March 17, 2017 Read More →

New Mexico Utility: Closing Coal-Fired San Juan Plant Would Be to Customers’ Benefit

The Santa Fe New Mexican:

The Public Service Company of New Mexico said Thursday it is considering shutting down the remaining coal-burning units at its San Juan Generating Station near Farmington in 2022, a move that was applauded by renewable energy advocates but could result in hundreds of laid-off workers.

The utility said in a news release that early analysis shows a shutdown could provide long-term benefits to customers and create an opportunity to add more renewable energy production to PNM’s service.

“I want to stress that this is only a preliminary finding regarding our San Juan Generating Station. No decisions have been made,” PNM Resources President and CEO Pat Vincent-Collawn said in the release.

The announcement signals a shift in PNM’s long-held position that continuing to operate part of the San Juan power plant was the most cost-effective option for the company, its shareholders and customers.

Environmental and renewable energy groups said the closure of the plant would help shift New Mexico’s energy reliance to sources that cause significantly less pollution than coal.

Coal power accounts for 50 percent of the utility’s energy generation.

“It is more beneficial to ratepayers to close this plant than to keep it open, which is what we have said for years now,” said Mariel Nanasi, director of New Energy Economy, which has long been an opponent of PNM’s heavy reliance on coal power.

But environmental and renewable energy groups said the potential closure raises questions about how the company plans to comply with the extensive decommissioning and reclamation requirements for the generating station and the San Juan Coal Mine, which supplies 100 percent of the coal to the plant. The burden should not fall on ratepayers, they said.

PNM employs just under 400 people at the power plant.

“We understand and recognize the fact that retiring the station would impact not only the local economies of Farmington, San Juan County and the Four Corners, but the state of New Mexico as well,” Vincent-Collawn said.

PNM is on track to shut down two of the plant’s four coal-burning units by the end of 2017 and replace the lost power with electricity generated by natural gas units and nuclear, solar and wind power.

The plan to close the two units was developed in order to bring the generating station into compliance with federal haze regulations under the Clean Air Act. The plan was approved by the state Public Regulation Commission in December 2015 following a drawn-out debate between environmental groups and the utility.

The company said Thursday it intends to submit a new integrated resource plan to the PRC in July, launching a yearlong process and consideration of all energy options to serve its more than 500,000 customers in New Mexico.

The Public Regulation Commission will make the final decision on the plant shutdown.

Pahl Shipley, a spokesman for PNM, said the potential closure would align with the expiration of the company’s finance and supply agreements with the owner of the San Juan Coal Mine.

The mine was purchased by Westmoreland Coal Co. in early 2016 for $127 million. At the time of the purchase, Westmoreland said in a news release that a PNM-affiliated company had loaned it $125 million to finance the purchase, with the loan maturing in five years.

If PNM were to default on its coal-supply agreement with Westmoreland prior to June 2022, the utility would be financially liable to Westmoreland and have to payout a percentage of the purchase price, according to a copy of the coal-supply agreement obtained by The New Mexican in 2015.

Shipley said early financial modeling shows that a shutdown in 2022, when the loan is repaid and the coal contract expires, “could be cost effective and beneficial for customers.”

The year 2022 is also when PNM’s partnership agreement for the San Juan plant expires with Tucson Electric Power, the city of Farmington, Los Alamos County and Utah Associated Municipal Power Systems. PNM is the largest stakeholder in the plant, owning 66.4 percent of shares.

PNM said a decision to close the plant would also depend on the input from these stakeholders.

Senior managers at PNM met with a number of groups earlier this week in anticipation of its announcement Thursday on the possible closure of the plant.

PNM considering San Juan power plant shutdown

Comments are closed.