Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR Hochman-Vigil
LAST UPDATED
ORIGINAL DATE 2/3/2025
SHORT TITLE
Distribution System and Electrification
Plans
BILL
NUMBER House Bill 13
ANALYST Rodriguez
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
PRC
No fiscal
impact
$55.4 $58.7 $114.1 Recurring General Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Sources of Information
LFC Files
Agency Analysis Received From
Public Regulation Commission (PRC) Energy, Minerals and Natural Resources Department (EMNRD)
Agency Analysis was Solicited but Not Received From
New Mexico Office of Attorney General (NMAG)
SUMMARY
Synopsis of House Bill 13
House Bill 13 (HB13) requires electric public utilities to develop and file detailed distribution
system plans and beneficial electrification plans with the Public Regulation Commission (PRC).
The proposed distribution system plans would allow utilities to proactively plan, engineer, and
upgrade their electrical distribution system to ensure customers can connect without delays and
meet decarbonization standards. HB13 Beneficial electrification programs encourage the
transition from fossil fuels to electricity in residential, commercial, and industrial sectors. The
bill also establishes a virtual power plant program, which enables electric utilities to aggregate
distributed energy resources for the purpose of enhancing grid reliability and efficiency and
requires PRC to set performance targets and compensation structures. HB 13 allows utilities to
recover costs related to beneficial electrification programs and distribution system upgrades.
Detailed Synopsis
Section 1 enacts a new section to Article 62-8 NMSA 1978 that requires electric utilities to plan
and upgrade their distribution systems to meet decarbonization standards and ensure customers
can connect without delays, while submitting detailed plans to PRC including costs, timelines,
and strategies for using distributed energy resources. Utilities will also need to file plans every House Bill 13 – Page 2
three years, report staffing needs, and may apply for cost recovery through tariffs or rate
changes, with the PRC approving plans based on cost-effectiveness and benefits. The bill defines
“distributed energy resource” as distributed generation, energy storage systems, electric vehicles,
microgrids, fuel cells and demand-side management measures.
Section 2 amends the Efficient Use of Energy Act to include additional definitions. The bill
defines “beneficial electrification” as converting a customer’s energy use from a non-electric
source, such as like gas or oil, to a more efficient electric source or avoiding the use of non-
electric fuel sources in new construction.
Section 3 creates a new section of the Efficient Use of Energy Act that establishes and oversees
beneficial electrification plans for utilities, requiring them to set targets for greenhouse gas
reductions, file plans every three years, ensure participation from all customer types, and allocate
funds for low-income households while allowing utilities to recover program costs through
approved tariffs and ensuring regular reporting on the program’s impact.
Section 4 enacts a new section to the Public Utility Act that requires PRC to create rules for a
virtual power plant program, including performance targets, compensation for participants, and
allowing both utilities and third parties to manage distributed energy resources, with a deadline
for implementation by February 1, 2026. Notably, the bill defines “virtual power plant” as a
system where different distributed energy sources, like solar panels or batteries, are controlled by
software to help manage the electricity grid.
This bill does not contain an effective date and, as a result, would go into effect 90 days after the
Legislature adjourns if enacted, or June 20, 2025.
FISCAL IMPLICATIONS
HB13 would require additional staff hours at PRC to implement the various provisions of the
bill, including adopting rules for the virtual power plant program, establishing beneficial
electrification targets, reviewing applications and plans submitted by utility companies, and
reviewing and approving tariff riders and changes in base rates. The agency indicates that the
bill would require additional staff hours for its attorneys, economists, engineers, and hearing
examiners.
SIGNIFICANT ISSUES
Renewable Energy Goals
The Energy, Minerals and Natural Resources Department (EMNRD) notes that the purpose of
HB13 is to support the state’s broader energy transition goals, such as reducing greenhouse gas
emissions, while maintaining affordability for ratepayers. EMNRD states that HB13 “would help
push the state’s public electric utilities to meet the renewable energy goals as set forth in the
Renewable Energy Act (Section 62-16-4 NMSA 1978) and the greenhouse gas emission
reduction goals as set forth in the Governor’s executive order 2019-003.”
