SPS seeks approval in New Mexico to retire certain generating units

The New Mexico Public Regulation Commission, in a Nov. 7 order, appointed a hearing examiner to assist it to conduct and preside over all necessary hearings and take all such actions as are necessary in the matter involving Southwestern Public Service’s (SPS) application for approval to retire and abandon certain generating facilities.

As noted in the order, SPS’ application requests that the commission issue an order authorizing SPS to:

  • Retire and abandon the use of Plant X Generating Station Unit 1 (Plant X 1) and Cunningham Generating Station Unit 1 (Cunningham 1) as of Dec. 31, 2019, and to retire and abandon the use of Plant X Generating Station Unit 2 (Plant X 2) as of Dec. 31, 2020
  • Record and recover the remaining, unrecovered net plant balance and estimated dismantling costs of each unit at the time of retirement and to include that amount in the base rates established in SPS’ next base rate case
  • Record in a deferred account the difference between actual and estimated decommissioning and dismantling costs for each of the three units after completion of actual dismantling activities
  • Recover the deferred balance from customers if actual decommissioning and dismantling costs exceed estimated decommissioning and dismantling costs, or to return the deferred balance to customers if estimated decommissioning and dismantling costs exceed actual decommissioning and dismantling costs

According to SPS’ application, which was filed in October, Plant X 1 is a General Electric Model B1 steam turbine that was installed in 1952; Plant X 2 is a General Electric Model C1 steam turbine that was installed in 1953; and Cunningham 1 is a General Electric steam turbine that was installed in 1957. Plant X 1 has the ability to generate 41 MW in the summer and 41 MW in the winter; Plant X 2 has the ability to generate 90 MW in the summer and 90 MW in the winter; and Cunningham has the ability to generate 71 MW in the summer and 71 MW in the winter, SPS said.

Plant X 1, Plant X 2, and Cunningham 1 are near the end of their useful lives, SPS said, adding that the capacity from Plant X 1, Plant X 2, and Cunningham 1 is not needed to reliably serve SPS’ customers. The company also said that the present and future public convenience and necessity do not require the service or use of the Plant X 1, Plant X 2, or Cunningham 1 facilities.

The end of the current commission-approved service life is 2019 for Plant X 1 and Plant X 2, while the end of the current commission-approved service life for Cunningham 1 is 2022. However, SPS added, significant capital expenditures estimated to cost in excess of $13m – or about $2.9m for the New Mexico retail jurisdiction – will be needed to allow Cunningham 1 to operate until 2022.

Additionally, significant operating and maintenance (O&M) costs for a major overhaul outage could be required, SPS said. The company noted that it also estimates capital and O&M expenditures of $10.5m – or about $2.3m for the New Mexico retail jurisdiction – would be required to continue operating Plant X 1 and Plant X 2 until 2022.

SPS said that it does not believe incurring those capital and O&M costs for those plants would be an economically prudent use of capital.

At their expected retirement dates, Plant X 1, Plant X 2, and Cunningham 1 will have combined unrecovered amounts for investment and dismantling costs of about $2.7m – or $592,000 on a New Mexico retail basis, SPS said.

The company noted that authorizing full recovery of the undepreciated investment in Plant X 1, Plant X 2, and Cunningham 1 is just and reasonable and consistent with commission policy.

SPS, a wholly owned subsidiary of Xcel Energy (NYSE:XEL), requested that the commission issue a final order in the case by April 15, 2019. The company noted that it is planning to file a base rate case in New Mexico next summer and that as part of that rate case, it will present a new depreciation study.

If Plant X 1 and Cunningham 1 remain in service beyond the end of 2019, they will need to be included in the depreciation study. However, if those facilities are to be retired at the end of 2019, they will not be included in the depreciation study, and the commission will not need to establish depreciation rates for them, SPS added.

About Corina Rivera-Linares 3059 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.