FERC okays PNM buy of San Juan coal plant shares from four parties

The Federal Energy Regulatory Commission on Dec. 30 approved a Public Service Co. of New Mexico request to buy part of the San Juan coal plant, with that buy a key element in a recent New Mexico Public Regulation Commission decision related to the power plant.

On Sept. 25, Public Service Co. of New Mexico (PNM) and its affiliate, PNMR Development and Management Corp. (PNM Development) applied for FERC approval of a transaction whereby 100% of the ownership interests of the Southern California Public Power Authority, M-S-R Public Power Agency, City of Anaheim, California, and Tri-State Generation and Transmission Association (collectively called the “Exiting Participants’) in the San Juan Generating Station, including Units 3 and 4, would be transferred to the applicants.

PNM Development, like PNM, is a wholly owned subsidiary of PNM Resources (NYSE: PNM). Currently, PNM Development has no ownership of physical assets.

The applicants told FERC that the proposed transaction is a “critical component of a plan whose implementation will resolve numerous issues associated with complying with [the] environmental and regulatory requirements of several federal and state entities” related to the San Juan Station, a four-unit, coal-fired plant located in San Juan County, New Mexico, with a net capacity of about 1,683 MW.

The San Juan Station is a joint participant project that is owned, in varying shares, by: PNM; Southern California Public Power; M-S-R Public Power; Anaheim; Tri-State; Tucson Electric Power; The City of Farmington, New Mexico; the Incorporated County of Los Alamos, New Mexico; and Utah Associated Municipal Power Systems (Utah AMPS). PNM operates the San Juan Station on behalf of all of the participants.

Under a regional haze compliance deal with the U.S. Environmental Protection Agency, in place of EPA’s mandate of costly selective catalytic reduction (SCR) equipment added to all four units, the plant owners will install less expensive selective non-catalytic reduction technology on Units 1 and 4 in early 2016, and retire Units 2 and 3 by Dec. 31, 2017.

In the meantime, the California legislature enacted statutes, and the California Energy Commission promulgated regulations, which the three plant participants that are California public agencies indicated could limit their ability to enter into certain life extension projects for coal-fired power plants such as San Juan. That triggered their need to exit coal plant ownership. 

A plant ownership restructuring agreement provides that, simultaneously with the retirement of San Juan Units 2 and 3 on Dec. 31, 2017, PNM and PNM Development will acquire 100% of the interests of the Exiting Participants in the San Juan Station, including the interests in Unit 3 (which will be shut down on or about Dec. 31, 2017) and Unit 4, and amend the San Juan Participation Agreement to reflect the new ownership of that facility.

Upon completion of the transfers, ownership of Units 1 and 2 of the San Juan Station will remain at 50% PNM and 50% Tucson Electric, whereas the remaining participants will hold the following ownership interests in Units 3 and 4:

Participant              Unit 3      Unit 4

PNM                        100.00%   64.482%

PNM Development    0.000%   12.815%

Tucson Electric         0.000%    0.000%

Farmington               0.000%    8.475%

Los Alamos               0.000%    7.200%

Utah AMPS                0.000%    7.028%

Applicants also explained that PNM is a party to a pending proceeding before the New Mexico commission wherein PNM and certain parties entered into and filed a supplemental stipulation related to the San Juan Station. That stipulation, among other things, authorizes PNM to acquire the 65 MW of San Juan Unit 4 that is currently anticipated to be acquired by PNM Development under the restructuring agreement. 

PNM on Dec. 16 received approval from the New Mexico commission of that stipulated agreement. The NMPRC voted 4-1 to approve the NMPRC General Counsel’s proposed order for approval of the hearing examiner’s Nov. 16 recommended decision.

“We are very pleased to have Commission approval of the agreement,” said Pat Vincent-Collawn, PNM Resources’ chairman, president and CEO. “The record for this case over the last two years has demonstrated our continued commitment to customers to provide reliable, affordable and environmentally sustainable power. This plan not only represents the least-cost alternative for compliance with federal environmental regulations, but also protects the economy of the Four Corners region and the state.”

Signatories to the Aug. 13 agreement, which was the subject of the hearing examiner’s recommended decision, were PNM, the Utility Division Staff of the NMPRC, the New Mexico Attorney General, Western Resource Advocates, the New Mexico Coalition for Clean Affordable Energy, New Mexico Industrial Energy Consumers, New Mexico Independent Power Producers and Interwest Energy Alliance.

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.