Utilities Seek to Extend Last Gasps From Arizona, New Mexico Coal Plants

Written by Abigail Sawyer of California Energy Markets

Interested parties are doubling down on efforts to extend the lives of two aging coal plants scheduled for decommissioning in northwestern New Mexico and northern Arizona.

A lawsuit filed in Arizona seeks to preserve the market for power generated by the Navajo Generating Station, scheduled to close in December 2019, in hopes that a buyer will come forward. Meanwhile, Public Service Company of New Mexico, the state’s largest utility, plans to repair—rather than shut down—a unit damaged during an explosion in March at its San Juan Generating Station, which is scheduled for closure in 2022. The move prompted a joint petition to regulators from activists who do not want to see repair costs passed on to ratepayers.

Amid reports of a possible buyer for the 2,250 MW Navajo Generating Station, located on the Navajo reservation near Page, Arizona, the Hopi Tribe; United Mine Workers of America of Quantico, Virginia; and Peabody Western Coal Co. of St. Louis, Missouri, filed a complaint this week to compel the Central Arizona Water Conservation District, NGS’ biggest customer, to continue buying power from the coal plant beyond its December 2019 closure date if a buyer could be found.

The water district operates the 336-mile Central Arizona Project, which diverts water from the Colorado River in the north through rural Arizona to the population centers of Tucson and Phoenix in the south. Construction of the project was financed by the U.S. Department of the Interior’s Bureau of Reclamation, and as part of an agreement to pay back $1.65 billion of the debt, CAP has been bound to purchase power from NGS to pump its 1.5 million acre-feet of water each year. The bureau owns 24.3 percent of NGS and is the only partner not resisting the plant’s retirement amid falling prices for alternative energy sources including natural gas and renewables.

According to the complaint, filed May 1 in the U.S. District Court of Phoenix, “An interested buyer that is willing and able to run NGS after 2019 has come forward and has nearly completed its diligence process.” The suit maintains CAWCD’s continued relationship with NGS is critical to securing a buyer willing to operate the plant beyond 2019, and that “Five other potential buyers are ready to step forward if that interested buyer decides not to acquire the non-federal NGS ownership interests.”

Salt River Project, Arizona’s second-largest utility and NGS’ largest shareholder at 42.9 percent, operates the plant. In an April 23 letter to DOI Associate Deputy Secretary James Cason, then-SRP Deputy Manager Mike Hummel (now general manager and CEO) wrote that the decision to close NGS was made “after it became clear that current and forecasted low natural gas prices had made coal generation at NGS uneconomical” and that “continued low gas prices over the past 15 months support that conclusion.”

Hummel states in the letter that “NGS owners have been and continue to be open to potential offers from buyers who may want to own and operate NGS beyond 2019.”

Emails obtained by the Institute for Energy Economics and Financial Analysis and shared with Bloomberg Environment last week reportedly named Avenue Capital Group of New York and Deerfield, Illinois-based Middle River Power as interested parties and indicated the companies sought to discuss power-purchase agreements with CAP. A CAP spokesperson verified the authenticity of the emails, according to Bloomberg. “At this time no potential buyers have notified or entered into negotiations with the NGS owners to purchase the plant. We do not have indications of any interest levels,” Jeff Lane of SRP media relations said in a statement May 3.

SRP says the likelihood of avoiding at least a temporary shutdown at NGS is waning. “Based on our past experience negotiating previous lease agreements and coal contracts, and with the need to comply with [regulatory] review requirements, we believe that any offer to buy the plant beyond mid-May of this year will face significant challenges in executing the agreements and meeting the requirements by [the shutdown date of] Dec. 22, 2019,” Hummel said.

Further east, at the San Juan Generating Station, also on the Navajo reservation and located 15 miles northwest of Farmington, New Mexico, a fire in a coal silo and a subsequent explosion at Unit 1 have prompted calls for PNM to decommission the damaged unit now rather than wait for the plant’s scheduled closure at the end of the current coal-supply agreement on June 30, 2022.

