San Juan coal exit, relief funds approved

By Mona Blaber Chapter Communications

The New Mexico Public Regulation Commission on April 1 unanimously approved Public Service Company of New Mexico’s request to exit the coal-fired San Juan Generating Station and use low-interest bonds to finance the stranded costs of the plant.

The low-rate financing authorized by the Energy Transition Act will reduce customer utility bills, provide millions of dollars of support to coal-dependent communities and create new clean-energy jobs. The financing will lower the average PNM customers’ rates by $6-$7 a month.

“As PNM transitions to cleaner energy, the closing of San Juan Generating Station provides an opportunity to fundamentally redefine economic development to incorporate renewable energy in the Four Corners Region. This decision by the PRC is progressive in identifying that coal-impacted communities need transition planning and resources now,” said San Juan Citizens Alliance Energy and Climate Program Manager Mike Eisenfeld.

PRC staff was the only party that recommended against PNM’s San Juan exit, claiming the utility hadn’t sufficiently considered retrofitting San Juan for carbon capture, a risky and expensive technology that is running at only one, much smaller, power plant in the U.S. But the PRC and its hearing examiners noted that carbon capture is speculative and expensive: “The modeling conducted by PNM also shows that the abandonment will cost substantially less than PNM’s continued operation of the plant retrofitted with carbon capture technology, and no party has presented contrary evidence.”

Another encouraging development for the climate came March 27, when PRC hearing examiners recommended expedited approval of the Arroyo Solar Project, which is 300 MW of solar and 40 MW of battery storage, and the Jicarilla Project, with 50 MW solar and 20 MW battery storage. Approval of these projects would preclude the gas-heavy replacement portfolio that some stakeholders favored. In recommending the renewable projects, the hearing examiners cited the Energy Transition Act’s requirement to favor replacement energy with the least environmental impact.

Commissioners must approve the two projects by April 30 because of expiring bids.

The two projects fill only part of the gap left by abandonment of San Juan, however, so the examiners will issue a separate recommendation on the balance of the resources needed to replace San Juan. For that recommendation, they will choose among portfolios that include the Arroyo and Jicarilla projects, including the proposals by Sierra Club and Coalition for Clean Affordable Energy. However, both the CCAE and Sierra Club proposed larger batteries at the Arroyo and Jicarilla sites than the hearing examiners are recommending.

Approval of the Jicarilla and Arroyo projects does not preclude approval of gas units. But the Sierra Club, after doing extensive modeling, has submitted a cost-effective portfolio consisting of 100% renewable energy and storage, and we will continue to advocate for 100% renewables and battery to replace the coal power.

The hearing examiners also firmly rejected a PRC staff proposal to delay approval of a full replacement scenario to allow a bid by Enchant, the corporation that will attempt to keep burning coal at San Juan and capture some of the CO2 to either sell for enhanced oil recovery or sequester.

The commissioners’ decision to allow PNM to exit San Juan Generating Station and to finance the exit using low-rate bonds means that surrounding communities and San Juan mine and plant workers will receive $40 million in severance, training and reinvestment funding.

Following the April 1 decision, and the likely plant closure by mid-2022, the PRC will next issue its decision regarding replacement of the electricity generated by the San Juan Generating Station. The PRC held a hearing on replacement power resources in January. During the hearing, community, tribal, and environmental groups pressed the commissioners to approve a replacement option that ensures the utility and the state will meet the carbon-reduction goals of the ETA.

Labor unions, environmental advocates, the Navajo Nation, community organizations, businesses, and utilities came together in 2019 to support passage of the ETA. The law paves the way for the retirement of the San Juan Generating Station and will ensure that 50 percent of investor-owned utilities’ electricity is renewable by 2030 and 100 percent is carbon-free by 2045. The law also provides $40 million in economic assistance for coal miners, San Juan plant workers and the affected region and encourages placing up to 450 megawatts of replacement power in San Juan County, an investment of hundreds of millions of dollars that could help restore lost property taxes after coal plant retirements. Additionally, under the law, future energy generation projects will be required to hire apprentices from diverse and disadvantaged backgrounds, supporting local workforce and economic development efforts. In 2023, the first full year after the San Juan Generating Station’s expected retirement, the ETA will save the average PNM customer about $80 or more on their annual utility bill.

San Juan coal exit, relief funds approved