.M. Att'y General v. N.M. Pub. Regulation Comm'n, 2011-NMSC-034, 150 N.M. 174, 258 P.3d 453.
Substantial evidence supported final order. — Where the public regulation commission had approved the utility's adder rates for expenditures on energy efficiency and load management measures in a case decided under regulations that the supreme court subsequently vacated; the prior case was never appealed; the commission docketed the present case to determine whether the adder rates approved in the prior case were consistent with the supreme court ruling; and the commission relied on the factual findings in the prior case to support its determination that the adder rates were consistent with the supreme court ruling, the final order in the present case was supported by substantial evidence and the commission reasonably relied on the record in the prior case to support its determination because the present case involved a legal issue, not a ratemaking decision, the case did not depend upon any redetermination of facts adjudicated in the prior case, and the commission was required to review the record in the prior case in order to perform a legal review of the prior order. N.M. Att'y. Gen. v. N.M. Pub. Regulation Comm'n, 2013-NMSC-042.