Committee hears microgrid tax-credit bill, accepts substitute and holds measure for tax package

Senate Tax, Business and Transportation Committee members heard testimony and debated Senate Bill 4 18 on microgrid tax credits before approving a committee substitute and agreeing to hold the bill for possible inclusion in a tax package.

Sponsor Senator Padilla, chairing the presentation, said SB 4 18 would establish a "qualified microgrid tax credit" to encourage construction and installation of microgrids in underserved New Mexico communities. The bill, as explained to the committee, would offer a refundable tax credit of $100,000 per qualified microgrid and include application, transferability and carry-forward provisions. Padilla said the credit is intended to support renewable infrastructure and economic development, including projects such as the Borderplex development announced last week, which she said could bring a $5,000,000,000 investment and about 1,000 jobs to the state.

The committee substitute narrowed who could use the credit and clarified regulatory procedures. Key changes added in the substitute include removing distribution cooperatives from eligibility so the credit applies only to investor-owned electric utilities, adding authorizing language enabling an electric public utility to acquire self‑source generation resources (while not preempting required Public Regulation Commission approvals), and adding a requirement that qualified microgrids meet a net‑zero greenhouse gas outcome by 2050 through reductions, removals or offsets. The substitute also added clarifying definitions for "self source generation resources" and for "electric public utility." The sponsor told the committee the edits were made after consultation with utilities and committee members.

Supporters said the credit would help New Mexico compete for large-scale projects that need fast access to power. Alicia Keys, identified as the former state economic development secretary and a Borderplex Digital partner, told the committee the Borderplex project needs SB 4 18 to provide legal certainty for a multibillion-dollar investment and to create jobs. Industry witnesses including representatives of El Paso Electric and Xcel Energy described interconnection and grid planning delays in the Southwest Power Pool and said the bill could provide a pathway to bring power to economic sites sooner. Daven Lopez of the Mesilla Valley Economic Development Alliance and others urged approval to retain and attract advanced manufacturing investment.

Opponents and environmental advocates warned the bill could authorize new fossil‑fuel infrastructure or rely on offsets instead of real emissions reductions. Camilla Feibelman of the Sierra Club's Rio Grande chapter said the credit as explained "still does not comply with the Energy Transition Act" and argued that using tax credits to support new natural‑gas infrastructure would be at odds with state renewable‑energy mandates. Other speakers urged stricter limits on any fossil‑fuel components and more detail about how offsets would be measured.

Committee debate focused on the bill's interaction with existing law and oversight. Several senators pressed whether projects that sell power into the public grid would fall under the Energy Transition Act and Public Utility Act processes and PRC oversight. The sponsor and her expert said the ETA remains the law of the land and that "all electrons that go to a public utility are still subject to the ETA," but that the bill provides flexibility for new microgrids built as discrete systems where the majority of power serves a project's own dedicated load and only surplus power would be offered to the broader grid. Committee members also questioned the technical meaning of the "net zero" requirement; an amendment to replace the phrase "net zero" with a 99% standard failed on a 6‑4 vote, while a later amendment adding PRC determination language and adjusting punctuation to align the net‑zero sentence with state goals passed 9‑1. The committee approved a committee substitute for discussion and then held the bill for consideration in a potential tax package.

Votes and formal actions recorded during the hearing include approval to adopt the committee substitute for discussion and adoption of a separate amendment clarifying PRC jurisdiction and formatting; the overall bill was not advanced out of committee today and was held for possible inclusion in a tax package. The sponsor and staff will continue conversations with utilities, the PRC, environmental groups and other stakeholders before the committee reconvenes on final tax package consideration.

The committee heard both technical and policy arguments: supporters emphasized faster interconnection and economic development, while opponents stressed compliance with the Energy Transition Act and skepticism of offsets. Committee members asked staff and counsel to clarify statutory cross‑references and PRC processes before further action.

Senator Padilla (sponsor) and her staff told the committee they are continuing to refine definitions and implementation language and plan to return with additional drafting and fiscal details if the bill is placed in a tax package. The bill remains under the committee's jurisdiction and will return as part of tax‑package negotiations later in the session.

(Reporting note: the committee counted four in‑room supporters and three in‑room opponents in a public show‑of‑hands; three additional supporters participated online.)