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AN ACT

RELATING TO ENERGY; AMENDING SECTIONS OF THE NMSA 1978 TO

PROVIDE FOR ENERGY EFFICIENCY AND LOAD MANAGEMENT FOR PUBLIC

UTILITY CUSTOMERS.

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

Section 1. Section 62-3-1 NMSA 1978 (being Laws 1967,

Chapter 96, Section 2) is amended to read:

"62-3-1. DECLARATION OF POLICY.--

A. Public utilities, as defined in Section 62-3-3

NMSA 1978, are affected with the public interest in that,

among other things:

(1) a substantial portion of public

utilities' business and activities involves the rendition of

essential public services to a large number of the general

public;

(2) public utilities' financing involves the

investment of large sums of money, including capital obtained

from many members of the general public; and

(3) the development and extension of public

utilities' business directly affects the development, growth

and expansion of the general welfare, business and industry of

the state.

B. It is the declared policy of the state that the

public interest, the interest of consumers and the interest of

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investors require the regulation and supervision of public

utilities to the end that reasonable and proper services shall

be available at fair, just and reasonable rates and to the end

that capital and investment may be encouraged and attracted so

as to provide for the construction, development and extension,

without unnecessary duplication and economic waste, of proper

plants and facilities and demand-side resources for the

rendition of service to the general public and to industry."

Section 2. Section 62-8-6 NMSA 1978 (being Laws 1941,

Chapter 84, Section 42, as amended) is amended to read:

"62-8-6. DISCRIMINATION.--No public utility shall, as

to rates or services, make or grant any unreasonable

preference or advantage to any corporation or person within

any classification or subject any corporation or person within

any classification to any unreasonable prejudice or

disadvantage. No public utility shall establish and maintain

any unreasonable differences as to rates of service either as

between localities or as between classes of service. Nothing

shall prohibit, however, the commission from approving

economic development rates and rates designed to retain load

or from approving energy efficiency programs designed to

reduce the burden of energy costs on low-income customers

pursuant to the Efficient Use of Energy Act."

Section 3. Section 62-17-2 NMSA 1978 (being Laws 2005,

Chapter 341, Section 2) is amended to read:

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"62-17-2. FINDINGS.--The legislature finds that:

A. energy efficiency and load management are

cost-effective resources that are an essential component of

the balanced resource portfolio that public utilities must

achieve to provide affordable and reliable energy to public

utility consumers;

B. energy efficiency and load management in New

Mexico are resources that are currently underutilized, and it

is necessary and appropriate to provide rate treatment and

financial incentives to public utilities to develop all cost-

effective and achievable energy efficiency and load management

resources;

C. public and municipal utility energy efficiency

and load management programs present opportunities to increase

New Mexico's energy security, protect New Mexico energy

consumers from price increases, preserve the state's natural

resources and pursue an improved environment in New Mexico;

D. energy efficiency and load management programs

by public utilities in accordance with the Efficient Use of

Energy Act can bring significant economic benefits to New

Mexico;

E. it serves the public interest to support public

utility development of all cost-effective energy efficiency

and load management by removing, to the extent possible,

regulatory disincentives and allowing recovery of costs for

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reasonable and prudently incurred expenses of energy

efficiency and load management programs and also allowing

public utilities the opportunity to earn a profit on cost-

effective energy efficiency and load management resource

development that, with satisfactory program performance, is

financially more attractive than developing supply-side

resources, while at the same time ensuring it is done in a

manner that balances the public interest, consumers' interests

and investors' interests;

F. utility energy efficiency and load management

programs for economically disadvantaged New Mexicans, in

conjunction with low-income weatherization programs managed by

the state of New Mexico, will reduce the burden of utility

costs on low-income customers;

G. cost-effective energy efficiency and load

management programs undertaken by public utilities can provide

significant reductions in greenhouse gas emissions, regulated

air emissions, water consumption and natural resource

depletion, and can avoid or delay the need for more expensive

generation, transmission and distribution infrastructure;

H. New Mexico should participate in regional

efforts to reduce energy consumption by twenty percent by 2020

through programs to reduce energy consumption;

I. public utility resource planning to meet

New Mexico's energy service needs should be identified and

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evaluated on an ongoing basis in accordance with the

principles of integrated resource planning; and

J. it is necessary and appropriate to allow

distribution cooperative utilities to participate in the

implementation of energy efficiency programs in ways that

differ from rules applicable to public utilities that are not

customer owned."

Section 4. Section 62-17-3 NMSA 1978 (being Laws 2005,

Chapter 341, Section 3) is amended to read:

"62-17-3. POLICY.--It is the policy of the Efficient

Use of Energy Act that public utilities, distribution

cooperative utilities and municipal utilities include all

cost-effective energy efficiency and load management programs

in their energy resource portfolios, that regulatory

disincentives to public utility development of cost-effective

energy efficiency and load management be removed in a manner

that balances the public interest, consumers' interests and

investors' interests and that the commission provide public

utilities an opportunity to earn a profit on cost-effective

energy efficiency and load management resources that, with

satisfactory program performance, is financially more

attractive to the utility than supply-side resources."

Section 5. Section 62-17-4 NMSA 1978 (being Laws 2005,

Chapter 341, Section 4) is amended to read:

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

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Energy Act:

A. "achievable" means those energy efficiency or

load management resources available to the utility using its

best efforts;

B. "commission" means the public regulation

commission;

C. "cost-effective" means that the energy

efficiency or load management program meets the total resource

cost test;

D. "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;

E. "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;

F. "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;

G. "large customer" means a customer with

electricity consumption greater than seven thousand megawatt-

hours per year or natural gas use greater than three hundred

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sixty thousand decatherms per year;

H. "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;

I. "public utility" means a public utility that is

not also a distribution cooperative utility; and

J. "total resource cost test" means a standard

that is met if the monetary costs that are borne by the

utility and the participants 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. In developing

this test for energy efficiency and load management programs

directed to low-income customers, the commission shall either

quantify or assign a reasonable value to reductions in working

capital, reduced collection costs, lower bad-debt expense,

improved customer service effectiveness and other appropriate

factors as utility system economic benefits."

