PRC discusses replacement power case as deadline looms for PNM solar contracts

AZTEC — The state’s largest utility is transitioning away from coal-fired generation, and that means by the summer of 2022 it must have other electricity sources ready to provide the power that it currently receives from the San Juan Generating Station.

Those replacement sources must be approved by the New Mexico Public Regulation Commission, which regulates investor-owned utilities like Public Service Company of New Mexico.

The PRC must make a decision by the end of the month or certain contracts for solar arrays will no longer be options for replacing the power from the San Juan Generating Station. The expiration dates on those contracts have already been extended.

PRC General Counsel Michael Smith said he is in the process of drafting a proposed final order. That means the PRC could rule on the case next week during its 9:30 a.m. Wednesday meeting, which is held via Zoom.

If those solar contracts expire, hearing examiners warn that future proposals for solar could have higher price tags.

Previous coverage:  PRC continues discussion of replacement power

However, the commissioners may choose to reject the various proposed scenarios and order PNM to go through a new process of soliciting proposals for replacing the power it currently receives from the coal-fired power plant.

That could allow Enchant Energy to present a proposal to provide PNM with baseload power from the San Juan Generating Station following a carbon capture retrofit. Enchant Energy would likely be able to submit the proposal by June next year.

The commissioners expressed mixed opinions on that matter.

Commission Chairwoman Theresa Becenti-Aguilar pointed out that the proposed resources to replace the San Juan Generating Station do not create many permanent jobs while the coal-fired power plant has been a stable source of employment for decades. She also pointed out the need for reliable power during pandemics, including for the health-care industry.

"What is more important — the cost of solar going up or losing human lives in Four Corners?" she said.

She said in light of the pandemic, the commission should reprioritize "in favor of projects that directly impact reliability of electric systems."

Meanwhile, Commissioner Stephen Fischmann said Enchant Energy does not need a contract with PNM to make its project successful.

“The best way to give Enchant a chance to succeed and to create jobs is to eliminate as many obstacles that we can,” Fischmann said, adding that he is skeptical about the project but has no interest in stopping it or trying to interfere with it.

Fischmann said PNM needs flexibility rather than large amounts of baseload power as it transitions to more and more renewables. The San Juan Generating Station, even after the carbon capture retrofit, will be a provider of baseload power.

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Approving a portfolio of replacement resources that includes 100% renewable sources will remove one obstacle — the demand for space at the San Juan Generating Station site.

Proposals that include natural gas generation to replace the coal-fired power plant call for utilizing land at the power plant. The land is owned by PNM and Tucson Electric Power. Hearing examiners said that PNM may be more willing to negotiate with Enchant Energy and the City of Farmington for the transfer of the power plant and continued operations if PNM does not rely on the site for replacement generation.

Fischmann also expressed concern that the COVID-19 pandemic could impact supply chains and delaying a decision may make it harder for PNM to have the replacement resources online when it stops receiving power from the San Juan Generating Station.

“We could end up in a situation where we don’t have enough power to turn on the lights,” he warned.

If the PRC chooses not to delay a decision, the hearing examiners have recommended a proposal that would replace the power with solar energy and battery storage located in San Juan, McKinley and Rio Arriba counties — including a solar array with battery storage in the Central Consolidated School District.

Thomas Conroy, who has worked with new technologies in the utility sector for 40 years, warned against that approach during the hour of public comments at the beginning of the meeting.

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He highlighted two risks associated with it — a rapid increase of renewable energy onto PNM’s system at a rate that he said has not occurred before and relying on battery storage.

Conroy said it would increase the amount of electricity PNM receives from renewables from 7% to 30% in three years and would need long-term battery storage, which is still a technology being developed and has unknown risks.

“If New Mexico suffers blackouts, it will become extremely ugly extremely quickly,” Conroy said.

These are similar concerns that PNM has brought up while proposing a combination of natural gas and renewables.

However, the hearing examiners say they believe a 100% renewable replacement plan could meet the reliability requirements based on evidence gathered over the course of the last year in the case.

PNM’s preferred portfolio included an 11-unit natural gas plant at the San Juan site as well as solar and battery storage in Rio Arriba and McKinley counties.

Hearing examiners Ashley Schannauer and Anthony Medeiros said the 11-unit natural gas plant does not fulfill the requirements outlined in the Energy Transition Act. Those requirements include location, environmental impact, reliability and cost.

The 11-unit natural gas plant meets the requirements for location as well as reliability and cost, but cannot fulfill the requirement for least environmental impact, Schannauer said. 

One of the other proposals that the hearing examiners have included in their recommendation was drafted by the Sierra Club and calls for a smaller, four-unit natural gas plant, as well as solar and battery storage. While Sierra Club proposed the combination of a smaller natural gas plant with solar and battery storage, it prefers the 100% renewable scenario. The portfolio was one of several proposed by the Sierra Club.

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Two Shiprock High School students called in for public comment to express support for the 100% renewable plan, describing solar power as the "energy choice of the future." Shiprock Chapter President Duane “Chili” Yazzie also said he supports a 100% renewable replacement plan, citing environmental and health concerns related to fossil fuel generation.

Jicarilla Apache President Darrell Paiz also spoke in favor of the plan to replace the power from the San Juan Generating Station with 100% renewable sources. One of the solar arrays as well as battery storage proposed would be located on Jicarilla Apache land.

"This is a great moment in time for you, the state of New Mexico," Paiz said. "And I'm here to tell you it's a great time for the Jicarilla Apache Nation."

He said the solar and battery projects will provide the nation with self-efficiency and revenue capability, and will lead to opportunities for both natives and non-natives in San Juan, Rio Arriba and McKinley counties.

Paiz said if the PRC approves the portfolio recommended by the hearing examiners, "decades from now, my children and my grandchildren and their children will remember you and this decision."

 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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