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Looking forward: PNM official talks next steps as utility looks to end SJGS operations

FARMINGTON — The New Mexico Public Regulation Commission is approaching the wire for when it must issue a ruling on Public Service Company of New Mexico’s application to end operations at the San Juan Generating Station.

PNM Vice President of Generation Tom Fallgren said he anticipates a recommendation from the PRC’s hearing examiner in the upcoming weeks. Following the recommendation, the PRC commission will make a final decision. That decision must be made by April.

It will take longer for PNM to receive a PRC decision regarding replacement power. Fallgren said the PRC may not decide on some portions of the replacement power application, including the Piñon Gas Plant, until this fall.

Fallgren visited with power plant employees on Feb. 6 prior to visiting The Daily Times.

He said he wanted to speak to them following recent developments including the New Mexico Supreme Court’s ruling that the Energy Transition Act applies to PNM’s application to end operations at the power plant. The visit also came a week after the New Mexico Public Regulation Commission’s hearing on replacing the power from the San Juan Generating Station.

PNM is planning for the future

The visit also comes as PNM prepares its 2020 integrated resource plan — a document submitted to the PRC every three years that maps the future of generation over the upcoming years. The IRP released in 2017 served as the first public announcement that the San Juan Generating Station would close in 2022.

The future generation sources could look very different than what New Mexicans are used to seeing.

Fallgren said battery storage is effective in meeting short-term energy needs, but can only store enough power to provide electricity for two to four hours. PNM is looking at other methods that could provide longer storage without producing carbon emissions. One of these options in pumped storage. Fallgren said he has several pumped storage proposals he is evaluating.

The idea of pumped storage has gained attention in the southwest, and Los Alamos National Laboratories completed an assessment of pumped storage at the San Juan site. Pumped storage involves two large reservoirs. Water would move in between the two reservoirs. One would be at a higher elevation than the other.

The Los Alamos assessment found the three tunnels in the San Juan Mine could store about 150 million gallons of liquid and the ventilation shafts would allow for an approximately 400-foot drop. The assessment estimates it could provide 150 megawatt hours of electrical storage potential.

The Los Alamos National Laboratories assessment considered using the San Juan Mine as the lower reservoir. Fallgren said that would lead to environmental concerns, and PNM would likely not choose to go that route.

In addition to battery and pumped storage, Fallgren said PNM is also looking at other ways to produce electricity with little to no emissions. These options include hydrogen power and using methane from cow manure or emissions from landfills to generate power.

Carbon capture at San Juan Generating Station not an option for PNM

One option that Fallgren said will not be on the table is continued use of the San Juan Generating Station with carbon capture. But that doesn’t mean PNM opposes Enchant Energy’s proposal to retrofit the power plant with carbon capture technology.

PNM spokesman Raymond Sandoval said choosing a generation portfolio is not like building with Legos, where one piece can easily be placed on top of another. Instead, he compared it to completing a jigsaw puzzle, and said PNM must find the right piece.

Sandoval and Fallgren said San Juan Generating Station is not the right piece of the puzzle for the utility in the future because it is not as flexible as natural gas and the Energy Transition Act requires PNM to receive a certain amount of electricity from clean or renewable sources.

Fallgren said PNM hopes Enchant Energy can be successful with retrofitting the San Juan Generating Station with carbon capture, but needs further reassurances that PNM customers will not be liable for the costs if Enchant Energy takes ownership and something happens, such as an environmental disaster.

The five current power plant owners and the four owners who have previously exited the plant met with Enchant Energy on Feb. 5.

“I would have termed yesterday as very preliminary discussions,” Fallgren said when he visited The Daily Times office the following day.

He said they did not reach any agreements, and another meeting between the various entities is scheduled for April.

Enchant Energy Chief Operating Officer Peter Mandelstam agreed with Fallgren’s assertion that the meeting covered preliminary discussions. He said an agreement between the nine participating owners includes a lot of complicated topics that must be addressed before the transfer occurs. However, he said he believes the meeting was productive.

“We believe there is now a process for moving forward together,” Mandelstam said.

Fallgren said PNM does not dispute the science behind carbon capture technology, but it does not have the financial assurance that the project can be successful. He said PNM needs to protect its customers from having to pick up the bills if something happens.

Enchant Energy plans to use surety bonds to cover that liability, which Fallgren said could be a solution. He said the “devil’s in the details” when it comes to surety bonds. Whether those bonds are enough to satisfy PNM will depend on the length of the bonds’ term as well as the amount.

“We would love to see it go forward,” he said, adding that it would preserve the tax base and prevent job losses.

Sandoval and Fallgren said they would like to see Enchant Energy provide more information to the San Juan Generating Station employees to allow them to make informed decisions about their futures.

Fallgren talks about decommissioning if power plant closes in 2022

If the power plant does close in 2022, PNM will be responsible for decommissioning the plant. That would involve closing evaporation ponds and making the structure both physically and environmentally safe. The utility would also have to comply with its permit requirements in terms of restoration at the mine site.

Fallgren said PNM believes it would save customers money if the company defers dismantling the structure.

This has been a concern for San Juan County officials who fear it could become an eyesore like the old refinery on County Road 5500.

Fallgren said PNM would not let that happen, and cited how the company has maintained the Algadones power plant, which hasn’t been used to generate electricity in decades. Fallgren said PNM would control access to the San Juan Generating Station and patrol the location.

While some other communities that have faced power plant closures have been able to repurpose the structure into another type of business, including shipping docks, museums and restaurants, Fallgren said the location of the San Juan Generating Station makes it not viable for many of those proposals. However, he said PNM would entertain conversations with Four Corners Economic Development for possible industrial uses of the power plant site.

Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652 or via email at hgrover@daily-times.com.

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