As PNM seeks extension at SJGS, Enchant Energy's CEO has no opposition to the plan
PRC will start to discuss PNM's extension proposal on Wednesday
FARMINGTON — The CEO of the company that sought to start running the San Juan Generating Station on behalf of the City of Farmington on July 1 said last week she has no problem with the Public Service Company of New Mexico (PNM) continuing to run the station as an emergency power source through September.
Enchant Energy CEO Cindy Crane said the company understands “the situation that PNM is in and their desire to hold on to it for one more quarter.”
PNM's formal proposal was filed with the Public Regulation Commission on Thursday afternoon. The utility seeks a three-month extension under an abandonment agreement already approved by the state commission.
The PRC’s spokesperson said the commission will discuss the newest filing at its first opportunity to do so.
"The commission intends to determine the procedure to address PNM's request at its next open meeting on Wednesday," PRC Public Information Officer Sarah Valencia said on Feb. 17.
San Juan Generating Station extension would change timeline for proposed takeover
The extension would delay plans made by the city and Enchant Energy as they move jointly to step in and run the plant once the other owners walk away for good. Adding to the complexity of that plan is a lack of engagement in power purchase talks so far by PNM, which Enchant hopes will buy power from the plant via existing power lines.
Despite all that, Farmington City Manager Rob Mayes said he is supportive of the extension — with a caveat.
“The City of Farmington is delighted to see PNM acknowledge the need to maintain the San Juan Generating Station in order to serve their customers with reliable power and avoid disruptions in service," Mayes said Feb. 18 in a prepared statement to The Daily Times. "Therefore, we are in full cooperation with extending the life as long as they are cooperative with the long term plans for Enchant Energy to permanently operate the plant as a clean reliable and low cost source of power.”
Crane said Enchant submitted bids in PNM’s recent replacement resource request for proposals, but said PNM did not reach out to them.
Crane said she’d rather see Enchant take over the plant and sell power to PNM directly.
“We believe there’s a variety of ways to get there,” Crane said during an interview last week. “PNM extending operations is one of those ways. Again, we have bids into them, and they have not approached us.”
A PNM executive said that the company has not yet embraced the idea of buying power from the generating station if Enchant takes over the plant.
“They have a lot of hurdles to yet overcome," said PNM Vice President of Generation Tom Fallgren.
Fallgren said Enchant would need to show proof of steady financing, as well come up with balance sheets and a plan that shows PNM that working with Enchant and the city won’t burden PNM customers.
Fallgren said Enchant and the city should use this time, if the extension is granted, to firm things up.
“In some regards, Enchant can see that’s a benefit — three months of negotiating time. I would hope they would see that as a benefit to them,” he said.
“What we can’t do,” Fallgren added, ”I can’t add additional liability to my PNM customers for something that doesn’t serve their needs.”
There are also Federal Energy Regulatory Commission rules to follow, and that process can take some time, Fallgren said. “By FERC rules I can’t just hand them transmission rights.”
As for Enchant and the city's original plan to take the generating station over on July 1, Fallgren said “I just, yeah, I don’t think that was realistic.”
Fallgren said he thinks some key pieces needed to move such a deal forward “still are not visible to the owners.”
Crane noted that PNM owns the transmission equipment at the generating station and could use it to move the power it would buy.
Still, she said, she doesn't mind a little breathing room the extension affords. "I think we can all make good use of the time," she said.
Crane said that PNM frequently brings up financing as an issue. She said PNM might be referring to financing for a carbon-capture technology system to be installed after the ownership transfer, not the running of the business.
She said Enchant has investors already, including the Navajo Transitional Energy Company. She said NTEC came on board to support Enchant's bid to save local jobs and protect the regional economy.
Crane said she has been negotiating with nine entities that have ownership in the power station, five current and four former users, since fall of 2020. She said negotiations picked up with some offers and counter offers being exchanged starting in July 2021.
PNM, she noted, is one of the generating station's owners, and those negotiations are about the transfer of assets and have nothing to do with the separate issue of power sales.
"Carbon capture is on a separate track," Crane said on Feb. 18. She said the financing search for the carbon-capture system begins after they evaluate the results of a study that may be completed about five months from now.
Enchant plans to run the power station for an indefinite time as is until the carbon-capture system can be studied and installed.
