State regulators have outlined what the largest electric utility in New Mexico must do to comply with a section of the Energy Transition Act.

The New Mexico Public Regulation Commission issued a final order last week in a docket outlining compliance with an emissions requirement in the ETA that applies only to the Public Service Company of New Mexico.

The commission approved the final order on a vote of 2-1, with Commission Chairman Pat O’Connell casting the dissenting vote. He supported a one-year compliance period rather than the three-year timeframe that made it into the final rule.

PNM is the only utility that has used the financing provisions of the ETA to shut down a coal-fired power plant. Because of that, PNM is limited in how much carbon dioxide it can emit per megawatt hour. This limit of 400 pounds per megawatt-hour went into effect on Jan. 1, 2023. 

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While PNM may not currently be meeting that emissions limit, compliance is measured on a three-year basis and is based on average emissions over those three years. This allows greater flexibility for the utility, as PNM could face higher emissions one year due to factors outside of its control such as extreme weather or project delays. PNM has faced various solar project delays in part due to supply chain constraints.

O’Connell said during last week’s meeting that he supported having one-year compliance because, using the average over three years, could allow the utility to emit high levels for two years and then a low amount of carbon dioxide the third year to meet the 400 pounds per megawatt hour requirements. This level will reduce in 2032.

Other commissioners felt that the ETA language indicates there will be a three-year compliance period.

O’Connell said that the ETA is ultimately about climate change.

“Rather than trying to craft a rule around how people might appeal (the rule to the courts), we should put ourselves in the shoes of trying to create the best climate rule we can,” he said.

He argued that the best rule for the climate would have an annual compliance period.

But Commissioner Gabriel Aguilera said his decision was not based on the fear of an appeal. Instead, he said it is based on how he interprets the language in the ETA.

O’Connell argued that the language in the ETA is ambiguous and that a one-year compliance time frame would better align with other state statutes.

“On the ambiguity, there is some,” Aguilera said. “However, I think that the text more clearly reads in favor of a triennial compliance period.”

He agreed with O’Connell that the ETA is about climate. 

“It’s also about a deal that was offered to the utility and the utility took up that deal,” Aguilera said.

PNM was involved in drafting the ETA after it announced plans to close the San Juan Generating Station.

While the new rule implements a three-year compliance time period, it also requires annual reporting.

While Aguilera said that the information O’Connell would be seeking with an annual compliance period will likely be provided through the annual reporting.

But O’Connell said he is unconvinced.

“I think that addressing climate requires being bold,” he said.

Ideally, the PRC would have had a rule in place prior to the new limit going into effect. In the final order, the PRC states that it is “unfortunate and regrettable that this rulemaking could not be completed prior to January 1, 2023.”

The reasons given for that delay include lack of available personnel and that “no other stakeholder took initiative to petition the Commission to begin the rulemaking.”

This delay does have consequences. The order states that the delay complicates “the implementation of the first three-year period for purposes of compliance, measurement, and verification.”

Should PNM fail to comply with this part of the ETA, it could face sanctions. Exactly what those consequences might look like has not yet been determined. The commission discussed the possibility that such sanctions benefit communities impacted by the closure of the San Juan Generating Station rather than going into the state’s general fund.

Using sanctions to help the impacted community was something O’Connell supported.

“Instead of just forking money over [to] the general fund, there might be better things that can be done with that money,” he said.