Owners of New Mexico power plant, mine reach agreement to ensure coal supply through 2022

Energy Associated Press

The owners of a power plant that supplies more than 2 million customers throughout the Southwest have reached an agreement that will ensure it has coal through 2022.

Continue Reading Below

Public Service Co. of New Mexico and mining company BHP Billiton made the announcement Friday, saying documents outlining the agreement as well as details about the future ownership makeup of the plant were filed with state regulators.

The current coal contract for the San Juan Generating Station expires in 2017. That, along with uncertainty about the plant's ownership, have been sticking points as New Mexico regulators consider plans for closing part of San Juan and shifting to other sources of electricity.

"Securing these two agreements provides clear evidence of our ability to execute our plan for the San Juan Generating Station that is in the best interests of our customers, the New Mexico economy and environment," Pat Vincent-Collawn, PNM Resources' chairman, president and CEO, said in a statement.

Utilities in other states have been looking to divest their ownership in the plant because of policies that discourage investment in coal power. The costs of complying with future federal pollution regulations also have encouraged electric providers to look to other sources.

Even though two of San Juan's units are scheduled to close in 2017, PNM is in line to assume a greater percentage of ownership as other utilities drop out.

Continue Reading Below

A state hearing examiner testified last month that PNM's position as the owner of last resort magnifies the risk to ratepayers.

Environmental groups reiterated that concern Friday.

"PNM's statements on their new draft proposals do nothing to address the already enormous cost increases of the plan, the plummeting support for their proposal, or resolve question over who will even own the plant after 2022," said Nellis Kennedy-Howard of the Sierra Club.

PNM has consistently said its plan for San Juan remains customers' lowest cost alternative. The utility's regulatory filings have estimated the cost over 20 years at more than $6.8 billion.

In 2013, the utility, Gov. Susana Martinez's administration and the U.S. Environmental Protection Agency agreed to close part of the San Juan plant to reduce haze-causing pollution in the Four Corners region. The ensuing disagreement has centered on how the lost electricity will be replaced.

Under the proposals announced Friday, Colorado-based Westmoreland Coal Co. would buy the mine that feeds the plant from BHP Billiton and take over operations in 2016.

The utility says it would see a savings of about 15 to 20 percent in 2016 and 2017 if the contract is approved and the sale goes through. The savings would be passed on to customers through PNM's fuel clause.

BHP Billiton says the proposals would ensure the sustainability of the mine and its workforce as well as the plant's coal supply.