Utility, critics file more arguments as New Mexico regulators weigh power replacement plan

Energy Associated Press

New Mexico's largest electric provider is defending its plan to replace power from part of an aging coal-fired plant with a mix of coal, natural gas, nuclear and solar generation.

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Critics, including environmentalists and consumer advocates, counter that the plan isn't in the best interest of ratepayers.

Public Service Co. of New Mexico said Monday in a filing with state regulators that rejecting the plan could jeopardize the continued operation of the San Juan Generating Station and end up costing customers more.

The utility's objections follow the recommendation last week of a hearing examiner who suggested the plan not be approved by the Public Regulation Commission unless changes are made. The examiner cited uncertainty surrounding the ownership makeup of the plant and the lack of a coal-supply contract beyond 2017.

Commissioners will hear the matter Wednesday. It could be another month before a final vote is taken.

Two units at the San Juan plant are scheduled to close in 2017 under an agreement with federal and state officials to curb haze-causing pollution in the Four Corners region.

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PNM, the operator of the plant, proposed replacing the two units with coal from one of the plant's other units, electricity generated by the Palo Verde nuclear plant in Arizona, a new natural gas-fired plant and more solar generating stations. Even with the addition of 132 megawatts of coal, PNM says its coal generation would drop below 50 percent if the plan is approved and part of San Juan is shuttered.

PNM's regulatory filings estimate the cost over 20 years at more than $6.8 billion. The plan represents the most cost-effective alternative for dealing with federal environmental mandates that call for reducing emissions at San Juan, the utility says.

"The company has worked diligently to find the best balance among affordability, reliability and environmental protection, and the hearing examiner's recommendations could have the opposite impact," Ron Darnell, a PNM vice president, said in a statement.

Renewable energy advocates have questioned the costs of adding more coal and investing in the Palo Verde nuclear plant. They're pushing for PNM to add more solar to its portfolio and to keep in place roof-top solar incentives.

A coalition of environmental groups on Tuesday delivered a letter to Attorney General Hector Balderas' office, calling on him to withdraw support for the PNM plan.

Last week in a separate rate case, Balderas urged state regulators to investigate the costs and benefits of roof-top solar and wind-generation systems on the electric grid. He said New Mexico needs a plan that guarantees energy security as well as affordable clean energy.