PNM asks for extra time to work out final San Juan coal supply agreements

PNM Resources (NYSE: PNM) subsidiary Public Service Co. of New Mexico (PNM) on June 3 filed with the New Mexico Public Regulation Commission a request for additional time to submit final executed ownership and fuel supply agreements for the coal-fired San Juan Generating Station.

The extension is needed to provide some of the participants with the time necessary to comply with their approval processes.

“This extension is reasonable and will allow PNM to complete this very complex process which would result in a large cost savings for customers, dramatically cut the company’s use of coal and increase the use of cleaner energy resources, including solar generation,” said Pat Vincent-Collawn, PNM Resources’ chairman, president and CEO, in a June 4 statement. “We have made truly remarkable progress and we are grateful that the Commission is taking the time to fully consider the plan for San Juan. We are requesting the Commission grant us the extension, which would not burden any of the parties in the case, yet would ultimately benefit customers and the state as a whole.”

Recently, the commission issued an order requiring PNM to file the agreements by July 1. The order included a provision for an extension if the company showed good cause. PNM, PNM Resources Development, Tucson Electric Power and the City of Farmington expect to meet the July 1 deadline. These entities represent 92% of ownership in San Juan as of Jan. 1, 2018. Ownership percentages are changing at the plant as some of the existing co-owners exit.

The six other owners are municipal or cooperative organizations that have several levels of public notice and meeting requirements, and are therefore unable to meet the July 1 deadline. All but one of these entities however, filed affidavits indicating that they expect to meet an Aug. 1 deadline. The City of Anaheim is striving to meet the Aug. 1 deadline but may need until Aug. 4.

The agreements are necessary for the company to proceed with implementing the Stipulated Settlement Agreement for San Juan, which would provide significant environmental benefits at the lowest cost to customers, if approved by the commission, PNM said.

PNM on May 14 had signed an executed letter agreement with Westmoreland Coal (NasdaqGM: WLB) for the new coal supply contract for the San Juan Generating Station (SJGS). 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.

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 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 MW 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.