Section 6. 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

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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 must 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 total

resource cost test.

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

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general, the energy, minerals and natural resources department

and other interested parties. The commission may for good

cause require utilities to solicit competitive bids for energy

efficiency and load management resources.

F. The commission shall, upon petition or its own

motion, identify regulatory disincentives or barriers for

public utility expenditures on energy efficiency and load

management measures and ensure that they are removed in a

manner that balances the public interest, consumers' interests

and investors' interests. The commission shall also 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.

G. Public utilities providing electricity and

natural gas service to New Mexico customers shall, subject to

commission approval, acquire all 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 2005 total retail

kilowatt-hour sales to New Mexico customers in calendar year

2014 and ten percent of 2005 total retail kilowatt-hour sales

to New Mexico customers in 2020 as a result of energy

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efficiency and load management programs implemented starting

in 2007.

H. A 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 all 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

utility, 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."

Section 7. Section 62-17-6 NMSA 1978 (being Laws 2005,

Chapter 341, Section 6, as amended) is amended to read:

"62-17-6. COST RECOVERY.--

A. A public utility that undertakes cost-effective

energy efficiency and load management programs shall have the

option of recovering its prudent and reasonable costs along

with commission-approved incentives for demand-side resources

and load management programs implemented after the effective

date of the Efficient Use of Energy Act through an approved

tariff rider or in base rates, or by a combination of the two.

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Program costs and incentives may be deferred for future

recovery through creation of a regulatory asset. The only

limit to the tariff rider or customer impact for any utility

customer is that it shall not exceed seventy-five thousand

dollars ($75,000) per year without the customer's consent.

Unless otherwise ordered by the commission, a tariff rider

approved by the commission shall require language on customer

bills explaining program benefits.

B. The tariff rider shall be applied on a monthly

basis, unless otherwise allowed by the commission.

C. A tariff rider proposed by a public utility to

fund approved energy efficiency and load management programs

shall go into effect thirty days after filing, unless

suspended by the commission for a period not to exceed one

hundred eighty days. If the tariff rider is not approved or

suspended within thirty days after filing, it shall be deemed

approved as a matter of law. If the commission has not acted

to approve or disapprove the tariff rider by the end of an

ordered suspension period, it shall be deemed approved as a

matter of law. The commission shall approve utility

reconciliations of the tariff rider annually."

Section 8. Section 62-17-8 NMSA 1978 (being Laws 2005,

Chapter 341, Section 8) is amended to read:

"62-17-8. MEASUREMENT AND VERIFICATION.--

A. A public utility shall submit to the commission

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an annual report that provides information relating to the

actions taken by the public utility to comply with the

standards of the Efficient Use of Energy Act. The report

shall include documentation of program expenditures, customer

participation levels, estimated energy savings, demand

reductions and customer monetary savings resulting from

programs, evaluation of the cost-effectiveness of

expenditures, evaluation of the cost-effectiveness of self-

directed programs, a qualitative assessment of program

effectiveness and any other information the commission may

require pursuant to its rulemaking authority.

B. At least every three years, a public utility

shall submit to the commission a comprehensive measurement,

verification and program evaluation report prepared by an

independent program evaluator. In preparing the report, the

independent program evaluator shall measure and verify energy

and demand savings, determine cost-effectiveness of the

programs, assess the performance of the public utility in

implementing energy efficiency and load management programs

and, as appropriate, provide recommendations on how program

performance can be improved.

C. The commission may direct a public utility to

modify or terminate a particular energy efficiency or load

management program if, after an adequate period for

implementation of the program, the commission determines the

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program is not sufficiently meeting its goals and purposes.

Termination of a program or programs shall be accomplished in

a manner that allows the utility to fully recover its

reasonable and prudent program costs."

Section 9. Section 62-17-11 NMSA 1978 (being Laws 2005,

Chapter 341, Section 11) is amended to read:

"62-17-11. DISTRIBUTION COOPERATIVE UTILITIES.--

A. Distribution cooperative utilities shall

periodically examine the potential to assist their customers

in reducing energy consumption or peak electricity demand in a

cost-effective manner. Based on these studies, by January 1,

2009, distribution cooperative utilities shall establish

energy efficiency and load management targets and begin to

implement cost-effective energy efficiency and load management

programs that are economically feasible and practical for

their members and customers. Approval for such programs shall

reside with the governing body of each distribution

cooperative utility and not with the commission.

B. Each distribution cooperative utility shall

file with the commission concurrently with its annual report,

a report that describes all of the distribution cooperative

utility's programs or measures that promote energy efficiency,

conservation or load management. The report shall set forth

the costs of each of the programs or measures for the previous

calendar year and the resulting effect on the consumption of

electricity. In offering or implementing energy efficiency,

conservation or load management programs, a distribution

cooperative utility shall attempt to minimize any cross-

subsidies between customer classes.

C. Each distribution cooperative utility shall

include in the report required by Subsection B of this section

a description of all programs or measures to promote energy

efficiency, conservation or load management that are planned

and the anticipated date for implementation.

D. Costs resulting from programs or measures to

promote energy efficiency, conservation or load management may

be recovered by the distribution cooperative utility through

its general rates. In requesting approval to recover such

costs in general rates, the distribution cooperative utility

may elect to use the procedure set forth in Subsection G of

Section 62-8-7 NMSA 1978."

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