PNM gets support for planned buy of gas-fired Delta Person plant

A hearing examiner for the New Mexico Public Regulation Commission on May 23 issued a recommended decision for the commission that would approve the Public Service Co. of New Mexico (PNM) buy of the gas-fired Delta Person power plant.

On Jan. 3, PNM had filed an application which seeks approval for it to purchase all of the ownership interests in the Delta Person Limited Partnership, the entity that currently owns the Delta Person Generating Station. One of the three contracts under which PNM purchases energy is the Delta Power Purchase Agreement (Delta PPA), so the utility already gets capacity from this plant.

There is a May 30 deadline for parties to respond to the hearing examiner’s recommended decision, with responses to any exceptions to be filed by June 6.

The hearing examiner noted that the commission granted all necessary approvals under the Public Utility Act for PNM’s current involvement in this plant, pursuant to which a third party was to construct and operate the plant on a site owned by PNM and PNM was approved to purchase capacity and energy from the plant owner under a PPA.

The Delta Person plant began commercial operation in July 2000. It is located outside of the City of Albuquerque. The Delta Person plant consists of a GE 7FA combustion turbine and can be operated on either natural gas or fuel oil, although it is normally operated on natural gas. The Delta PPA’s Dependable Capacity is 132 MW, and the heat rate used for billing purposes when fired on natural gas is 12,063 Btu/kWh. It primarily operates as a peaking unit.

PNM agreed to acquire the Delta Partnership for $40.7m subject to adjustment based on a target aggregate net working capital amount of $3.4m. Upon closing, the Delta Partnership would become a wholly-owned subsidiary of PNM. PNM anticipates later liquidating the Delta Partnership.

The $40.7m purchase price assumes closing of the transactions on June 30, 2013. However, PNM witness Patrick O’Connell testified at hearing that the closing date is now anticipated to be in mid- to late-August 2013. The delay relates to a permitting issue.

Through an environmental due diligence process, PNM determined that the plant is not current with its particulate matter emission limit testing. In response, the current plant owner met with the City of Albuquerque and EPA Region 6 and is pursuing a revised permit that has a test procedure that is achievable with the configuration of the Delta Person plant. A condition to closing is issuance of a revised air permit by the city. PNM anticipates issuance of the revised permit in early August and closing in mid- to late-August. PNM now requests that this commission issue a final order by the end of June 2013.

The delay in closing past June 30, 2013, results in a decrease of about $8,400 per day in the outstanding loan balance, which results in a decrease in the purchase price. If the closing occurs in mid-August, PNM is projecting an approximate $500,000 decrease in the purchase price.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.