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PNM's San Juan power plant retirement plan loses support of key parties

Portland, Maine (Platts)--23Jan2015/514 pm EST/2214 GMT

PLATTS McGraw Hill Financial

Environmental group Western Resource Advocates has dropped its support for a plan to retire and find replacement capacity for two coal-fired units at the San Juan power plant in northwestern New Mexico.

But WRA is the just the latest group to withdraw support for the plan. Independent power producers and renewable energy advocates did so earlier this week, citing revelations that Public Service Co. of New Mexico, the plant's operator, expected to take more capacity in a remaining unit and increased cost estimates for the proposal.

Half the parties have now pulled out of a settlement agreement outlining the plan for the 1,800-MW San Juan plant.

At issue is a compromise plan released February 2013 that aims to reduce nitrogen oxide emissions that create regional haze from the San Juan plant. A key element of the plan calls for retiring the 350-MW San Juan Unit 2 and the 544-MW Unit 3 by 2018.

The New Mexico Public Regulation Commission is reviewing the various elements of the plan.

The proposal calls for a shifting ownership structure of the plant as California and a Colorado owners intend to leave the facility. To partly take up the California owners' capacity in the plant's 507-MW Unit 4, PNM plans to take 132 MW in the unit. Also, the municipal utility for Farmington, New Mexico, which owns 46 MW in unit 4, was expected to take an additional 65 MW in the unit.

But the Farmington utility has dropped that plan, leaving an ownership hole in the unit. PNM's parent company may take the capacity on a merchant basis, according to filings made Tuesday with the PRC.

Western Resources Advocates withdrew Thursday its support for the San Juan plan partly over the 65-MW issue, according to a PRC filing. Under current plans, PNM or an affiliate would be taking about 200 MW in unit 4.

"Such an acquisition would fundamentally change a foundation for WRA joining the stipulation," the environmental group said.

Also, there is significant uncertainty surrounding the coal supply for the plant and cost estimates for the plan. "The situation surrounding [the San Juan plant] is more risky and less certain than has been represented throughout this case, that time frames for concluding agreements relating to a fuel supply and revised participation agreement have been consistently extended, and that PNM economic studies underlying at least portions of the stipulated outcomes have been erroneously developed," WRA said.

The Renewable Energy Industries Association of New Mexico and New Mexico Independent Power Producers, a trade group, withdrew their support for the plan January 20.

Because of an earlier accounting mistake, PNM has raised the cost of its plan by $367 million, making the cost of retiring all of San Juan's four units more cost effective, the renewable energy group said.

The other parties to the stipulation agreement are PNM, PRC staff and the New Mexico attorney general.

--Ethan Howland, --Edited by Valarie Jackson,


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