"The site-specific front-end engineering and design (FEED) study for retrofitting the San Juan Generating Station with carbon capture technology has now achieved several significant milestones," Enchant's website states. "The FEED study is a collaboration between Enchant Energy and the City of Farmington funded through a Department of Energy (DOE) cooperative funding agreement."
The website said that study is 70% complete.
One power plant foe is OK with a short extension, then a shutdown
While the Sierra Club isn’t known for endorsing coal-fired generating stations, the state’s chapter isn’t opposing the proposed extension.
“PNM faces an added challenge during 2022’s peak-demand summer season because the pandemic and subsequent supply-chain issues have slowed construction of resources to replace the coal-fired San Juan Generating Station, which is set to retire in June,” Camilla Feibelman of the Sierra Club Rio Grande Chapter said in a Feb. 16 news release. “Keeping San Juan running an extra three months may be necessary to keep PNM’s reserve margin high enough until replacement resources start coming online in September.”
That being said, the organization was quick to note that it feels coal is not the future, and the plant should be shuttered as soon as possible.
“While PNM may need to keep San Juan running this summer to avoid service disruptions, the long-term solution is not to perpetuate our dependence on coal and gas plants that damage our health and threaten our children’s future,” the news release said. “PNM is retiring San Juan because coal is expensive. PNM estimated that switching from San Juan coal to solar/storage will save customers an average of $6-7 a month on their electric bills."
The Sierra Club release also noted that "as we have seen with recent maintenance disruptions, the aging plant has its own reliability issues.”
A PNM spokesman said Tuesday that no power supply shortages are expected once renewable energy sources come online.
Coal deal depends on PRC’s speedy approval
“Westmoreland is supportive of the three month extension of San Juan Unit 4 operation from June 30th, 2022, until September 30, 2022,” the company said in a letter from Westmoreland’s Jeffrey Kukura released by PNM along with its proposal to the PRC. “Westmoreland stands ready to help serve New Mexico customers and continue to provide reliable electric power to the people of New Mexico and the Southwestern United States.”
Fallgren said Westmoreland’s support, and the PRC’s speedy blessing, is necessary because there’s a late-March drop-dead date for extending operations there.
Westmoreland’s Kukura added his own warning about the timeline.
“While the San Juan Mine current CSA expires June 30, 2022, the mine will have stockpiled its current requirements under this CSA by the end of March,” Kukura’s letter said. “At that time, the San Juan Mine will begin permanent mine closure, decommissioning or moving equipment, and re-deploying workers. Therefore, to preserve this option to fulfill the electricity needs of New Mexico’s businesses and households, the PRC must act quickly, but no later than March 25th, 2022, to approve this agreement.”
Permission sought to keep one PNM power unit running
Fallgren told The Daily Times that PNM is asking the commission to approve the temporary extension as a measure designed to meet power demands.
PNM is not asking for a change in what the PRC approved in the San Juan replacement order, “we’re just asking to delay the compliance with this on Unit 4 only,” Fallgren said on Feb. 15 as the filing was being prepared.
Fallgren, a former plant manager at the generating station, said the ultimate goal is to keep serving customers and avoid disruptions in energy service.
“Maybe this is not the scenario PNM would have selected, and it is not the scenario others would have selected — this is a path that allows us to do it,” he said.
PNM made its case in a nine-page filing that has several attachments.
“To the extent the Final Order on Abandonment requires PNM to cease operating SJGS Unit 4 on or immediately after July 1, 2022, PNM requests a modification to or variance from such a requirement so that SJGS Unit 4 and any associated common plant may remain a certified resource and continue to operate and serve customers until September 30, 2022,” the company’s filing document states.
Part of the utility’s case rests with the problems it has had with four solar projects that were supposed to replace power from the generating station.
“Each of the vendors for the SJGS Replacement Resources anticipates delays to the commercial operation dates (“COD”) of the projects,” the filing states. “Because of delays, including for supply chain issues, the project developers for each of these projects now anticipate bringing resources on-line as indicated in the below table.”
That table spells out PNM’s anticipated timelines for each project.
The document also spells out what will happen if the commission doesn’t approve the extension:
“If the Commission does not grant the requested variance, and PNM complies with the Final Order on Abandonment and abandons its interest in all of SJGS on or around July 1, 2022, PNM may be unable to maintain an adequate reserve margin and may, therefore, be unable to meet the 2022 summer peak season load needs of its customers.”
Contact John R. Moses at 505-564-4624, or via email at email@example.com.
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