California municipal touts approval of plan to exit coal by the end of 2017

Silicon Valley Power (SVP), which is the City of Santa Clara’s municipal electric utility, said Jan. 5 that it will become a coal-free utility on Dec. 31, 2017, when it ends electricity imports from a New Mexico coal-fired power plant.

SVP will replace the power from the coal-fired San Juan Generating Station with cleaner energy from renewable and natural gas resources for its 53,000 Santa Clara customers. The Federal Energy Regulatory Commission issued its final approval of the move on Dec. 30.

SVP currently distributes about 36% of its power from state-mandated renewable resources, far exceeding California renewable energy requirements. Overall, more than 50% of the power supplied by SVP is carbon-free.

Since 2011, SVP has examined options to extract it from coal-powered resources that 32 years ago were reliable sources of affordable electricity that allowed it to supplement seasonal hydroelectric generation and reduce the need to purchase expensive short-term power. SVP and two other Northern California municipal utilities formed the M-S-R Public Power Agency in 1980 and purchased the interest in the San Juan plant in 1983.

While the San Juan plant provided just 10% of SVP’s electricity, it accounted for 50% of the utility’s carbon emissions. Confidential negotiations by SVP began four years ago to pull Santa Clara out of the San Juan contract due to the emissions issues, liabilities associated with upgrading the plant to reduce emissions, and escalating costs associated with the San Juan facility.

In 2012 SVP began receiving electricity from its share of the Lodi Energy Center, a natural gas-fired generation plant using modern technology that limits carbon emissions.

“Silicon Valley Power has been committed to eliminating coal as a source of electricity for our customers and turned toward a combination of new renewable resources and the ultra-modern Lodi Energy Center to replace the 51 megawatts of power from San Juan,” said Larry Owens, SVP Manager of Customer Services. “We will be coal-free two years earlier than the 2020 deadline called for in the City of Santa Clara’s Climate Action Plan, effectively reducing the carbon footprint of our power by over 50 percent.”

FERC on Dec. 30 had approved a Public Service Co. of New Mexico request to buy part of the San Juan 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).

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.

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.