PNM signs new coal supply deal with Westmoreland for San Juan power plant

PNM ResourcesPublic Service Co. of New Mexico (PNM) subsidiary on May 14 signed an executed letter agreement with Westmoreland Coal (NasdaqGM: WLB) for the new coal supply contract for San Juan Generating Station (SJGS).

Plans to do so had been announced on May 1. The combined new coal supply and SJGS ownership restructuring agreements will save customers approximately $300 million in fuel costs over the next six years, the utility said. The company filed the agreement and other documents in response to a New Mexico Public Regulation Commission (NMPRC) order that requested comments on how the commission should proceed in light of these agreements. PNM said it feels strongly that the NMPRC has reason to approve the company’s request to add 132 MW of capacity in SJGS Unit 4, conditional upon final execution of the ownership and coal contracts by August 31, 2015.

The May 14 filing included a resolution from the owners of the SJGS in support of PNM’s plans and a letter from Keith E. Alessi, Westmoreland CEO, urging the NMPRC to make a timely decision that enables Westmoreland to move forward with the transition of the mine. In the coming weeks, the NMPRC’s General Counsel will present a draft order for consideration by commissioners for a final vote on PNM’s SJGS Plan settlement agreement.

“PNM has worked diligently to find the best plan for the San Juan Generating Station that balances affordability, reliability, and environmental sustainability for our customers, along with minimizing the impact on jobs and the Four Corners economy,” said Pat Vincent-Collawn, PNM Resources’ chairman, president and CEO. “Our plan was already the lowest cost alternative, and now we have negotiated an even lower cost on behalf of our customers, if the NMPRC moves forward with our plans. It is up to the NMPRC now to determine whether customers will see these savings.”

The current agreement with the existing coal mine owner, international mining company BHP Billiton, was to terminate at the end of 2017. The new coal supply agreement and the agreement in principle for Westmoreland to purchase the San Juan Mine, which is adjacent to the power plant, will not be final or binding until all parties have secured needed approvals.

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 best available retrofit technology (BART) determination under EPA’s regional haze program. 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 for NOx control on San Juan Units 1 and 4 no earlier than Jan. 31, 2016.

PNM Resources (NYSE: PNM) is an energy holding company based in Albuquerque, N.M., with 2014 consolidated operating revenues of $1.4 billion. Through its regulated utilities, PNM and TNMP, PNM Resources has approximately 2,707 megawatts of generation capacity and provides electricity to more than 753,000 homes and businesses in New Mexico and Texas.

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.