Southwest: Stakeholders Want Evaluator for PNM Power Procurements

July 2014

By John Edwards

Energy Newsdata

Stakeholders want an independent evaluator to review PNM’s purchases of generation to replace planned unit retirements at the coal-fired San Juan Generating Station. However, New Mexico Public Regulation Commission staff and PNM on June 19 opposed the designation of an independent evaluator.

The debate stems from the February 2013 proposal of PNM, the New Mexico Environment Department and the U.S. Environmental Protection Agency to retire two units at the 1,684 MW San Juan plant. PNM, EPA and New Mexico also want to retrofit the remaining two units at San Juan with selective non-catalytic reduc- tion equipment to reduce nitrogen-oxide emissions and regional haze.

PNM in December 2013 filed an application asking the NMPRC to approve by December 2014 the plans for retiring the two San Juan units and replacing the lost generation. However, several stakeholders on May 29 filed a joint petition urging the commission to appoint an independent evaluator to ensure a fair review of requests for proposals on replacement generation.

The question of PNM’s fairness in handling RFPs arose in a renewable-energy plan case in 2010, according to the joint petition. The NMPRC expressed concern about the utility’s decision to build its own solar- photovoltaic projects totaling 22 MW, rather than contracting with NextEra Energy. The commission would guide the RFP process so that stakeholders would not be forced to wait for a PNM proposal that would come too late for the NMPRC to consider generation alternatives, attorney Bruce Throne told California Energy Markets. Throne, lead attorney for the joint petition, is with Denver-based Southwest Generation Operating Co., which is building a portfolio of natural gas generation.

California, Colorado, Utah, Arizona and Nevada allow appointment of independent evaluators for the selection of new power supplies, according to the joint petition.

Participants in the San Juan case would be prohibited from demanding that the independent evaluator disclose information. Nor could San Juan case participants cross-examine the independent evaluator, according to the joint petition.

Throne wants the NMPRC to name an independent evaluator as soon as possible without first conducting a rulemaking case on independent evaluators. The commission would need up to two years to adopt a new rule, too long for the rule to be applied in the San Juan case, he predicted.

Peter Gould, an attorney for the New Mexico Industrial Energy Consumers, disagreed in part. The NMPRC could extend its deadline for deciding the San Juan case long enough to first adopt a regulation on independent evaluators, Gould said.

The proposed agreement among the EPA, PNM and the New Mexico Environment Department gives PNM until December 2017 to shut down Units 2 and 3 at San Juan.

It is important to use an independent evaluator, given the large quantity of San Juan power generation that PNM will be replacing, Gould said. PNM will need to replace 419 MW, or about one-fifth of PNM’s peak load, he said.

However, the NMPRC staff said it was unnecessary to name an independent evaluator. The commission and PNM already can hire technical advisers to help them in the San Juan case, according to staff.

Staff has argued that an independent evaluator would be duplicative, because the NMPRC already has authority to investigate PNM’s competitive bid- ding processes. Furthermore, the Public Regulation Commission Act doesn’t authorize the NMPRC to delegate its power to a third party such as an inde- pendent evaluator, staff said.

PNM said the commission doesn’t have the authority to require a utility to pay for an NMPRC- appointed independent evaluator, as the joint petition- ers proposed. In addition, the utility said the functions envisioned for an independent evaluator already can be performed during NMPRC review of integrated resource plans and of requests for certificates for power projects.

However, if the commission decides to name an independent evaluator, it should first adopt a rule on independent evaluators, PNM said.

To replace retired capacity at San Juan, PNM proposes to build 177 MW of new gas-fired generation and 40 MW of solar power, and to use 134 MW that it owns at the Palo Verde Nuclear Generating Station and which it now uses for merchant sales. PNM also wants to buy up to 132 MW in additional generating capacity at San Juan Unit 4.

Conservation group New Energy Economy favors appointment of an independent evaluator because it objects to PNM’s plans to buy additional coal genera- tion and use nuclear energy for retail customers, NEE Executive Director Mariel Nanasi said in an e-mail.

“At a time when utilities are closing coal and shifting reliance to wind, solar and gas, PNM is doubling down on the very energy sources that have fueled climate disruption and economic inequity,” Nanasi said. She opposes nuclear generation because of problems with disposing of radioactive material.

The joint petitioners are NEE, the New Mexico Industrial Energy Consumers, New Mexico Attorney General Gary King, Interwest Energy Alliance, the New Mexico Green Chamber of Commerce, and Southwest Generation Operating Co. [John Edwards].