PNM is the plant’s largest shareholder, with 46 percent. The remainder is jointly owned by nine California publicly owned utilities. Originally an 1,848 MW plant, SJGS was operating at around half capacity before the explosion since closing Units 2 and 3 in December.

PNM plans to fix the damaged unit, and expects the as-yet-undisclosed repair costs will be covered by insurance without affecting ratepayers. A joint petition filed before the New Mexico Public Regulation Commission on April 12 by nine stakeholders, led by New Energy Economy and including Native American, Latino and environmental and social-justice organizations, calls for the commission to investigate the accident and require a cost-benefit analysis using economic modeling, risk analysis, and an alternative-resource evaluation to determine the advisability of repairing Unit 1.

PNM’s 2017 integrated resource plan makes clear its goal of eliminating coal completely by 2031 and its plan to replace it with solar, natural gas, and possibly energy storage. The IRP claims retiring “SJGS in 2022 would provide long-term cost savings for PNM’s customers,” enabling movement from “fixed costs and baseload operation associated with coal plants to resources that better match varying loads and are better equipped to work with renewable energy.”

Petitioners wary of PNM’s plan for Unit 1 state that “continuing capital expenditures are critical to PNM’s business model . . . as made repeatedly clear to investors, and acknowledged by this commission . . . investing in ‘Core Capital’ leads to increasing the rate base, from which follows growth in earnings and growth in dividends for shareholders.” The group argues in the petition that “investing in the operation of an aging plant today . . . scheduled to close in 2022 may result in unnecessary capital improvements and long-term stranded assets.”

PNM did not return calls requesting comment. –Abigail Sawyer


PRC orders PNM to respond to inquiries about silo structure failure

AZTEC — The New Mexico Public Regulation Commission unanimously approved an order giving Public Service Company of New Mexico 13 days to respond to questions about the structural failure that caused a small explosion in unit 1 of the San Juan Generating Station on March 17.

The PRC met today in Santa Fe. The meeting was streamed live online.

The PRC is asking PNM for information about the cause of the structural failure and subsequent explosion. The inquiry comes following a petition filed on April 12 by nine advocacy groups spearheaded by New Energy Economy.

The explosion caused PNM to temporarily shut down unit 1. A PNM spokesperson has previously told The Daily Times that the unit should be functioning again by June 15 and that the company's insurance will cover the bulk of the cost of the repairs.

The petition asked the PRC to investigate the cause of the structural collapse and to prevent PNM from repairing the unit to bring it back online without first looking at other generating sources and doing a cost-benefit analysis. It cites PNM's integrated resource plan, which calls for closing the generating station in 2022.

Read more

Cochiti de Pueblo Solarization Celebration

"The sun is shining today," said Governor Dwayne Herrera, " We have partnered up with New Energy Economy to have the installation of the solar panels here so we have renewable energy instead of using coal." 

Last Friday the Cochiti de Pueblo leadership and community held a ceremony for the solarization of Cochiti de Pueblo's Hahn Community Center.

This is New Energy Economy's 10th solarization project and the largest project to date. Below Gene Ka-Hee, from the Pueblo de Cochiti Department of Natural Resources and Conservation, hold us a graphic showing the community and visitors the financial savings the Pueblo has seen to date and the trajectory for savings in the future.

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New Mexico regulators demand answers from PNM on coal silo collapse

New Mexico regulators demand answers from PNM on coal silo collapse

By Joseph Ditzler | The New Mexican

The Public Service Company of New Mexico has 13 days to explain the cause of the March coal silo collapse and resulting fire at its San Juan Generating Station, according to an order issued Wednesday by the New Mexico Public Regulation Commission.

The order also requires PNM to explain what repairs it plans to make and when it will make them to restore the coal-fired unit No. 1 to service at the power plant near Farmington.

