Critics: Scrap San Juan plan; PNM says it has coal deal

Environmentalists and clean-energy advocates want the state Public Regulation Commission to disregard Public Service Co. of New Mexico’s claims about having “substantially final” fuel supply and ownership agreements in place at the San Juan Generating Station.

PNM asked the commission in early May to approve its plan to restructure the coal-fired electric plant to meet federal environmental regulations under the condition that it finalize new fuel and ownership restructuring agreements by Aug. 31. It told commissioners that talks with coal suppliers and plant co-owners were nearly concluded, with just a few last details pending, and it submitted tentative accords on those issues for confidential review by the PRC and intervenors in the case.

Such agreements are critical for commissioners to adequately assess the costs and benefits of PNM’s proposal to shut two of the plant’s four generating units and install pollution controls on the remaining ones to lower nitrogen oxide emissions. But PNM had failed for more than a year to sign a new coal contract for the plant or finalize ownership reorganization, leading PRC hearing examiner Ashley Schannauer to recommend in April that commissioners reject most of PNM’s plans for the plant.

PNM filed a new brief on Thursday with the commission that included a “letter of agreement” with Colorado-based Westmoreland Coal Co. to purchase the San Juan Coal Mine from BHP Billiton in January 2016. According to PNM, Westmoreland has agreed to supply coal to San Juan through 2022 at substantially lower cost than PNM and the plant co-owners are paying now, leading to a 15-20 percent savings for ratepayers over the life of the new contract.

However, given PNM’s failure to meet past deadlines, environmental and clean energy groups in the case filed responses on Thursday opposing PNM’s new request to commissioners. They said the agreements are still not finalized, their confidential nature impedes adequate public scrutiny, and significant issues could still derail their completion.

“PNM has claimed before to have virtually final agreements in hand that later completely unraveled,” said Steve Michel, chief counsel for Western Resource Advocates. “They’re using this as leverage to force a commission decision with exaggerated claims about ‘substantially final’ accords that can’t be verified because they say it’s all confidential.”

The company said the letter of agreement is a “binding” commitment by PNM and Westmoreland to execute on those agreement. Nevertheless, the accord remains contingent on BHP and Westmoreland completing the mine sale, and on PNM finalizing plant restructuring agreements with the other San Juan co-owners.

“The letter of agreement is legally binding,” said PNM spokeswoman Ryan Baca. “Both parties are legally committed to doing this, but they need to meet those conditions for it to become final.”

Michel said the still-pending conditions make the letter little more than a “feel-good” proclamation.

“It really doesn’t bind anybody to anything,” Michel said. “It’s contingent on all the other agreements falling into place, which may not happen.”

Commissioners seem divided so far on whether to accept PNM’s request for a conditional approval of its plan for San Juan contingent on finalization of coal and ownership agreements.

“I think we’re at a good point in the case with a coal supply agreement with Westmoreland and progress on the ownership restructuring agreement,” said Commissioner Pat Lyons. “They need a little more time to nail it all down, but it seems their well on the way.”

Commissioner Sandy Jones, however, said he prefers to see final agreements in place before the commission decides on PNM’s plan for San Juan.

“It’s very difficult in my opinion to decide this case without those contracts finalized, because without them, how do you determine what the costs to consumers will be?” Jones said. “PNM has had ample time to get these contracts in place. They’re nearly a year behind and they need to get these contracts done.”

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