Three-month extension for coal-fired San Juan Generating Station drew no opposition

FARMINGTON — State utility regulators on Feb. 23 said the Public Service Company of New Mexico (PNM) has the right to extend operations at the San Juan Generating Station for three months instead of PNM shutting the facility down on June 30.

Some commissioners also criticized the utility's public messaging about power supplies, potential brownouts and the need to keep the generating station online past the original shutdown goal.

The Public Regulation Commission's action cleared the way for the utility to carry out a new, short-term coal contract with Westmoreland, which runs the mine that feeds the coal-fired plant. The utility will keep one of the plant's two functioning units in service during the extension period.

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None of the interested parties the commission deals with objected to the plant staying open a few more months, although some had concerns about the associated costs the utility might later try to recover.

A PRC attorney said those costs will be examined later.

Plant shutdown is a voluntary action

The Public Regulation Commission's legal staff told the regulators that there was no firm timeline in the Energy Transition Act stating exactly when the station had to shut down, and PNM's previously announced shutdown date at the end of June was not written in stone.

PNM's filing last week sought the three-month extension to make up for a 120 megawatt shortfall in generation capacity during the summer's hottest months if the generating station's electricity wasn't available. 

The utility sought an order to amend it's abandonment agreement with the PRC, but PRC General Counsel Michael Smith told commissioners that the utility already has the authority to run the plant longer than the June shutdown date that PNM chose.

"No provision of the ETA actually mandates PNM abandon San Juan Generating Station by July 1, 2022, or even by Sept. 30, 2022," Smith said near the end of the commission's Feb. 23 Zoom meeting.

Smith clarified for the commission what they were voting on.

"We're not saying 'yes,' because 'yes' in this order would be conferring an approval on PNM's actions," Smith said.

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Smith again clarified that no requirement was made by commission for a date of abandonment, so PNM's decision to continue operating the plant is a voluntary action.

"I wouldn't even say we're saying go ahead." Smith said. "What we're saying is they have that authority in operating their plant to make these decisions."

Smith said the issue of an abandonment timeline has to do with whether PNM can take advantage of part of the Energy Transition Act that requires the plant to be abandoned by the end of this year if the utility is to take advantage of financial incentives known as securitization to help recoup its costs.

Changes in air quality laws that came about with the ETA are the factors that will eventually make the plant extinct if its future emissions surpass state standards, Smith said.

Two pieces of legislation that would have changed those air standards temporarily to allow the plant to continue without carbon capture technology were rejected by the state Legislature earlier this month.

PNM weighs in

While thanking the commission for a fast resolution, the utility that runs the power plant was also quick to remind the panel that, in PNM's opinion, the PRC's choices for elements in PNM's renewable replacement power portfolio caused the crisis when the pandemic made building the state's approved options difficult.

"PNM proposed its plan to make up for a 120 MW shortage and developers' delays that created obstacles in implementing the Commission's selected portfolio to replace coal power," PNM said in a statement after the hearing. "PNM was put into a tough position, but quickly jumped to action with its plan that extends operations of just one unit of its San Juan coal plant through the 2022 summer peak season."

Environmentalists on Feb. 23 held a press briefing and released a statement rebutting PNM's claims and stating that its choice of gas-fired turbines would have run into the same supply chain issues as the solar projects that have been delayed during the pandemic.

"PNM would have had to not only build and put in place the gas power plant but construct a new pipeline to transport the gas there," the Sierra Club Rio Grande Chapter said in its release.

"It is hard to believe installation of new gas turbines and construction of a new gas pipeline would not have been subject to the same kind of delays industries worldwide are experiencing due to Covid-19," the Sierra Club statement continued. "And PNM's preferred portfolio contained two of the same solar-plus-storage projects that the PRC approved and are delayed due to Covid-19. Thus, even if the commission had approved the exact portfolio that PNM recommended, PNM would still be short on capacity because the other projects are delayed."

The Associated Press reported that environmentalists at that press conference Wednesday said that no one could have predicted that the closure of the San Juan power plant and construction of the replacement power would be disrupted by a pandemic. They argued that the delays are short term and should not derail public confidence in New Mexico's mandates for emissions-free electricity generation within the next two decades.

"We're still squarely on this path to transition out of fossil fuels," said Jason Marks, a former member of the Public Regulation Commission and an attorney who works with the Sierra Club. "Renewable energy plus storage is a solution. It works. There's nothing that we're seeing that changes that."

The Sierra Club briefing Feb. 23 addressed the commission's vote and PNM's future plan to go with a completely renewable energy portfolio by 2040. The club's statement said once this hurdle is passed and PNM's projects come online.

"The situation PNM faces in the summer of 2022 is due solely to the fact that Covid-19 caused delays in bringing replacement resources online," the statement said.

Planning for 2023's peak season is on PRC commissioners' minds

What happens after the plant is abandoned was a topic of conversation at the PRC meeting, but no mention was made of a plan by Enchant Energy and the City of Farmington to take over the plant and continue to run it without carbon capture technology at first until studies are done and financing for the ambitious plan are finalized.

The utility focused it's statements after the vote on a future without the coal-fired plant.

"As PNM puts its solution into action for this summer, challenges remain on ensuring customer needs are met in the summer 2023 due to regulatory delays that created yet another obstacle for reliability," the utility said in its statement.

"PNM will always work to serve PNM customers regardless of regulatory outcomes," said PNM's Vice President Generation Thomas Fallgren in the utility's prepared statement. "While this was not PNM's original plan, we are relieved that the commission acted promptly on our solution. We will also continue to pursue alternatives for serving customers to address ongoing new resource delays in 2023 as well."

District 1 Commissioner Cynthia Hall said before the unanimous vote that she previously didn't fully appreciate nuances in the ETA and how the law leaves it to a utility if and when to abandon a power plant, putting the utility in the driver's seat if it wants to enjoy the financial benefits of securitization to recoup costs associated with closing a coal plant.

"This is a desirable way to leave it," Hall said of the commission's upcoming vote. She noted "the ball is basically in PNM's court to make the securitization process work" and have adequate resources to keep the power on.

"I do fear there was some fear-mongering going on," Hall said, saying that PNM investors were recently told everything was covered for the summer, then the utility was telling others there might be rolling brownouts without an extension of operations at the generating station.

Hall said the commission is looking beyond just this summer and must "hold their feet to the fire" and get information on PNM's future plans to ensure resource adequacy. 

"PNM bears a burden to make sure they secure firm resources in advance, more in advance than they were doing this summer, for next year," Hall said.

District 5 Commissioner Stephen Fischmann said he takes "a very dim view" of the utility's communication efforts during this time.

Transparency and clarity are important, Fischmann said. Citing differing messages he said the utility issued, he said PNM needs to perform much better in terms of clarity and consistency in its communications.

The Associated Press contributed to this story.

Contact John R. Moses at 505-564-4624, or via email at jmoses@daily-times.com.

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