Reviewing Applications, Rulemaking, and Reporting
HB13 requires PRC to take final action on beneficial electrification plans and any recovery rate
recovery mechanisms within 180 days, set electrification targets, approve funding levels,
establish performance-based tariffs for the virtual power plant program, and review annual
reports and requested adjustments from utilities—all which increase PRC’s workload. PRC notes House Bill 13 – Page 3
that the timeline to promulgate the multiple rules in HB13 is insufficient. Additionally, because
the bill introduces multiple new regulatory filings, PRC's review process could become more
time-consuming as utilities may submit overlapping requests for cost recovery, tariff approvals,
and program compliance updates.
Rate Filings
HB13 allows utilities to submit tariff riders or changes in the base rate for approval to recover
costs for distribution system plans and beneficial electrification programs. The bill also requires
PRC to oversee the tariff structure based on performance requirements and performance-based
compensation for the virtual power plant program and allows utilities to submit tariff proposals
from utilities tied to the program. The requirements for PRC in HB13 would be a significant
burden to the agency. Typically, general rate cases in New Mexico can take nine months to a
year for full review and approval, depending on complexity, stakeholder input, and the need for
hearings or modifications. For filings and approvals for tariff riders, the general timeline is
between three months and one year, depending on the type of case, issues being raised, and the
number of interveners.
Fair and Reasonable Rates
HB13 allows public utilities to recover reasonable costs associated with distribution system
upgrades, beneficial electrification programs, and the virtual power plant program through tariff
riders, base rates, and regulatory asset deferrals approved by PRC. While it is hard to determine
the actual costs upfront, PRC may have to approve plans that could cost millions of dollars to
utility companies and, therefore, increase costs to ratepayers.
Preordering Transformers
HB13 requires utilities to preorder transformers and other needed equipment to ensure customers
can be connected to the electric distribution system and establish adequate load capacity.
However, as addressed by the National Infrastructure Advisory Council in their June 2024
report, the transformer manufacturing industry was among the industries that experienced the
most severe supply chain disruptions during the Covid-19 pandemic. The report notes that an
electric utility or generation developer that orders a transformer may have to wait 2 to 4 years for
it to be delivered, compared to a wait of just months before the pandemic. Additionally, there has
been a rise in demand for transformers—driven by national trends in increasing electrification,
the building out of renewable electricity generation, and the growth of large-load customers. The
price of transformers has increased by 80 percent compared to the beginning of the pandemic.
Virtual Power Plant Programs
As defined by the U.S. Department of Energy, virtual power plants are “aggregations of
distributed energy resources, such as rooftop solar with behind-the-meter batteries, electric
vehicles and chargers, electric water heaters, smart buildings and their controls, and flexible
commercial and industrial loads, that can balance electricity demand and supply and provide
utility-scale and utility-grade grid services like a traditional power plant”. EMRND highlights
how virtual power plants can help manage peak loads and increase the state’s resilience. The
agency notes:
By implementing advanced metering infrastructure across New Mexico, utilities and
third-party aggregators will soon have greater ability to incorporate distributed resources
into virtual power plants that will optimize local electricity demand to better manage
peak loads (and increase resilience). This benefits grid affordability by reducing the peak
capacity and thus the associated grid infrastructure a utility needs to procure to meet that
peak demand. House Bill 13 – Page 4
By 2030, New Mexico is forecast to install over 160 megawatts of potential virtual power
plant capacity in the form of behind-the-meter storage, smart thermostats, and electric
water heaters. Discounted cash flow analysis suggests that these resources, if aggregated,
would serve the top yearly demand hours at a fraction of the cost of equivalent natural
gas peaker plants or utility-scale storage capacity. However, in addition to peak load
management benefits, virtual power plants also incentivize distributed resource adoption
which provides other grid services (including upgrade deferrals and cost-effective grid
frequency maintenance). HB13’s requirement for utility virtual power plant programs
would spur utilities to take advantage of these benefits and pass savings onto ratepayers
while also compensating distributed resource owners for the services they provide.
PRC raises concerns over the term “slate of programs” used in the virtual power plant section of
HB13. The agency notes:
In Section 4(E), the term “slate of programs” is used for the first time in this section, and
it is unclear what the difference would be between a virtual power plant program and a
slate of programs—it is unclear if a virtual power plant program would encompass a slate
of programs, or if it refers to multiple virtual power plant programs.
JR/SL2