New Mexico Senate Passes 100% Carbon-Free Electricity Target

New Mexico has joined the drumbeat of states pushing for a transition to clean electricity.

The state Senate passed the Energy Transition Act (SB 489) late Wednesday night in a 32-9 vote. The ETA would impose a "zero carbon" electricity standard on public utilities by 2045. The bill also ramps up interim renewables targets, including 50 percent by 2030 and 80 percent by 2040.

For the bill to become law, the House has to approve it before the legislative session ends March 16. Gov. Michelle Lujan Grisham has already said she supports it. Public Service Co. of New Mexico (PNM), the state's largest utility, also supports the measure.

"Senate Bill 489 is bold, comprehensive legislation that will establish the state as a national leader in both renewable energy and address the causes of climate change, providing a pathway for a low-carbon energy transition away from coal and providing workforce training and transition assistance to affected communities," the governor wrote in an op-ed this week.

As of November, coal supplied 50 percent of New Mexico's electricity, natural gas produced 30 percent and renewables 20 percent.

State-level efforts to take greenhouse gas emissions out of the electrical grid have become increasingly common.

Hawaii passed its law first, followed by California and Washington, D.C. At least a dozen other states are considering policies to achieve either 100 percent renewable or 100 percent carbon-free electricity. The latter allows for a broader range of technologies, such as nuclear or carbon capture and sequestration.

In just the past week, governors in Wisconsin and Minnesota proposed zero-carbon electricity by 2050. 

The New Mexico bill differs from the pack in how detailed it gets on the financial and economic impacts of the transition. That concern didn't start with this bill.

PNM had already filed plans to shut down its coal assets, and regulators approved them in December. It argued in the plan that pulling out of coal in favor of renewables and flexible gas plants would ultimately save ratepayers money.

PNM is set to close the 847-megawatt San Juan coal plant in 2022, and pull out of the Four Corners plant by 2031. Earlier unit retirements have pushed coal-fired generation down by two-fifths since 2005, according to the Energy Information Administration.

As such, the bill dedicates much of its language to maintaining the economic integrity of the utility and the communities where coal plants and mines provide a major source of jobs and tax revenue.

Consumers to pay the bill

The bill allows PNM to socialize the costs incurred by abandoning existing investments and switching to cleaner ones. It can issue bonds to pay for the transition, and charge customers "for the recovery of energy transition costs," including financing and power plant abandonment costs.

Utilities have proven amenable to ambitious clean energy adoption when they are able to rate-base it and earn a return on investment. In PNM's case, it is looking to get paid out on investments that it made on behalf of ratepayers, and now is prepared to walk away from in the long-term interests of a cleaner and more cost-effective grid.

Those abandonment costs may include up to $20,000,000 per power plant for "severance and job training for employees losing their jobs as a result of an abandoned qualifying generating facility," as well as mines that only supplied that facility and will close along with it. 

"The bill also demonstrates the state’s willingness to thoughtfully and proactively grapple with a declining coal industry," said Julie McNamara, senior energy analyst at the Union of Concerned Scientists, in a statement. "It supports economic development and training for affected coal industry workers and communities."

Those efforts haven't mollified the communities in the state's northwest corner that would be hit hardest by the coal closures. A senator from that area filibustered for four hours Wednesday night in an attempt to change the bill, the Albuquerque Journal reported.

By confronting the costs of the transition, the bill's authors have embraced the more difficult, practical questions that tend to be overlooked in the excitement around targets with "100 percent" in them. These questions will play out at a national scale as lawmakers debate the Green New Deal, which would mobilize a 10-year transition to clean electricity.

Just because something is cleaner does not necessarily make it a good deal for consumers. California's ratepayer advocate raised that objection in opposing Moss Landing, a landmark energy storage project that Pacific Gas & Electric wanted to build to reduce reliance on gas capacity.

The long-term popularity of New Mexico's energy transition, if the House approves it, will hinge in part on what exactly ends up in those energy transition charges on customers' bills, and whether they appear commensurate with the gains in clean, cheap renewables.