Justices consider PNM plan skirmish

Utility, environment group deliver arguments over San Juan shutdown

The New Mexico Supreme Court heard oral arguments on Wednesday about Public Service Company of New Mexico’s plan to close half of the coal-fired San Juan Generating Station near Farmington.

The Santa Fe environmental group New Energy Economy is asking the court to block the plan, which the state Public Regulation Commission approved in December 2015 to allow PNM to lower plant emissions in compliance with federal regulations.

Key environmental groups, the Attorney General’s Office and others support the plan. But New Energy Economy opposes it because PNM would replace lost generation from closing two of San Juan’s four units by consuming more electricity from the remaining generators and by acquiring more power from the Palo Verde Nuclear Generating Station in Arizona.

The group wants the utility to instead acquire more wind and solar power. It accused PNM on Wednesday of manipulating modeling data to make those resources appear more expensive than coal and nuclear generation, and it said the PRC violated its own regulations by approving it.

“PNM was allowed to cook the books in support of its preferred energy supply,” executive director Mariel Nanasi told the five Supreme Court justices.

The group says PNM jacked up the price of wind and solar when running computer models of power replacement resources, while eliminating cost concessions it had made in its own San Juan plan. Those concessions included a sharp cut in the price for new nuclear power it would charge ratepayers — from $2,500 per kilowatt to a net book value of $1,118 — and foregoing cost recovery for 50 percent of its losses from the two-unit shutdown.

Eliminating those concessions in the alternative modeling made coal and nuclear seem cheaper than wind and solar, Nanasi said.

But those concessions were negotiated as an integral part of the two-unit shutdown plan, meaning higher costs would apply if that plan is scrapped, said PNM attorney Patrick Ortiz. At that point, a market rate of $2,500 per kilowatt for nuclear power would be justified and PNM would pursue more cost recovery for the shuttered units.

“PNM would have the right to pursue that,” Ortiz told the judges.

Other environmental groups support PNM’s plan, among them the Coalition for Clean Affordable Energy and Western Resource Advocates. They said PNM’s concessions, plus an agreement for new PRC hearings in 2018 to examine the future of San Juan’s two remaining generating units, made it a good deal.

More units could be shut down after 2022, when the plant’s

coal supply contract and co-ownership agreements with other utilities expire, said Western Resources attorney Steve Michel.

Without the agreement, it’s unclear whether any San Juan generating units would be shut, especially with federal regulations expected to become more lax under President Donald Trump.

“We’d be back to ground zero,” Michel said. “There’s concern we’d end up with nothing.”