SENATE CONSERVATION COMMITTEE SUBSTITUTE FOR

SENATE BILL 235

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

 

 

 

 

 

 

 

AN ACT

RELATING TO UTILITIES; ENACTING THE MICROGRID OVERSIGHT ACT; CREATING THE MICROGRID RENEWABLE PORTFOLIO STANDARD; PROVIDING AUTHORITY FOR THE PUBLIC REGULATION COMMISSION TO REGULATE COMPLIANCE WITH THE MICROGRID RENEWABLE PORTFOLIO STANDARD; REQUIRING ANNUAL REPORTING FROM MICROGRIDS; PROHIBITING PUBLIC UTILITY RATE INCREASES TO COVER THE COSTS ASSOCIATED WITH MICROGRID INFRASTRUCTURE DEVELOPMENT.

 

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

     SECTION 1. [NEW MATERIAL] SHORT TITLE.--This act may be cited as the "Microgrid Oversight Act".

     SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the Microgrid Oversight Act:

          A. "commission" means the public regulation commission;

          B. "electric public utility" means an electric public utility regulated by the commission, pursuant to the Public Utility Act, that is not also a cooperative nonprofit membership corporation organized pursuant to the Rural Electric Cooperative Act;

          C. "low-income household" means a household in which the current annual income is at or below eighty percent of the area median income, adjusted for family size, as published by the United States department of housing and urban development or that is enrolled in a low-income program facilitated by the state or a low-income energy program led by a utility or as determined by the commission;

          D. "microgrid" means a permanent or temporary electric system that:

                (1) includes a self-source generation resource;

                (2) is capable of generating not less than twenty megawatts; and

                (3) is capable of operating independently or connected to the grid;

          E. "renewable energy" means electric energy produced by use of a renewable energy resource;

          F. "renewable energy resource" means the following energy resources, with or without energy storage:

                (1) solar, wind and geothermal;

                (2) hydropower facilities;

                (3) biomass resources, limited to agriculture or animal waste, small-diameter timber not to exceed eight inches, salt cedar and other phreatophyte or woody vegetation removed from river basins or watersheds in New Mexico; provided that these resources are from facilities certified by the energy, minerals and natural resources department to:

                     (a) be of appropriate scale to have sustainable feedstock in the near vicinity;

                     (b) have zero life cycle carbon emissions; and

                     (c) meet scientifically determined restoration, sustainability and soil nutrient principles;

                (4) fuel cells that do not use fossil fuels to create electricity; and

                (5) landfill gas and anaerobically digested waste biogas;

          G. "self-source generation resource" means a permanent or temporary electricity-generating resource that is dedicated to primarily serving the persons connected either directly or indirectly through business affiliates to a microgrid;

          H. "zero carbon energy" means electric energy produced by use of a zero carbon resource; and

          I. "zero carbon resource" means an electricity-generating resource that emits no carbon dioxide into the atmosphere.

     SECTION 3. [NEW MATERIAL] OVERSIGHT AUTHORITY--POWERS AND DUTIES OF COMMISSION.--

          A. The commission has authority over matters relating to the compliance of microgrids in the state with the microgrid renewable portfolio standard.

          B. The commission may:

                (1) require and collect fees that are used to cover the cost of the commission's oversight of microgrids' compliance with the microgrid renewable portfolio standard from owners and operators of microgrids; and

                (2) prohibit the operation of a microgrid that fails to meet the requirements of the microgrid renewable portfolio standard.

     SECTION 4. [NEW MATERIAL] MICROGRID RENEWABLE PORTFOLIO STANDARD.--

          A. A microgrid shall meet the microgrid renewable portfolio standard requirements to include renewable energy in its electric energy supply portfolio, as demonstrated by accurate metering and energy audits.

          B. Renewable energy shall comprise no less than forty percent of a microgrid's total annual energy generation:

                (1) for a microgrid that begins operation on or after May 20, 2026; and

                (2) no later than January 1, 2028 for a microgrid in operation prior to May 20, 2026.

          C. Renewable energy shall comprise no less than fifty percent of a microgrid's total annual energy generation no later than January 1, 2030.

          D. Renewable energy shall comprise no less than eighty percent of a microgrid's total annual energy generation no later than January 1, 2040.

          E. Zero carbon energy shall comprise one hundred percent of a microgrid's total annual energy generation no later than January 1, 2045.

          F. An owner or operator of a microgrid shall issue a report to the commission beginning July 1, 2027, and January 1 every year thereafter, that includes:

                (1) total annual energy generation measured in megawatt-hours;

                (2) total annual energy generation of renewable energy measured in megawatt-hours, organized by technology type;

                (3) the status of compliance with the microgrid renewable portfolio standard;

                (4) total water use, including water used for power generation and cooling of facilities directly served by the microgrid;

                (5) information related to alternative compliance with the microgrid renewable portfolio standard pursuant to Section 5 of the Microgrid Oversight Act; and

                (6) other information the commission may require to verify compliance.

