The New Mexico Supreme Court was hearing arguments Wednesday as it determines whether state regulators followed the law when deciding a case that will chart the path forward for a major electric provider and its half-million customers.
The dispute centers on a plan that details how the Public Service Co. of New Mexico will replace electricity lost when it shutters two units at one of the region's largest coal-fired power plants later this year.
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The closure is the result of a federal mandate to curb haze-causing pollution in the Four Corners, the home of numerous national parks and monuments where the borders of Arizona, New Mexico, Colorado and Utah meet.
After a two-year battle, the utility, the state of New Mexico, federal regulators and others reached an agreement to replace electricity lost from the San Juan Generating Station with a mix of coal, nuclear, natural gas and solar-generated power.
The environmental group New Energy Economy pushed back, contending the Public Service Co. of New Mexico is relying too much on coal and nuclear power and that the utility failed to prove the cost-effectiveness of the plan before it was approved by the state Public Regulation Commission.
New Energy Economy executive director Mariel Nanasi said before the high court hearing that the commission had a legal and moral obligation to consider whether more renewable energy could fill the void being left at San Juan.
She also accused the utility of failing to evaluate risk and uncertainty related to investment in fossil fuels.
"If PNM honestly evaluated their own coal and nuclear resources on a consistent and comparable basis against solar and wind, those renewable resources would be less costly and save ratepayers hundreds of millions of dollars," she said.
The utility has dismissed the complaints, saying the power replacement plan is supported by a diverse group of stakeholders and was vetted during exhaustive hearings before the commission.
Evidence presented during the hearings showed it was the right thing to do, utility spokesman Pahl Shipley said.
"It complies with the EPA rule on reducing regional haze, is the most cost effective for customers, helps ensure a reliable supply of energy and cuts carbon emissions at the plant in half," he said Tuesday.
Shipley said the plan also helps preserve jobs and minimize the economic effect that closing the two units will have on the region.
It's not clear when the justices will make a decision in the case.
New Energy Economy also is challenging the utility's recent request for a rate increase, which if approved would be the second in as many years.
The utility announced in December that the latest request seeks in part to recover the costs associated with closing the two units and replacing the lost capacity.