Hearing officer advises PRC to reject PNM’s power plan

ALBUQUERQUE — A New Mexico hearing examiner declined Wednesday to give his blessing to a plan for filling the void that will be left by the partial closure of an aging coal-fired power plant that supplies more than 2 million customers in the Southwest.

Two units at the San Juan Generating Station are scheduled to close in 2017 under an agreement with federal and state officials to curb haze-causing pollution in the Four Corners region.

Public Service Company of New Mexico, the state’s largest electric utility and the operator of the plant, wanted to replace the two units with more coal-fired generation and a mix of natural gas, nuclear and solar power.

Hearing examiner Ashley Schannauer said the plan as proposed doesn’t provide net benefits to the public and shouldn’t be approved by the state Public Regulation Commission unless some changes are made. It will be up to the commission to issue a final decision.

Further negotiations among the commission staff, the utility and other environmental and consumer advocacy groups are possible.

Schannauer said some parts of the plan were agreeable, but his concerns centered on the proposed addition of 132 megawatts of coal-fired power. He said uncertainty still surrounds the ownership makeup of the plant, and PNM has no contract to provide coal for the plant beyond 2017.

With a growing ownership share in San Juan, he said, PNM would be assuming a greater share of the risks and the associated capital and other costs that other utilities are seeking to avoid as the federal government looks to crack down on carbon-dioxide emissions. “A greater diversification of PNM’s generating resources away from coal and not too far into natural gas is likely to benefit ratepayers going forward,” he stated.

Schannauer supported the utility’s plan to assume a larger interest in the Palo Verde nuclear plant in Arizona as long as that interest was valued at a certain level, less than what PNM had proposed.

Regardless, he warned that the changes spurred by the partial closure of San Juan would result in substantial rate increases for customers over the next 20 years.

Environmentalists who have been pushing for PNM to tap more renewable energy praised the recommendations, saying the case could serve as a turning point for energy policy in New Mexico.

PNM, however, was quick to voice its disappointment. “Our primary concern is to balance reliability and affordability for our customers, and this decision does not appear to support either priority,” PNM spokesman Pahl Shipley said.

Despite the addition of more coal to fill the void, PNM has argued its overall dependency on coal would decrease with the closure of the two units, the addition of Palo Verde power, a new natural gas-fired plant and more solar generating stations around the state.

In 2014, more than 60 percent of electricity generated by PNM came from coal. If regulators were to approve the plan as is, the utility says coal generation would drop below 50 percent and nuclear would to increase to one-third. Renewables would total more than 11 percent.

Mariel Nanasi, executive director of the environmental group New Energy Economy, said New Mexico ratepayers “dodged a bullet” with the recommendations.

“We have serious concerns about the risks and liability of PNM’s further coal and nuclear investment,” she said. “We’re not going to throw out everything that was worked on, evaluated and vetted over the last year and a half. But we have an opportunity now to negotiate.”

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