PNM files for approval of partial San Juan coal plant shutdown

PNM Resources’ (NYSE: PNM) New Mexico utility, PNM, on Dec. 20 filed with the New Mexico Public Regulation Commission (NMPRC) for approvals needed to make important changes in the way PNM provides power to its New Mexico customers.

The filing is the company’s next step in moving forward with the Revised State Implementation Plan (Revised SIP) from earlier this year, which is the result of an agreement among the New Mexico Environment Department, the U.S. Environmental Protection Agency and PNM. Actions requested in the filing are necessary for the coal-fired San Juan Generating Station (SJGS) to comply with federal visibility regulations under the Clean Air Act.

“The Revised SIP is the best way forward because it minimizes the cost impact to customers, creates broad and significant environmental benefits, and reduces exposure to the anticipated costs of complying with future federal regulations,” said Pat Vincent-Collawn, PNM Resources’ chairman, president and CEO. “In addition, PNM is able to further diversify its fuel portfolio and integrate cleaner resources, including more natural gas and solar.”

The Revised SIP is expected to save customers more than $780m over 20 years, compared to the original federal implementation plan.

The PNM filing requests:

  • Permission to retire Units 2 and 3 at SJGS and recover about $205m in undepreciated costs over 20 years;
  • A certificate of convenience and necessity (CCN) to include PNM’s ownership of 134 MW of Palo Verde Nuclear Generating Station Unit 3 to serve New Mexico retail customers at a proposed value of $2,500 per kW;
  • An order allowing cost recovery for the installation of selective non-catalytic reduction (SNCR) equipment on SJGS Units 1 and 4, not to exceed a total cost of $82m. This deal allows the plant owners to avoid the more expensive option of installing selective catalytic reduction (SCR) on all four units; and
  • A CCN for an exchange of capacity out of SJGS Unit 3 and into SJGS Unit 4, resulting in ownership of an additional 78 MW in Unit 4 for PNM. The expected net impact of this transaction and the retirement of Units 2 and 3 will be a reduction of 340 MW in PNM’s ownership of SJGS.

In the filing, PNM identifies two additional sources of power to replace the balance of the retired SJGS capacity. These include 177 MW of new, natural gas-fired generation to be built in San Juan County that is an additional commitment under the agreement, as well as 40 MW of new utility-scale solar generation. Future regulatory filings will detail the specific costs of the new facilities and request any needed approvals. PNM would also address rate increases related to the Revised SIP in future rate cases as they are not included in the Dec. 20 proposal.

PNM has asked the NMPRC to issue its final ruling no later than December 2014 to accommodate compliance with the Revised SIP.

San Juan is a four-unit (1,683 MW net) coal-fired plant located in Waterflow, N.M, fifteen miles west of Farmington. The net generation capacity and in-service dates for each of the four units at San Juan are:

  • Unit 1: 340 MW, on line in 1976
  • Unit 2: 340 MW, on line in 1973
  • Unit 3: 496 MW, on line in 1979
  • Unit 4: 507 MW, on line in 1982

The plant procures all of its fuel from the adjacent San Juan mining operations of BHP Billiton. PNM said it is negotiating  new coal supply agreement for beyond 2017 that takes into account the closure of two units.

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.