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The New Mexico Public Regulation Commission on Wednesday denied Public Service Company of New Mexico’s request to abandon the Four Corners coal plant in December 2024.
The commission’s order said PNM had so far failed “to identify adequate potential new resources sufficient to provide reasonable and proper service to retail customers.”
“Basically what this does is just ask for some more information on the issues of prudency and on the issues of the replacement portfolio,” Commission Chair Stephen Fischmann said during Wednesday’s public meeting. “That’s information that we need to make a good decision.”
The denial of the abandonment meant that the PRC also rejected PNM’s plan to recover $270 million in lost investments through low-interest bonds.
Unanimous votes to deny both the exit plan and the financing followed nearly four hours of closed executive session.
Commissioners ultimately rejected hearing examiner Anthony Medeiros’s conclusion that it is in the public interest for the utility to sell its 13% share in the coal plant near Farmington to the Navajo Transitional Energy Co.
The PRC order said in the previous PNM abandonment case of San Juan Generating Station, the commission was able to review a list of resources that would support continued energy demand.
But PNM submitted projections of “proxy resources” in the Four Corners case.
The PRC order said the models provide “astonishingly thin evidence” to support an abandonment decision that could affect New Mexico ratepayers.
“When we look at replacement resources, we (need to) have more than just a prediction from a model,” Commissioner Cynthia Hall said. “We really do need to have a suite of portfolios presented to us that show what their real replacement resources will be.”
Fischmann said that the commission anticipates PNM will provide the replacement resource information as soon as early 2022. That could initiate a reconsideration of the abandonment plan.
Pat Vincent-Collawn, PNM Resources president and CEO, said the utility will “carefully review the order … to determine next steps, including a possible appeal to the New Mexico Supreme Court.”
“We are deeply disappointed that the commission chose to reject a coal-free PNM at the earliest date possible and to ignore the Energy Transition Act’s careful balancing of shareholder responsibility, millions in customer savings, economic aid and significant environmental benefits,” Vincent-Collawn said in a statement.
New Mexico’s 2019 Energy Transition Act authorizes utilities that are abandoning generating facilities to recover lost investments through bonds.
Commissioners had expressed concern about the PRC’s legal authority to approve the utility’s investment recovery plan and then conduct a prudence review of $150 million in PNM expenditures for pollution control.
Commissioner Joe Maestas said Wednesday’s decision highlights the unresolved prudency issue of “questionable capital investments,” such as the utility’s installation of pollution control systems to keep the plant running and comply with federal regulations.
“We all know the purpose of the ETA is to not just allow PNM to divest itself of the coal-burning resources, but to allow New Mexico to transition away from any coal-burning resources in the state,” Maestas said.
PNM is proposing that customers would pay off the bonds with a small monthly bill surcharge.
The utility would reduce its base rates once it abandons the plant.
Bond sales would also generate $16.5 million for local economic development and displaced workers that will be affected by the plant’s eventual shutdown.
Medeiros said earlier this month that the PRC can make a decision on those investments during the utility’s next general rate case.
If the commission determines the pollution investments were imprudent, Medeiros said, the PRC could order PNM to credit the difference back to customers.
Utility executives said the commission’s rejection of much of the hearing examiner’s recommendations following the lengthy executive session “creates uncertainty about the regulatory environment in New Mexico.”
“The commission’s actions aim to penalize the utility for complying with federal environmental standards while ignoring shareholders’ commitment to pay $75 million to relieve customers from coal obligations,” Vincent-Collawn said. “This also ignores shareholders’ commitment to forgo previously authorized returns to provide a fair transition away from coal.”
The Navajo Nation currently owns a 7% stake in the coal plant.
Prior to the vote, Navajo Nation President Jonathan Nez and other Navajo leaders had spoken in support of the abandonment plan.
“As we determine how to transition to a post-coal economy, we continue to rely on these jobs and revenue for the foreseeable future,” Nez said. “This is not going to be an easy task.”
Vivie Melendez, environmental safety manager at Navajo Mine, said a transfer would be the “most viable way to keep good-paying jobs” for Navajo residents.
The mine is the sole coal supplier to the Four Corners Generating Station.
“I am really proud to be a coal miner, and I’m proud of NTEC,” Melendez said.
NTEC also operates mines in Wyoming and Montana.
Some environmental groups maintain that an early PNM exit from Four Corners would only prolong carbon-emitting operations at the coal plant.
Camilla Feibelman, director of the Sierra Club Rio Grande Chapter, said the group is pleased with the commission’s decision to deny an “attempt to offload polluting coal onto the very mine owner that wants to keep the plant polluting indefinitely.”
“To our mind, the commission really upheld the spirit of the ETA by exercising their power to evaluate PNM’s action through the lens of the public good, which also happens to be the planet’s good,” Feibelman said.
A 2024 exit from Four Corners would have put PNM about seven years ahead of its previously scheduled departure, and help meet state-mandated climate goals.
The ETA requires public utilities to reach 100% carbon-free energy by 2045.
Four Corners owners have agreed that only one power plant unit will operate year-round beginning in fall 2023.
Two units will operate during the summer season during peak customer demand.
PNM estimates that the seasonal operations would reduce carbon emissions at Four Corners by 20% to 25%.
Customers could save up to $300 million over 20 years as the utility transitions to renewable energy sources, according to PNM.