Eight advocacy groups, led by Santa Fe-based New Energy Economy, petitioned the PRC on April 12 for an investigation of the collapse and fire and a cost-benefit analysis by PNM to justify the unit’s continued operation. The petition asked whether further investment in the generation plant is fair to ratepayers compared to investment in other energy sources. The San Juan Generating Station, in operation since 1973, is scheduled to close in 2022.

The PRC order also requires PNM to address the New Energy arguments for an analysis that compares the cost to repair the unit to replacing it with an alternative source of power. PRC staff was ordered to make its own assessment, due 13 days after PNM submits its response.

The silo, where coal is stored, collapsed March 17, causing an explosion and fire near unit No. 1, a 16-story structure that produces 340 megawatts of power, according to the petition by New Energy Economy and the other groups. No one was injured in the incident.

PNM expects unit No. 1 to come back online by mid-June, according to an email statement Wednesday from PNM spokesman Dan Ware.

He wrote that PNM would comply with the PRC order but has already provided detailed information about the incident.

He said previously that the utility, in addition to repairs, used the downtime to do scheduled maintenance to unit No. 1. Only unit No. 4, of four generating units at the power plant, is still in operation. To make up for the loss of unit No. 1, PNM draws power from the Afton gas-fired plant near Las Cruces, Ware wrote. PNM shut down units No. 2 and No. 3 at the station in December.

When the petition was filed, the executive director of New Energy Economy, Mariel Nanasi, said it was meant to force PNM to explain what happened March 17 at unit No. 1 and explain to what extent repairs constituted a major investment, the cost of which ratepayers would bear.

“We know already that it’s cheaper today to buy electricity on the open market than it is to buy coal-generated electricity from San Juan. We know that already,” Nanasi said Wednesday. “The plant’s inoperable; why fix it?”

The utility dismissed the claim that PNM would pass unit No. 1 repair costs to ratepayers.

“As we’ve explained, insurance will pay for repairs to the damaged equipment, minus a deductible that will be absorbed by the normal operating budget,” Ware wrote. “The insinuation that customers would be on the hook for a big repair bill is just flat wrong.”

Contact Joseph Ditzler at 505-986-3034 or jditzler@sfnewmexican.com.


PNM investigating silo structure failure that caused fire before putting Unit 1 back in production in mid-June

Below is an article from The Daily Times. Written by Megan Petersen and Published April 18th 2018. 

PNM announced plans in 2017 to end coal operations at the plant by 2022, and two units were shuttered in December before Unit 1 was damaged.

PNM spokesman Dan Ware said the company is performing inspections on the silos at the station that should be completed by May 30 so that Unit 1 can go back online by June 15.

The coalition of petitioners argues that investing to reinstate Unit 1, which has been in operation since 1973, “may result in unnecessary capital improvements and long-term stranded costs.”

The petitioners are urging the PRC to “be proactive so that an investigation, including an adequate cost-benefit analysis, be performed, so that only a prudent investment be made in SJGS Unit 1, and that after-the-fact imprudent findings will not result in unnecessary costs to ratepayers,” according to the petition.

However, Ware said the cost of reinstating Unit 1, which has not yet been determined, will not be passed on to ratepayers, saying insurance will cover the bulk of the cost.

“There’s a $2 million deductible, which will come out of our current operating budget, so this is not going to be passed on to ratepayers,” Ware said on April 17. “Ratepayers are not going to pay more because of this incident.”

But Diné CARE President Adella Begaye said the incident should be used as an opportunity to move toward renewable energy.

“We know that PNM will close the coal plant in 2022, thank goodness,” Begaye said in an April 12 press release. “Why should PNM spend more money propping up a polluting coal plant when we can use that same money creating Navajo jobs in solar. It doesn't make sense to invest in a coal plant that will close in three years when we can use those dollars to benefit our community long-term.”

Megan Petersen covers business and education for The Daily Times. Reach her at 505-564-4621 or mpetersen@daily-times.com.


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