Dive Brief:

• New Mexico Gov. Michelle Lujan Grisham, D, signed a bill on Thursday to establish decoupling, which aims to remove the disincentive for utilities to conserve energy, as well as boost energy efficiency funding 67%.
• The legislation is the continuation of a 2005 law that allows electric and gas utilities to implement energy efficiency programming. From Public Service Company of New Mexico's (PNM) programming alone, ratepayers have saved up to $400 million in the past decade, Rep. Andrea Romero, who sponsored the bill, told Utility Dive.
• Due to the success of those programs, the law expands the cap on efficiency spending from 3% to 3-5%, and Romero said the state expects the return on those investments to exceed $500 million over the next 10 years.

Dive Insight:

The New Mexico law is another addition to the state's growing clean energy programming.

This bill in particular is a win-win-win for consumers, environmentalists and utilities, according to Romero. It gives energy companies a higher ceiling to invest in energy efficiency and removes the traditional incentive model they were operating under, which directs utilities to set costs based on how much power they expect to sell, and make more profit if they sell more, so they're motivated for customers to use more energy.

Under decoupling, utilities are only able to recover the costs they set along with a set amount for profit, but nothing beyond that, which will incentivize them to drive more efficiency in their customers' energy usage, Tammy Fiebelkorn, Southwest Energy Efficiency Project's representative in New Mexico, told Utility Dive.

"It's not fair to ask [utilities] to sell less of their product," said Fiebelkorn. "So this decoupling mechanism will make them pretty much indifferent to whether they sell more energy or not. They'll still get all their costs recovered."

While PNM is the largest utility in the state, Xcel Energy and El Paso Electric also operate in New Mexico, and their combined programming has reduced electricity demand by 7% since the projects' launch from 2008 to 2017, according to the Southwest Energy Efficiency Project.

While this bill is not under the umbrella of a January executive order by Lujan Grisham, which tackled a wide sweep of climate change initiatives including building energy efficiency standards, Romero said it is part of "a broader package for New Mexico's energy future. There are just so many opportunities right now for New Mexico to really lead clean energy production," she said.

The state last month became the third in the country, along with the District of Columbia, to commit to 100% carbon-free energy. The bill followed Lujan Grisham's January order, which commits New Mexico to the U.S. terms under the Paris Climate Agreement and directs state agencies to set emissions standards for vehicles and power plants, as well as identify transmission infrastructure needed for renewable energy growth.