New Mexico

Summary New Mexico has recently taken a number of steps to fund and implement energy efficiency programs in the state. The Efficient Use of Energy Act, which was enacted in 2005, directed utilities to develop and implement cost-effective DSM programs, established cost recovery mechanisms for both electric and natural gas utilities, and directed the Commission to remove financial disincentives for utilities to reduce customer energy use through DSM programs—i.e., enact some type of decoupling. Subsequent policy activity yielded additional provisions to support energy efficiency programs. In 2008, Governor Richardson signed into law H.B. 305, which directs electric and natural gas utilities to acquire all cost-effective and achievable energy efficiency resources. Electric investor-owned utilities are required to reduce electricity use by 5% by 2014 and 10% by 2020 as a result of DSM programs implemented starting in 2007. The amendments also direct the Commission to provide utilities with a positive financial incentive for implementing cost-effective DSM programs. New Mexico is entering a new phase of utility-sector energy efficiency initiatives with policies in place or pending (decoupling, financial incentives, and integrated resource planning) that require and support the development and implementation of energy efficiency programs. Total spending trends in energy efficiency programs highlight this shift. In 2006, total spending was about $1 million. In 2008, this amount is estimated to be about $9 million.

Historically, utilities in New Mexico have funded and provided few energy efficiency programs for their customers. New Mexico has recently taken a number of steps to fund and implement energy efficiency programs, which has dramatically changed this picture. The Efficient Use of Energy Act, which was enacted in 2005, does several things: (1) directs utilities to develop and implement cost-effective DSM programs, (2) defines "cost-effectiveness" in terms of the total resource cost test, (3) establishes cost recovery mechanisms for both electric and natural gas utilities, (4) directs the New Mexico Public Regulation Commission to establish rules for integrated resource planning, and (5) directs the Commission to remove financial disincentives for utilities to reduce customer energy use through DSM programs—i.e., enact some type of decoupling.

On May 19, the New Mexico Public Regulation Commission approved a settlement agreement regarding demand-side management (DSM) programs to be implemented by the Public Service Company of New Mexico (PNM). The agreement calls for PNM to spend $14 million per year on nine DSM programs starting in July 2009. The programs are designed to save 59 million kWh of electricity per year, equivalent to about 0.63% of PNM's retail electricity sales, according to the Southwest Energy Efficiency Project. This is more than double the amount of electricity savings PNM was pursuing through its previous set of DSM programs.

According to the Energy Information Administration, New Mexico utilities reported efficiency program savings of 10,241 MWh in 2007, 0.04% of total retail sales.

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The policy and regulatory changes recently enacted have yielded a rapid increase in historically low spending on energy efficiency programs in New Mexico. According to the Energy Information Administration, New Mexico utilities spent $3.0 million on energy efficiency in 2007, or 0.15% of total revenues.

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Subsequent policy activity to the 2005 Efficient Use of Energy Act has yielded additional provisions to support energy efficiency programs. Governor Bill Richardson adopted energy efficiency resource goals in 2007—goals that are to reduce overall energy use per capita by 10% by 2012 and 20% by 2020. Utility stakeholders followed up these overall goals by negotiating and reaching consensus amendments to the 2005 Efficient Use of Energy Act, which were signed by Governor Richardson on February 27, 2008 (H.B. 305). The amendment require investor-owned utilities to achieve a 5% reduction from 2005 electricity sales by 2014, and a 10% reduction by 2020 as a result of DSM programs implemented beginning in 2007.

A utility that determines it cannot achieve the energy saving requirements shall report to the Commission, explain the shortfall, and propose alternative requirements based on acquiring all cost-effective and achievable energy efficiency and load management resources. If the commission determines that the requirements exceed the achievable amount of energy efficiency and load management available, it may establish lower requirements for the utility.

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The 2005 Efficient Use of Energy Act lays the groundwork for decoupling. The Act directs the Commission to remove financial and regulatory disincentives for utilities to reduce customer energy use through DSM programs. A decoupling proposal by Public Service of New Mexico was rejected in 2007. No specific mechanism has yet been proposed or implemented for electric companies.

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The amendments to the Efficient Use of Energy Act direct the Commission to provide utilities with a positive financial incentive for implementing cost-effective DSM programs. No specific mechanism has yet been proposed or implemented. The Commission is currently considering the issue of regulatory incentives and disincentives to utility energy efficiency programs in the Rulemaking in Docket No. 08-00024-UT.

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The 2005 Efficient Use of Energy Act directs the New Mexico Public Regulation Commission to establish rules for integrated resource planning. These rules are not yet in place although the IRP rulemaking process is still ongoing according to the NMPRC Utility Division Operations and Strategic Plan 2009.

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• New Mexico Public Regulation Commission
• Southwest Energy Efficiency Project
• Database of State Incentives for Renewables and Efficiency
• H.B. 305
• NMPRC Utility Division Operations and Strategic Plan 2009

   

Last Updated 08/18/2009

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