PRC hearing examiners recommend three possible scenarios for PNM to replace SJGS power

AZTEC — New Mexico Public Regulation Commission hearing examiners have recommended possible scenarios for replacing the electricity that Public Service Company of New Mexico currently receives from the San Juan Generating Station.

These scenarios include one that does not include options that use fossil fuels.

The coal-fired power plant located in Waterflow was scheduled to operate until 2023. Then, in 2005, PNM asked for permission to extend the plant’s life through 2053 following various upgrades. The PRC approved that extension. In 2017, PNM announced plans to close the power plant in 2022 despite having its life extended through 2053.

The recommended decision documents were posted on the PRC’s case lookup site on June 24. They are more than 180 pages long and detail the history of the case as well as the reasoning behind the recommendations.

The utility filed an application in July 2019 to replace the power from the San Juan Generating Station with a mixture of solar and natural gas.

A variety of organizations including environmental advocacy groups, Westmoreland Mining Co. and the City of Farmington, as well as San Juan County, intervened in the case. That allowed them to present arguments and provide testimony and witnesses in the case.

The Energy Transition Act, which provides a template for moving from fossil fuels to clean energy sources, also became law in 2019.

The new law means the PRC must consider different factors while deciding on the best portfolio for replacing the San Juan Generating Station.

The hearing examiners suggested two alternative approaches the PRC could follow. The first would prioritize locating resources in Central Consolidated School District boundaries in an effort to maintain the property tax base that CCSD relies on. It would have a secondary emphasis on environmental impacts while also considering cost and reliability.

“The cost has to be reasonable, but it appears to be a factor that can be outweighed by location, environmental impacts and reliability,” the recommended decision states.

The second approach would be to make a decision like the PRC traditionally has done in the past, prioritizing the lowest cost alternative that can provide reliable service to customers.

Under the first approach, the hearing examiners recommended a portfolio proposed by the environmental advocacy group Coalition for Clean and Affordable Energy. This proposal does not have any fossil fuel generation attached. Instead it calls for 650 megawatts of solar with 300 megawatts of battery storage. This would include 430 megawatts of combined solar and battery in CCSD, which would be a $447 million investment into the community. It also calls for solar and battery located in McKinley and Rio Arriba counties.

Using the same approach, the hearing examiners said one of PNM’s scenarios would rank second. That proposal would lead to 440 megawatts of natural gas generation as well as 100 megawatts of solar and 30 megawatts of battery storage within CCSD boundaries.

The hearing examiners stated that the natural gas units would continue emitting carbon dioxide, which makes the CCAE proposal more environmentally friendly. At the same time, the recommended decision states that the CCAE proposal would lead to ratepayers paying more for electricity than under PNM’s proposal.

Under the second approach, the hearing examiners recommended a portfolio proposed by the Sierra Club. This portfolio would lead to 200 megawatts of natural gas in CCSD boundaries as well as 520 megawatts of solar in McKinley and Rio Arriba counties. It also includes 40 megawatts of battery storage in Bernalillo County.

While the hearing examiners recommended the Sierra Club proposal as the least costly alternative, the organization backed the CCAE proposal in a press release issued June 24.

“"Polluting coal at San Juan can now be replaced with 100% renewable energy and battery storage, with $447 million of investment in the same school district as San Juan, providing tax revenue as well,” Camilla Feibelman, the Rio Grande Chapter director, stated in the press release. “The hearing examiners have shown that PNM’s gas-heavy alternatives aren’t necessary. The Sierra Club urges the commission to adopt 100% renewable energy and storage to help lead the Four Corners and New Mexico into a clean-energy future.”

The hearing examiners did not support a second request for proposals process that would allow Enchant Energy to submit a bid for PNM to purchase power from the San Juan Generating Station once it has been retrofitted with carbon capture technology.

“The many uncertainties associated with the (carbon capture, utilization and storage) project prevented its inclusion in any party’s resource proposals,” the hearing examiners highlighted.

In addition, they pointed out that the retrofit will not be completed until at least a year after PNM ends its operation of the power plant and witnesses in the case testified that PNM needs flexible resources rather than the base-load capacity of a coal-fired power plant.

Enchant Energy Chief Operating Officer Peter Mandelstam praised the hearing examiners’ recommended decision and said they did a very thoughtful job. He said the carbon capture project does not need a power purchase agreement with PNM to be successful, however he said if PNM or the PRC desired to negotiate one that Enchant Energy would participate in those discussions.

San Juan County Commission Chairman Jack Fortner said the CCAE proposal is a step forward because it includes more power located in CCSD. He said the hearing examiner's support of that proposal was likely due to efforts by San Juan County, the City of Farmington and local state legislators who maintained that the Energy Transition Act required the PRC to consider the economic impact to the community where the power plant is located. He said that would not be achieved if the replacement power was located in another county.

"It partially protects the tax base of Central Consolidated, some of San Juan College and the county," Fortner said.

However, he said the county prefers options that include natural gas because solar and battery storage does not generate the same number of jobs that a natural gas plant would require.

He pointed out that the San Juan Basin is a natural gas basin and that it would make sense to use the natural gas that is abundant and inexpensive.

Fortner said the county will fight for and push for Enchant Energy to be able to successfully retrofit the San Juan Generating Station and keep it open after 2022.

Ultimately the PRC commissioners will have the final say in the portfolio that PNM uses to replace the San Juan Generating Station.

The commissioners will rule on it at a later date.

Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652 or via email at hgrover@daily-times.com.

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