Jun. 13—When state lawmakers set renewable energy standards nearly two decades ago, they wanted to make sure utilities’ business wouldn’t suffer and New Mexicans wouldn’t bear the burden of unaffordable electricity.

So far, everything’s going well. Utility regulation officials say the cost of the renewable energy transition has been extremely affordable.

At a Public Regulation Commission meeting on Thursday, PRC Director of Policy Administration Arthur O’Donnell updated New Mexico’s three state regulators on how the electricity transition to all renewables is going.

The PRC needs to give a report to the Legislature on the transition by July 1.

The report is specifically an update on the status of utilities’ renewable portfolio standards, or RPS, which legislators set in law in 2007 and have updated since with increasing clean energy milestones.

The first milestone is quickly approaching. By 2025, all utilities must generate at least 40% of their electricity with renewables.

Most, if not all, are on track to meet that goal.

Eventually — by 2045 for investor-owned utilities and 2050 for rural electric cooperatives — companies need to have all zero-carbon resources.

“The RPS seems to be working well and really is an effective tool in the energy transition,” O’Donnell said.

Affordability

O’Donnell said when policymakers passed the law enacting RPS, they were very concerned about affordability. At the time in 2007, he said, renewable energy was still more expensive than existing energy generation resources.

So they also set what’s called a reasonable cost threshold. The current threshold is estimated at $71.42 per megawatt hour, O’Donnell said.

He said recent power purchase agreements for utilities have been less than half of that.

New Mexico is benefiting from lower prices on the West Coast, compared to higher costs in mid-America and the East Coast, O’Donnell said.

“So far, it has been an exceedingly affordable policy for the state,” he said.

Utilities are allowed to incrementally charge their customers for procurement costs — such as those to purchase renewable energy materials or supplies to meet state requirements — that come with the green energy transition. It appears as a surcharge on electricity bills called RPS riders.

O’Donnell said all the riders are relatively low.

Surcharges for customers of the Public Service Company of New Mexico will likely go down next year because of the large amount of renewable energy the utility has been generating, he said. PRC Commissioner James Ellison later expressed skepticism that PNM’s renewable numbers are really that high.

In 2024, PNM reported its procurement costs sat at about $63 million, O’Donnell said, resulting in a $0.008 surcharge per kilowatt-hour for customers.

He said the utility estimates its procurement costs will decrease to $58 million in 2025, so the company has proposed customers will see a lower surcharge of $0.007 per kilowatt-hour.

Southwestern Public Service Company has even lower surcharges because many costs are built into customers’ rates, as the utility builds its own projects.

O’Donnell said SPS had $6.4 million in procurement costs in 2024, resulting in a $0.00058 surcharge per kilowatt-hour for customers.

He didn’t list the exact surcharge costs for 2025 because SPS still needs to file its renewable energy plan with the PRC, but he said it’ll slightly go up for customers.

El Paso Electric has the highest RPS riders. O’Donnell said EPE reported about $14.3 million in RPS procurement costs in 2024, which customers saw as a $0.008 surcharge per kilowatt-hour.

In 2025, the utility wants to essentially double that, he said, with a rider of $0.015 per kilowatt-hour and procurement costs estimated at $28 million.

“But still, relatively a small portion of the impact for ratepayer bills,” O’Donnell said.

Reporting issues, delays

It’s somewhat more costly for the smaller, rural cooperatives to make the energy transition, O’Donnell said.

He explained that co-ops rely heavily on wholesale purchases from generation and transmission entities to meet state energy requirements.

All of the state’s distribution cooperatives are part of either Tri-State Generation and Transmission or the Western Farmers Cooperative, he said, with the exception of Kit Carson Electric Cooperative. O’Donnell said Tri-State provides 95%-100% of energy needed to its members, and Western Farmers provides 100% of power.

“So that means that as the co-ops move from 10% to 40% (renewables), it will really be Tri-State and Western Farmers who are providing that energy,” he said.

Both generation entities have told the PRC they’re ready for the transition, O’Donnell said.

However, he said there have been inconsistencies in the co-ops reporting of energy requirements. He said he couldn’t find 2024-2025 reports for a few small co-ops.

The RPS reports for the Duncan Valley, Navopache and Rio Grande utilities weren’t available, according to his presentation, and the Central Valley co-op didn’t meet the 10% RPS requirement for 2023.

“Too many of the co-ops aren’t really following what’s in the Act, but we’re taking care of that,” he said.

O’Donnell said regulators should be able to maintain reporting compliance through rulemaking.

“But right now, the co-ops are looking good, and what we’re hoping for is more consistency in their reporting,” he said. “Right now, essentially, we get the numbers from Tri-State for their members and Western for its members.”

Overall, one of the significant barriers that remains for all utilities’ RPS efforts is interconnection delays. O’Donnell said wait times to get connected to the grid are as high as six or seven years.

He said there are holdups at the distribution level as well, like the state has seen with the roll-out of the community solar program, which has been delayed in recent years. .

O’Donnell said next year is a significant milestone for the state’s RPS program.

“This is very important in terms of meeting the state’s goals for replacing the old polluting generation with clean, renewable power,” he said.

In the near-term, O’Donnell said New Mexico can anticipate utilities to go to the market for the additional solar or wind resources needed to meet the state’s clean energy requirements.