Ownership deal revised for slimmed down San Juan coal plant

Public Service Co. of New Mexico (PNM) filed with the Federal Energy Regulatory Commission on Sept. 18 the San Juan Generating Station Fuel and Capital Funding Agreement, which covers continued operation of a smaller, coal-fired San Juan power plant.

The San Juan station is a four-unit, 1,848 MW coal-fired facility located near Farmington, New Mexico. Under the terms of the San Juan Project Participation Agreement (SJPPA), San Juan is owned by: PNM; Tucson Electric Power; The City of Farmington, New Mexico; M-S-R Public Power Agency; The Incorporated County of Los Alamos, New Mexico; Southern California Public Power Authority (SCPPA); City of Anaheim; Utah Associated Municipal Power Systems; and Tri-State Generation and Transmission Association. PNM is the operating agent of San Juan and is responsible for the operation and maintenance of San Juan under the terms of the SJPPA.

The SJPPA replaced and superseded previous project agreements and provides the basis(with any further amendments) for the ongoing operation and management of San Juan through July 1, 2022. The SJPPA was last filed with the commission in 2006.

In August 2011, the U.S. Environmental Protection Agency published its Federal Implementation Plan (FIP) under the Clean Air Act that included a proposed Best Available Retrofit Technology (BART) determination for emissions of NOx from San Juan requiring installation of costly selective catalytic reduction (SCR) technology on all four San Juan units.

In February 2013, PNM, in its capacity as San Juan Operating Agent, EPA and the State of New Mexico executed a non-binding agreement outlining an alternative BART determination. The BART Alternative will require retirement of San Juan Units 2 and 3 by Dec. 31, 2017, and the installation of selective non-catalytic reduction (SNCR) technology on San Juan Units 1 and 4 no earlier than Jan. 31, 2016.

In September 2013, the State of New Mexico approved the BART Alternative. On May 12, EPA published its proposed rule approving the BART Alternative, initiating a 30-day public comment period, which has expired. The EPA process to issue final approval of the BART Alternative and withdraw the FIP is expected to be complete on or around Sept. 29.

“The Participants have determined that modifications to the SJPPA will be necessary to accommodate the retirement of San Juan Units 2 and 3 and to restructure the ownership configuration of San Juan Unit 4,” said the Sept. 18 filing. “On June 26, 2014, the San Juan Coordination Committee adopted a resolution (‘Resolution’), defining the principal terms and conditions to effectuate the retirement of San Juan Units 2 and 3 and the restructuring of the ownership configuration of San Juan Unit 4. A Supplement to Resolution was approved on September 2, 2014, to provide further terms and conditions of the restructuring. The Participants have commenced negotiations of a formal agreement (‘San Juan Restructuring Agreement’) to effectuate the Resolution and Supplement to Resolution and have determined that such negotiations, and the regulatory review of the terms and conditions of the San Juan Restructuring Agreement, will require significant time and effort and that the San Juan Restructuring Agreement will not be completed before expenditures need to be made to support timely completion of the construction and installation of the BART Alternative.

“To implement certain provisions of the Resolution and Supplement to Resolution as soon as possible to allocate the now ongoing costs of the construction and installation of the BART Alternative and other ongoing fuel, capital and restructuring costs, the Participants have entered into the Funding Agreement. Section 4.1 of the Funding Agreement establishes, inter alia, a condition precedent to its effectiveness that requires that the Commission accept the Funding Agreement for filing.”

The agreement notes that there are four “Exiting Participants” that are dropping out of plant ownership – M-S-R, Anaheim, SCPPA and Tri-State. The other current owners are called the “Remaining Participants.” The “Exit Date” is Dec. 31, 2017.

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.