New Mexico panel weighs decision on coal-fired power plant

March 19, 2020 GMT

ALBUQUERQUE, N.M. (AP) — New Mexico regulators are close to deciding whether to approve an application by the state’s largest electric provider to abandon its interest in a major coal-fired power plant in 2022.

At a meeting Wednesday, the Public Regulation Commission said it plans to issue its order April 1 after considering the recommendations of hearing examiners who have been presiding over the case, which has included legal wrangling before the New Mexico Supreme Court. The examiners have listened to hours of public testimony and heard from dozens of witnesses and technical experts.

If commissioners approve the recommendations, Public Service Co. of New Mexico will be able to recover investments in the San Juan Generating Station by selling bonds that will be paid off by utility customers. The bonds would raise roughly $360 million to fund decommissioning costs, severance packages for displaced workers and job training programs.

San Juan will be just the latest coal-fired power plant in the U.S. to close as regulatory pressures mount and New Mexico and other states enact more ambitious renewable energy targets. PNM plans to replace San Juan with a mix of natural gas, wind, solar and battery storage, but regulators have yet to sign off on that plan.

PNM has proposed collecting a monthly energy transition charge from customers over a 25-year period to cover the debt service payments on the bonds. The monthly charge would be either $1.90 or nearly $5 depending on how much electricity is consumed, with higher users paying more.

To offset the cost to customers, the hearing examiners are recommending the utility immediately reduce its base rates once the energy transition charge begins in 2022. Overall, they estimate customers will see lower bills by abandoning the power plant.

Some commissioners questioned the examiners about how much authority the regulatory panel will have to ensure that the final order includes some protections for customers, saying their mission is to ensure that rates are “just and reasonable.”

Commissioners can take up those issues in future rate cases and adjust PNM’s base rates to fix any questions about fairness, hearing examiner Ashley Schannauer said.

“This isn’t a rate case that we have here,” he told the commissioners. “We’re leery of doing too much in a case that is not a rate case. We’re trying to stick to what we need to decide in these two sets of issues — abandonment and securitization. We didn’t want to go too far.”

The dollar figures associated with decommissioning the plant are estimates. Officials said the utility could end up spending more — or less — and the commission could adjust rates later depending on the final price tag.

“We certainly have the authority to review the costs and deny any costs that are not reasonable,” Schannauer told the commissioners.

The recommendations call for clarifying that any future costs PNM incurs are subject to the commission’s review. They also make clear the limits on the types of things the bond proceeds could be spent on. For example, the utility wouldn’t be able to use the money for compensating executives or making payments to its parent company, PNM Resources.