New Mexico Takes Steps Toward More Flexible, Affordable, Electrified Buildings

New Mexico is asking a lot of its electricity grid. Demand is growing, bills are rising, and utility rates are higher in both summer and winter. The state needs practical ways to serve that growth without driving up costs for customers. 

Fortunately, some of the tools New Mexico needs are already in homes and businesses across the state. Smart thermostats, electric water heaters, heat pumps, batteries, and other high-efficiency building technologies can help customers use less energy and shift electricity use away from the most expensive hours. In some cases, they can even send power back to the grid when it is needed most. With the right programs and incentives, these everyday technologies can make buildings cheaper to run for the people inside them and more useful to the grid. 

The problem isn’t a lack of programs. It’s that they don’t fit together. Efficiency programs, electrification incentives, demand response programs, rates, and financing tools are mostly designed and run separately, by different utilities and agencies, under different rules. Customers are left to piece it all together, and most often they just don’t.  

That’s why Advanced Energy United worked with the New Mexico Public Regulation Commission (PRC) and the office of House Majority Whip Rep. Day Hochman-Vigil to convene a working group on building flexibility. PRC staff facilitated four meetings from August through October, bringing together representatives from state agencies, legislative staff, utilities (investor-owned and cooperative), building contractors, consumer and clean energy advocates, and technical experts.

Rather than starting with a predetermined policy approach, we started by examining what building electrification and demand flexibility programs already exist, who is actually participating, what prevents customers from participating, and which policy solutions could advance through utility programs, rates and tariffs, regulatory action, or legislation. 

New Mexico already has a foundation to build on. Utilities currently offer energy efficiency and demand response programs for residential and commercial customers, including some programs specifically for income-qualified customers. The state supports low-income efficiency upgrades, weatherization, and energy savings performance contracting for public buildings. And advanced metering is starting to arrive. PNM, for example, is installing its first 88,000 smart meters this fall, with a systemwide rollout over the next few years. 

Themes that emerged from the working group meetings include:  

• Help customers find what already exists: Customers should be able to navigate energy efficiency, electrification, and demand-management programs without confronting confusing and disconnected requirements, incentives, or application processes. Participants pointed to opportunities to build from existing tools, including state resources, utility program pages, contractor networks, and community outreach to give customers a clear place to start. 

• Fix the house before you upgrade it: Many homes in New Mexico need repairs, such as fixing a leaking roof, before they can be weatherized or get the full benefits of electric technologies. Funding for that pre-weatherization work runs out quickly. Expanding access to these improvements will require renewing existing funding, increasing state investment in energy efficiency and electrification, and identifying and removing administrative or legal barriers to wider weatherization.  

• Make rates work for customers and the grid: As advanced metering infrastructure (AMI) becomes more widely available in New Mexico, utilities can offer more dynamic rate options that reward customers for shifting electricity use to off-peak hours. These rates can help contain overall system costs while making it easier for customers to get value from technologies like smart thermostats, batteries, and electrical appliances. Rate design should also account for the differences across utilities and the regions they serve.  

• Update how we measure value and plan for the future: Today’s rules for efficiency programs are built around using less electricity. That makes it hard to credit a heat pump that replaces a gas furnace, or the value of shifting load off peak hours. Utilities and advocates alike supported continued work with the PRC and stakeholders to update utility cost-effectiveness tests and better account for building electrification and demand flexibility. They also discussed giving beneficial electrification its own lane, and possibly its own funding, so it doesn’t compete with existing efficiency budgets. 

• Keep what’s working: The state’s Sustainable Building Tax Credit helps New Mexicans build and upgrade high-performance homes and buildings. It’s set to expire on January 1, 2028, and several participants supported renewal. Buildings are part of the grid solution. 

Utility planning has traditionally focused on how much new generation and transmission will be needed to meet future demand. Those investments still matter, but they’re not the only tools available.  

If thousands of New Mexicans can reduce or shift demand during a few high-cost hours, that flexibility can help the grid serve more customers within the infrastructure it already has. That flexibility can reduce reliance on the most expensive power plants and delay or avoid some costly grid upgrades. But to capture that value, flexible buildings and customer technologies have to be part of utility planning from the start, not an afterthought. The good news is that the venues already exist. Utilities are filing their first distribution system plans, and as smart meters reach more customers, we will have even more options for rates that reward flexibility. 

The stakeholder process gave New Mexico a clearer picture of what can happen now under existing authority and where new policy may be needed.  

A more efficient, flexible, and affordable grid is possible. United thanks PRC staff, Rep. Hochman-Vigil’s office, and everyone who gave their time to this process, and we look forward to working with partners in the state on next steps in 2027.