Senate passes bill that aims to regulate microgrids in the state

The state Senate passed the Microgrid Oversight Act on a thin margin Saturday afternoon following a lengthy debate on microgrids that pitted the welfare of New Mexico's economy against a fear of dwindling resources and exploitative corporations.

Senate Bill 235, which would place regulation of microgrid facilities under the supervision of the state Public Regulation Commission and have reporting requirements on water usage, passed on a 22-20 vote. Microgrids, by definition, are small-scale power grids that operate independently to generate, store and distribute electricity for a localized area.

The bill, introduced by Sens. Jeff Steinborn, D-Las Cruces, and Antoinette Sedillo Lopez, D-Albuquerque, will now head to the House. If approved, it will be sent to Gov. Michelle Lujan Grisham's desk. 

The Democratic senators who voted against the measure were: George Muñoz of Gallup, Roberto "Bobby" Gonzales of Ranchos de Taos, Antonio "Moe" Maestas of Albuquerque, and Michael Padilla of Albuquerque.

An amendment brought by Muñoz that would have excluded McKinley, San Juan and Cibola counties from the bill failed on a razor-thin vote of 20-20 with a tie-break by Lt. Gov. Howie Morales.

Muñoz, who nearly spared his constituents from the bill, smiled broadly at Morales and said, "Oh, that was close Mr. President." 

The legislation was filed as the New Mexico Environment Department is accepting public comment on two proposed microgrid facilities for the large AI-focused data center, known as Project Jupiter, currently under construction in Santa Teresa. The microgrids are estimated to generate as much as 2.8 gigawatts of electricity via natural gas, as much as Albuquerque and Las Cruces combined.

Supporters of the bill said the microgrids for Project Jupiter were a peek at the possible future for the state due to a loophole in New Mexico’s Energy Transition Act, passed in 2025.

Critics said the loophole temporarily allowed larger utilities to buy energy from microgrid owners outside the requirements of the ETA, which requires zero-emission power generation by 2045 — even if that energy was produced by burning natural gas.

"We set ourselves on a very dangerous path, I would say, a wildly irresponsible path. It was not vetted. We did not understand the ramifications," Steinborn said. "We did not know there was a two gigawatt data center announced right around the corner... And I would say this is not a Doña Ana County issue. This is statewide. We need to deal with this now. Doña Ana County is the harbinger of what is coming."

He said there are more than a dozen other data centers being considered for future development in the state and, with the bill, New Mexico could make such facilities work toward its renewable goals.

SB 235 would direct the PRC to set rules for microgrids, including a renewable portfolio standard aligned with the ETA, and making approval of the facilities contingent on their plans to comply with renewable energy benchmarks.

Beginning in May of this year, microgrids would have to generate a minimum of 40% of their energy from renewable sources, up to 50% by 2030, 80% by 2040 and 100% by 2045.

The bill also includes language protecting ratepayers from increases if a microgrid operator purchases power from a public utility. 

The bill presented to lawmakers Saturday was a substitute of the original, which was crafted and first approved by the Senate Conservation Committee on Tuesday before being passed by the Senate Tax, Business and Transportation Committee on Friday.

The substitute made several changes to definitions and included an alternative compliance section which would allow a microgrid to satisfy up to 10% of renewable energy generation by installing solar energy systems to serve low-income households within the county where the facility is located.

In this scenario, the estimated annual solar energy generation of the installed systems shall be credited toward a microgrid's compliance with the facility's renewable energy portfolio standard "for the duration of the system's projected operational lifespan."

In a statement, Demis Foster, Conservation Voters New Mexico chief executive officer, applauded the bill's passage. 

“Responsible economic development means ensuring that the industries that invest in New Mexico also protect our people, our air, and our scarce water resources. The guardrails in SB 235 do that. They are simply common sense,” Foster said.

Good money, bad money

The debate around the bill crossed party lines and often cast the state's opportunity to make money and boost the energy supply against the fear of propelling climate change through carbon emissions and depleting the state's already scarce resources — mainly water.

Senate Majority Whip Michael Padilla, D-Albuquerque, asked the floor to consider the future economic advantages microgrids could bring to New Mexico, saying current large-scale projects in New Mexico are projected to bring $165 billion to $400 billion "with a B" worth of economic activity to the state. He said he feared that the legislation would cause such projects to move their business elsewhere and scare future projects away. 

Padilla said the bill undermines economic competitiveness across the state, does not reduce utility rates for customers — and he guessed it would increase rates amid a shortage of power needs. 

"This session really has been focused on affordability. This bill is going to make New Mexico somewhat less affordable," he said. "It limits firm and backup power needed for hospitals and yes, data centers and large employers."

Padilla added that, if the issue is data centers, then lawmakers should throw out their cellphones "because you're carrying a data center in your pocket right now." He noted that data centers that used to be the size of a football field "are the size of the desk in front of each of the members here right now."

"In 10 years, that's how much technology has advanced," Padilla said, asserting that the water used by data centers only take one fill-up when using a closed-loop cooling system, as Project Jupiter's developers have promised. "You fill it up once and let it do its business for the rest of time." 

Noting that he "rarely" goes up against a bill from his caucus, Padilla said he hoped he and Steinborn "would go to Tiny's and have a beer and a burger together as soon as this is over."

While the bill was generally crafted to protect the state from future operations, often the discussion circled back to Project Jupiter, which Steinborn pointed out that, even as it's being built, the facility's water usage estimates have "just been a constant moving target." 

Cervantes said he was not speaking out against Project Jupiter but questioned the placement of the facility — which is expected to produce high levels of pollution — in an "economically disadvantaged community" and "as far away from Santa Fe as possible" 

"If this project was being proposed in Santa Fe there would be recalls, there would be protests, and there would be marching in the streets — those county commissioners would no longer be county commissioners. And if this project was proposed in Albuquerque, the same result," he said.

Sen. William Soules, D-Las Cruces, said instead of natural gas — which the facility would run on at least for its first years of service — the state should work more toward renewables like solar and wind.  Sen. Harold Pope Jr., D-Albuquerque, said, with the bill, lawmakers were being reactive to Project Jupiter "but I'd also hope we're being proactive to ensure this doesn't happen anywhere else."

"We have to make a decision in our state. We want economic development, we want jobs, we want opportunities, but at what cost? It shouldn't be at a cost to our people and our planet," Pope said. "All money isn't good money and we always need to look at what that cost is on the back end."