Groups pull out of PNM San Juan deal

Groups pull out of PNM San Juan deal

Two of six organizations that signed an agreement in October to support Public Service Co. of New Mexico’s plan to shut down half of the coal-fired San Juan Generating Station near Farmington and replace the lost electricity with a mix of nuclear, natural gas and solar power are withdrawing from the deal.

The Renewable Energy Industries Association and New Mexico Independent Power Producers say they can no longer support the agreement, or “stipulation,” because the cost of PNM’s plan appears greater now than originally reported by PNM, and because the Farmington Electric Utility System –  a co-owner at the plant – announced last week that it was withdrawing from a tentative deal to acquire an extra 65 megawatts of capacity at San Juan.

Farmington’s position adds more uncertainty to PNM’s plan, and in general to the future viability of San Juan, said REIA attorney Adam Baker.

“The revelation by Farmington last week, plus the fact that negotiations among San Juan’s co-owners about how to restructure ownership at the plant have still not concluded, represent a lot of uncertainty about the economics and sustainability of operations at San Juan,” Baker told the Journal. “We’re concerned that there is just too much uncertainty for REIA to continue its support for the stipulation.”

In a filing on Tuesday at the Public Regulation Commission, which is now in its third week of public hearings on PNM’s plan for the coal plant, NMIPP said it’s also concerned that PNM’s parent company, PNM Resources, could acquire the extra 65 MW of capacity in Famington’s stead.

PNM, which is one of two utilities owned by PNM Resources, has said it will not acquire that capacity, but rather work with other San Juan co-owners to find a third party to absorb it.

Nevertheless, NMIPP said in its filing that it “understands” that PNM Resources “plans to take on the additional capacity as a merchant resource,” meaning the parent company could sell the electricity on the open market.

That would take PNM ratepayers in New Mexico off the hook. But both NMIPP and REIA say it’s time to consider other alternatives to PNM’s plan, such as shutting down more of San Juan and acquiring more renewable sources of energy as replacement power.

Further complicating the issues, PNM executives said in testimony at the PRC last week that it miscalculated projected costs for continuing to run San Juan because of clerical errors when tabulating coal prices. That could add an additional $367 million to the bill for ratepayers over 20 years.

“We’ve grown increasingly concerned about shifting cost calculations and the overall uncertainty about San Juan’s operations,” said REIA board member Patrick Griebel. “In a nut shell, the things we relied on to reach the stipulation agreement in October have crumbled.”

In addition to changing costs and Farmington’s decision, REIA is also angered by PNM’s decision to include a new “access fee” on rooftop solar systems in a rate case that it filed with the PRC in December.  As part of the October stipulation on San Juan, PNM had agreed to add an extra 3 MW per year of capacity to its customer-owned solar program, which provides subsidies to customers who install solar systems. That was critical for REIA to support the stipulation, but the group now says the access fee makes the October compromise meaningless.

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