New computer modeling by Public Service Company of New Mexico suggests the utility could save $445 million by pulling out of the coal-fired Four Corners Power Plant this year, rather than waiting until 2031.
The Santa Fe-based environmental group New Energy Economy has seized on those projections, released in early July, to oppose the utility’s request to recover $148.7 million in capital investments at the plant in its current rate case at the New Mexico Public Regulation Commission.
But PNM says the computer projections, which PRC rate-case examiners compelled the utility to do based on a request by New Energy Economy, are misleading and speculative because they rely on unrealistic and inaccurate assumptions provided by the environmental group.
“It was a bogus request,” said PNM spokesman Pahl Shipley. “We were told to run an analysis using NEE parameters that are wrong and/or inappropriate, which resulted in a bogus number simply designed to further NEE’s false narrative.”
The capital investments at Four Corners cover PNM’s share of costs for new pollution controls, plus maintenance and operating expenses at the plant, which is run by Arizona Public Service Co. PNM owns a 13 percent stake in the facility.
Recovery of those investments accounts for a significant chunk of the $62.3 million in new annual revenue PNM is seeking in its rate case. If approved, base rates for PNM customers would increase 9 percent, to be phased in over two years.
New Energy Economy says the new computer projections show PNM should have pulled out of Four Corners in 2013, instead of signing new contracts that year to remain in the plant until at least 2031. The group says PNM should have conducted a new financial analysis in 2013 to justify its decision, rather than relying on “outdated” modeling from 2012 that showed Four Corners generation was still cheaper than other alternatives like natural gas and renewables.
“We’re asking for disallowance of the capital expenditures associated with Four Corners,” New Energy Executive Director Mariel Nanasi said. “The PRC has to regulate if such investments are prudent before ratepayers pay for it.”
But PNM says the new modeling inappropriately uses current assumptions about prices for natural gas and renewables, and about growth in electric demand, whereas projections in 2012, and again in January 2014, showed remaining in the plant was still more economical than divesting.
The new modeling also ignores wind and solar resources PNM recently added to the grid, making Four Corners divestment more economical today, as well as costs for breaking contracts with plant co-owners and replacement power needed if PNM leaves the plant.
Other environmental organizations appear unswayed by New Energy’s arguments. Those groups signed a settlement agreement with PNM in May that lowered the utility’s initial rate request from 14 percent to the current 9 percent request.
Western Resource Advocates and the Coalition for Clean Affordable Energy said they still support the settlement. Sierra Club, which also signed the May agreement, declined to comment on the new computer modeling.