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PNM under fire over coal, nuke power in plan

July 2014

By Staci Matlock

The New Mexican

Public Service Company of New Mexico’s latest plan for providing power to half a million customers over the next two decades is drawing fire from renewable energy and environmental advocates over a proposal to add more coal and nuclear power.

The plan by PNM, the state’s largest electric utility, includes a proposal to replace power from two units at the coal-fired San Juan Generating Station with a mixture of sources including coal, natural gas, nuclear power and solar energy. The plan was filed last week with the state Public Regulation Commission.

Eventually, the cost of any plan approved by the state regulators will affect ratepayers’ monthly bills.

PNM’s plan “is the result of more than a year of rigorous, scientific analysis and significant and ongoing input from the public,” said Pat O’Connell, PNM’s director of planning and resources, in a statement.

O’Connell said the plan “responsibly balances the need for a robust power supply for our customers with our commitment to protect the environment and keep electricity affordable.”

Renewable energy advocates and environmental groups disagree, however, saying the proposal isn’t the least expensive plan for ratepayers and isn’t the most environmentally friendly. Environmentalists take particular issue with PNM including coal and nuclear energy in its plan to replace millions of kilowatts generated by the two San Juan units slated for closure by 2017.

David Robertson of the Sierra Club’s Rio Grande Chapter said PNM’s plan will use millions of gallons more water than if the utility opted for greater reliance on renewable energy.

New Energy Economy and the Sierra Club both advocate a plan that would more than double the amount of renewable energy in PNM’s proposal.

“Our plan, which is no new coal and no added nuclear and a total of 30 percent renewables, is absolutely cheaper and as reliable and without the financial vulnerability,” said Mariel Nanasi, an attorney and executive director of Santa Fe-based New Energy Economy.

O’Connell said in a recent interview that he had heard of the groups’ proposal, but “I have yet to see anything that is specific.”

Planning ahead

The “integrated resource plan” that PNM filed last week is closely tied to a San Juan power replacement proposal filed with the PRC in December. Both must be approved separately by the PRC before they can move forward.

PNM has to file an integrated resource plan every four years. Each plan requires a year of public input and meetings. A big part of this year’s plan is how PNM will replace power from the San Juan units.

O’Connell said his team ran through hundreds of scenarios before coming up with the proposed energy mix, which would be used through 2035.

PNM had to take into account the cost of a new carbon rule — an estimated $35 to $55 per ton of carbon emissions.

O’Connell said renewable energy and natural gas will likely provide a lot more of the power used by customers in the years ahead.

Battery storage for renewable energy in particular “could be a game changer,” he said. The cost of solar power already has declined dramatically in the last five years. Limited storage options have been the primary hurdle to expanding solar and wind, which can’t provide electricity constantly like natural gas or nuclear. PNM is experimenting with ways to store the renewable power at an experimental site near Albuquerque.

But currently, PNM says, a mix of coal, nuclear, solar and natural gas is the most reliable and least expensive way to replace power from the San Juan units slated for closure.

PNM originally told state regulators it wanted to buy an additional 78 megawatts of coal power generated by other units at San Juan. But in May, the company changed that request to 132 megawatts of additional coal power.

Sierra Club and New Energy Economy said that proposal will cost more in dollars, water use and long-term environmental problems.

For one thing, Nanasi said, PNM didn’t include the costs of a new proposed federal regulation for coal ash produced at coal-fired plants, which would make coal ash a hazardous waste.

In a recent report to investors, PNM notes that the new regulation would result in “significant exposure” to increased costs.

PNM also wants to start selling its New Mexico customers energy it owns from its share of the Palo Verde Nuclear Power plant in Arizona. Currently, that power is being sold to other customers on the open market.

Nanasi said estimates based on PNM’s own filings show the company would sell the power to New Mexico customers at a higher rate than it charges other customers. “Currently, they lose more than $6 million on Palo Verde III,” Nanasi said. “It will turn their losses into profits on the backs of PNM ratepayers.”

Timing and scale

O’Connell said he understands renewable energy and environmental advocates want to see solar and wind increased dramatically. “We’ve been adding and are planning to add more renewable energy,” he said.

But PNM has been constrained by costs, he said.

If the company had added more solar six years ago, he said, the cost to consumers would have been more than twice what a solar facility would cost now.

He expects new technology and market changes to keep driving down the cost of renewable energy.

A hearing on the San Juan Generating Station retirement and power replacement plan is scheduled for October. The PRC has not yet scheduled hearing on PNM’s integrated resource plan.

Contact Staci Matlock at 986-3055 or Follow her on Twitter @stacimatlock.

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