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State forges ahead on San Juan abandonment hearings

ALBUQUERQUE, N.M. — The Public Regulation Commission voted 5-0 on Wednesday to immediately begin public hearings on Public Service Co. of New Mexico’s plans to abandon the coal-fired San Juan Generating Station near Farmington.

PNM had asked the commission to wait until mid-2019 to give the utility time to prepare a detailed plan for abandoning the plant and replacing that electricity with alternative resources.

The utility said immediate hearings are unnecessary, since San Juan would not close until June 2022. And it warned that immediate PRC proceedings could interfere with a PNM-backed legislative initiative to help finance plant closure and mitigate the economic impact on local communities. That’s because the Legislature can’t approve things that may directly alter management of a regulatory case already under way.

But commissioners said PNM and three of the other four plant co-owners already firmly stated their intent in June and July 2018 to abandon San Juan yet PNM did not inform the commission about that decision until Dec. 31, when it submitted a “compliance filing” to the PRC on the future of San Juan.

The decision to cease operating the plant in 2022 represented a “triggering event” that requires the PRC to immediately review the issue with public input, according to PRC General Counsel Michael Smith.

“The commission is required to have an abandonment proceeding,” Smith told commissioners on Wednesday. “It’s our obligation to provide notice to the public and allow parties to intervene in opposition and support with a public hearing.”

That includes input from the city of Farmington, which owns an 8 percent share in one of two generating units that still operates at San Juan. The city, San Juan County and others in the Four Corners want to explore the potential transfer of San Juan to new operators after 2022.

Commissioner Stephen Fischmann said proceedings are urgent because closing San Juan and replacing it with alternative resources will take years of preparation and action. The plant supplies more than a third of PNM’s electric generation.

“This is a big deal,” Fischmann said. “I can’t imagine any scenario where San Juan just turns off and other generating resources turn on. It will be a complex process to phase things out and in, and that will have to start happening pretty fast.”

Commissioner Cynthia Hall questioned why PNM waited six months to tell the PRC about its abandonment decision.

“PNM simply didn’t tell us, and that impacts many people in this state, including people who would like to keep the plant open,” Hall said. “…We need to hear from all voices in the community.”

Regarding the upcoming legislation, Wednesday’s order says the commission is obligated to act under existing law, not base its actions on “speculative legislation,” Smith told commissioners.

Environmental groups are divided on the forthcoming legislation, which which would allow PNM to recover 100 percent of its investment in San Juan by selling low-cost bonds that utility customers would pay for through a surcharge on their bills. The money raised would help finance renewable energy replacement power, while providing resources to mitigate impacts from plant closure through economic development projects.

But opponents call it a bailout for the utility, which might not receive full recovery for its coal investments if left to the PRC, which must balance the costs of early plant closure between utility customers and PNM shareholders.

PNM called the commission’s action premature.

“During the session, lawmakers and our new governor are expected to enact legislation that will affect all aspects of our state’s energy policy,” said PNM spokesman Raymond Sandoval in an email to the Journal. “It would be prudent to let the governor and lawmakers do their jobs.”