     SECTION 5. [NEW MATERIAL] ALTERNATIVE COMPLIANCE WITH THE MICROGRID RENEWABLE PORTFOLIO STANDARD.--

          A. The owner or operator of a microgrid may satisfy up to ten percent of renewable energy generation required under the microgrid renewable portfolio standard through the purchase and installation of residential solar energy systems serving low-income households.

          B. Residential solar energy systems that qualify for alternative compliance with the microgrid renewable portfolio standard include:

                (1) photovoltaic or solar thermal systems installed on properties occupied by low-income households that are used to offset the use or cost of nonrenewable energy by those households; and

                (2) shared or community solar facilities from which the energy generated or the monetary savings on utility bills are allocated to low-income households.

          C. Residential solar energy systems shall be installed:

                (1) or placed in service on or after May 20, 2026;

                (2) within the state; and

                (3) within the county where the microgrid is located and prioritizing residents closest to the microgrid.

          D. The estimated annual solar energy generation of the installed systems expressed as a percentage of the microgrid's total annual energy generation that the solar energy is capable of offsetting shall be credited toward a microgrid owner's or operator's compliance with the microgrid renewable portfolio standard. The owner or operator of a microgrid may count an installed residential solar energy system toward the microgrid renewable portfolio standard for the duration of the system's projected operational lifespan.

          E. The owner or operator of a microgrid pursuing alternative compliance pursuant to this section shall provide evidence to the commission demonstrating:

                (1) that the associated renewable energy generation has not been otherwise claimed for renewable portfolio standard compliance; and

                (2) how the calculation made pursuant to Subsection D of this section was reached.

          F. Residential solar energy systems applied toward alternative compliance pursuant to this section shall not be eligible for state solar tax credits.

     SECTION 6. Section 62-17-12 NMSA 1978 (being Laws 2025, Chapter 93, Section 6) is recompiled in the Microgrid Oversight Act and is amended to read:

     "SELF-SOURCED POWER GENERATION.-- 

          A. Persons located within the state may receive electricity service using a [qualified] microgrid that may also deliver electricity to equipment, lines and facilities operated by an electric public utility; provided that the person and the electric public utility enter into an electric service agreement.

          B. [This section authorizes] An electric public utility, subject to approval by the [public regulation] commission, [to] may acquire self-source generation resources or energy and dedicate those resources or energy to retail services, wholesale services or self-generation services, or any combination of those services [and rates established for those services shall take into account the public interest and need, reliability and affordability]. The [public regulation] commission shall not approve an acquisition pursuant to this section from a facility that does not qualify as a self-source generation resource or if the acquisition would increase rates to cover the costs associated with microgrid infrastructure development.

          [C. Energy generated and sold from a self-source generation resource that is owned in whole or in part by a qualified microgrid shall not be considered retail sales or energy as contemplated under Sections 62-15-34, 62-16-4 and 62-18-10 NMSA 1978 until 2035, whether serving the qualified microgrid or purchased in whole or in part by the electric public utility to provide service. By 2045, all of the energy that a qualified microgrid generates and sells shall be from net-zero carbon resources. An operator of a qualified microgrid shall file reports as required by the public regulation commission, certifying the qualified microgrid's progress toward and compliance with the net-zero carbon resource standard.]

          C. The owner or operator of a microgrid may purchase energy from an electric public utility; provided that the purchase does not increase rates to cover the costs associated with microgrid infrastructure development.

          D. A person [who] that only provides [self-source generation sales] or sells electricity from a self-source generation resource to that person's employees or tenants, when the service or commodity is not resold to or used by others, shall not be considered an electric public utility.

          [E. As used in this section:

                (1) "electric public utility" means an electric public utility certified by the public regulation commission to provide retail electric service in New Mexico pursuant to the Public Utility Act that is not also a distribution cooperative utility;

                (2) "net-zero carbon resource" means an electricity generation resource that emits no carbon dioxide into the atmosphere, or that reduces methane emitted into the atmosphere in an amount equal to no less than one-tenth of the tons of carbon dioxide emitted into the atmosphere, as a result of electricity production;

                (3) "qualified microgrid" means a permanent or temporary electrical system that:

                     (a) incorporates a microgrid controller;

                     (b) includes a self-source generation resource that is capable of generating not less than twenty megawatts; and

                     (c) is capable of operating independently and disconnected from the grid;

                (4) "self-source generation resource" means a permanent or temporary electricity generating resource that is dedicated to primarily serving the persons connected either directly or indirectly through business affiliates to the construction and installation of a qualified microgrid; and

                (5) "self-source generation sales" means sales of electricity to persons or utilities generated from a self-source generation resource.]"

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