Analysis

Synopsis:

 House Bill 137 (HB 137) enacts the Clean Electrification Act that allows utilities and cooperatives to provide beneficial and low-income electrification and requires public utilities, municipal utilities and rural electric cooperatives to reduce carbon dioxide emissions from electricity generation over time. HB 137 prescribes deadlines and requirements and allows the creation of clean electricity credits. It establishes compliance procedures and fees. It creates a penalty and allows variances. HB 137 amends the State Air Quality Permit Fund and makes an appropriation.

Analysis:

 House Bill 137 (HB 137) enacts the Clean Electrification Act (CEA) in Chapter 62 NMSA 1978. It contains an extensive definition section with fifteen definitions starting with base-period emissions and ending with utilities. It contains definitions that are specific to the act such as beneficial and low-income electrification and clean energy credit.

HB 137 establishes clean energy requirements which include reduce carbon dioxide emissions from electricity generation over time by public utilities, municipal utilities and rural electric cooperatives using base emissions as the standard with the goal being zero emissions in twenty-five to thirty years. It directs a utility or cooperative to retire a number of credits to demonstrate compliance toward the zero emissions goal. It establishes the method to calculate base period emissions.

HB 137 institutes standards and incentives for an investor-owned utility or cooperative that provides beneficial and low-income electrification including a commission-approved tariff rider or increase in base rates; an additional one hundred base points return on equity; and a waiver for one year of the one dollar ($1.00) per credit fee required under this act if certain conditions are met.

HB 137 sets up a system of clean energy credits beginning by 1 June 2023.  The secretary will approve and certify the creation of credits associated with the prior calendar year's emissions from a utility's or cooperative's dedicated generation based on the standards established in this section. It allows the secretary to authorize credits to be sold or otherwise transferred in compliance with the conditions prescribed in this section. HB 137 permits credits, allowances or other instruments from another jurisdiction or economic sector that has a program to require comparable reductions of emissions over time and that accepts credits into its program to be certified and used for compliance with the CEA provided other criteria are met. It requires the department to establish and maintain a secure and verifiable system for creating, accounting, tracking and retiring credits which may include the use a third party, or a regional or national system to satisfy these requirements.

HB 137 requires a utility or cooperative to file a verified statement and supporting documentation with the department to establish its base period emissions on or before 1 January 2022. It establishes a fee of one dollar ($1.00) per metric ton of approved base period emission which will be determined by the department by 15 June 2022 and which will be paid within seven days of approval. Once established this determination of base period emissions does not change.  

HB 137 requires a utility or cooperative on or before 1 July of each calendar year beginning in 2023 to file, document and verify its entitlement to clean energy credits with specific information required. The secretary will determine the correct number of reconciled credits and by 1 October of the same year, the number of additional clean energy credits to which the utility or cooperative is entitled. The utility or cooperative will pay a fee of one dollar ($1.00) for each credit within thirty days of issuance of the credit.  

It establishes a procedure beginning on or before 1 July 2025 for compliance in the 2022 through 2024 period and for every three years thereafter by which a utility or cooperative will file an application, including verified documentation, certifying that it will retire the requisite number of clean energy credits. The department within thirty days of the application’s approval will require the retirement of these clean energy credits. HB 137 creates consequences for insufficient number of credits for retirement and allows a penalty of one hundred dollars ($100) per deficit credit payable to the department within thirty days of the assessment for any deficiency persisting beyond a second consecutive compliance period. It allows the department to undertake audits or other oversight procedures to ensure compliance with the CEA and charges the attorney general with seeking court enforcement when necessary. The department will deposit the fees it collects under this section into the State Air Quality Permit Fund.

HB 137 requires the department to adjust energy reduction requirements under the CEA to conform to federal law or state regulation when those laws or regulations require earlier or greater emission reductions.

HB 137 establishes a variance procedure through which the department may grant a requested variance for the shortest duration possible if it finds that the variance is required to preserve the reliability or affordability of electricity service in New Mexico and those factors outweigh any harm to public health, safety or the environment caused by noncompliance. 

HB 137 amends the State Air Quality Permit Fund in Section 74-2-15 NMSA 1978 to allow the fees collected by the CEA to be deposited into that fund. It changes the fund to a non-reverting fund. It expands the purpose of the fund to include regulating air pollution, including carbon dioxide and criteria pollutants. It no longer limits the appropriation to the payment of reasonable costs to achieve the purposes for which the fund was established.

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