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PNM’s San Juan plan gets thumbs down

The San Juan Power Plant near Farmington. (Richard Pipes/Albuquerque)

By Kevin Robinson-Avila / Journal Staff Writer UPDATED: Wednesday, April 8, 2015 at 11:02 pm PUBLISHED: Wednesday, April 8, 2015 at 6:23 pm

Copyright © 2015 Albuquerque Journal

A hearing examiner reviewing the Public Service Co. of New Mexico’s plan to shut down half of the coal-fired San Juan Generating Station near Farmington has recommended that regulators reject most of PNM’s proposals for the plant.

Ashley Schannauer, assigned by the state Public Regulation Commission to review PNM’s plans and recommend a decision to the five-member commission, said Wednesday afternoon that a settlement agreement the utility reached last fall with parties in the case is not in the public’s best interests.

Three of the six parties that had originally supported that settlement agreement backed out during public hearings about San Juan in January. The Albuquerque City Council also voted 6-3 on Tuesday to approve a resolution withdrawing city support for the agreement as a member of New Mexico Industrial Energy Consumers, which was one of the settlement supporters.

Although Schannauer recommended accepting PNM’s request to close two of the plant’s four coal-powered generating units, he rejected the utility’s request to absorb an additional 132 megawatts of coal generation in one of the remaining units, which PNM had proposed to pick up the slack from other co-owners who will abandon San Juan after 2017. Schannauer said the lack of final agreement among the remaining plant co-owners on the restructuring of ownership in that unit, plus the lack of a new coal contract to supply fuel for the plant after the current contract ends in 2017, made it unwise to accept PNM’s proposal at this time.

PNM owns about 47 percent of the roughly 1,700 megawatts of generating capacity at San Juan, which provides nearly 40 percent of the electricity PNM provides to its customers in New Mexico. The New Mexico utility and San Juan’s eight co-owners – which include Tucson Electric Power and Farmington Electric Utility – have been working to restructure plant operations and ownership to comply with federal regulations to reduce nitrogen oxide emissions at the plant. Under those negotiations, PNM had proposed to install additional pollution controls on the two units that remain functioning and to replace lost coal generation with additional electricity from the Palo Verde Nuclear Generating Station in Arizona and from a combination of new natural gas and solar generation in New Mexico.

PNM had proposed in the settlement agreement to take on an extra 132 MW of capacity in one of the remaining units. But a decision in January by the Farmington utility to back out of a tentative agreement to also absorb an extra 65 MW of capacity in that unit rattled supporters of the settlement, who feared that PNM’s parent company, PNM Resources, would step in to absorb the additional 65 MW, strapping the company with even more coal generation.

The settlement agreement – which PNM signed last fall with environmental groups, consumer advocates and others – also called for a significant reduction in the amount PNM would charge ratepayers for the additional nuclear power it would acquire to replace coal and for the amount of cost recovery it can receive for abandoning two of San Juan’s operating units.

Schannauer, however, says the settlement as now proposed is not in the public’s best interest and should be rejected by the commission unless PNM agrees to a number of modifications. That includes, among other things: rejection of PNM’s request to absorb more coal generation in one of the remaining units until a final ownership restructuring agreement and a new coal contract are in place; a further reduction in costs to be charged to ratepayers for additional nuclear energy; and a vetting by the PRC in a rate case of whether additional pollution controls proposed by PNM for the remaining two San Juan units is prudent and in the public’s best interest.

If PNM accepts the recommended modifications, Schannauer would then recommend approval by the commission. His order gives PNM seven days to respond.

PNM said it is reviewing the recommendations and can’t yet comment on what it plans to do.

“However, we are extremely disappointed in the hearing examiner’s recommendation,” said PNM spokesman Pahl Shipley in an email to the Journal. “Our primary concern is to balance reliability and affordability for our customers, and his decision does not appear to support either priority.”


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