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State’s San Juan Plan Cost Analyzed

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An independent analysis of the state’s proposed compromise to settle the regional haze dispute at the Juan power plant concludes it would hit PNM ratepayers harder than the one preferred by the U.S. Environmental Protection Agency.

“EPA’s regional haze plan would impose almost $375 million in compliance costs on PNM ratepayers … to achieve an ‘improvement’ in visibility that is imperceptible,” said the report’s author, William Yeatman of the Competitive Enterprise Institute, in a news release. “Unfortunately, the state’s alternative proposal is even worse – it would cost $20 million more, yet it would significantly diminish PNM’s firm generating capacity.”

Public Service Company of New Mexico disputes the report’s conclusions and says the compromise would cost less, not reduce capacity and be environmentally friendly.

The report says the state would be better off continuing what it considers a winnable court battle for the original proposal adopted by state Environmental Improvement Board in 2011. That would keep all four units at the plant operating with added, but far less-expensive, pollution controls.

PNM and the state gave oral arguments in their appeal of the EPA plan and are awaiting a ruling.

The less-expensive state plan “is far more sensible and cost-effective than the other two options,” said Paul Guessing, executive director of the Rio Grande Foundation in Albuquerque.

The foundation and Washington, D.C.-based CEI issued the report Wednesday, calling it the first independent look at the settlement proposal. The state has not publicly given a dollar estimate for the compromise proposal other than to say its impact on ratepayer bills would be 5 percent less than the federal plan by 2018. PNM, which owns 46 percent of the plant, however, questions some of the analysis’ assumptions.

Spokeswoman Valerie Smith said the report used PNM’s Integrated Resource Plan to arrive at some capital costs but doesn’t appear to account for undetermined variables that could affect the final total. She disputed the report’s assertion that PNM’s reliability would be threatened. PNM would only support a plan that is less expensive than the EPA’s plan, she said.

“We believe the state alternative proposal would not only cost less than the federal plan, but it would provide significant long-term environmental benefits to customers beyond those related to haze,” she said.

The state submited the compromise proposal to the EPA as an alternative to the selective catalytic reduction technology the agency views as the best way for San Juan to meet regional haze regulations. PNM says the total cost to install SCRs on each of the plant’s four coal-fired units would be $824 million to $914 million.

The EPA earlier this year OK’d most of the state’s regional haze plan adopted by the EIB last year, except for the selective non-catalytic reduction technology proposed for San Juan.

The state said SNCR would cost $77 million. The state and PNM have challenged the EPA rule in federal court, arguing the agency did not properly consider the EIB-approved plan.

The settlement proposal calls for PNM to shutter two units in 2017, equip the other two with SNCR, and build a 150-200 megawatt natural gas plant for peak loads. Additional power needed to meet demand would be purchased from existing gas-fired plants in the state.

Yeatman said because the state did not respond to requests for information, he did a line-item cost analysis using PNM regulatory filings and “conservative” assumptions: $308 million for a 200-megawatt combined cycle gas plant; $18.7 million for SNCR retrofits; $27.4 million in increased annual fuel costs; and $41.4 million “stranded” costs related to past investments in the units that would be retired.

He did not include an economic concession package for the Navajo Nation and pipeline construction.
— This article appeared on page B1 of the Albuquerque Journal

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