New Mexico Hearing Examiner Confirms October Hearing on PNM Application to Abandon San Juan ?Generating Stations Unit 2 and 3 ?


Earlier this month, Public Service Company of New Mexico (PNM) filed a notice of the status of negotiations among the San Juan Generating Station (SJGS) participants relating to the ownership restructuring of SJGS plants 1 through 4. The notice was filed pursuant to an order by the Hearing Examiner in Case No. 13-00390-UT, PNM’s Application to Abandon San Juan Generating Station Units 2 and 3. The notice provided a summary of the meeting from June 20, 2014, where the nine SJGS participants who have an ownership interest in the plants reached a non-binding agreement on the restructuring of the plants. Under the agreement, participants who will be exiting active participation in SJGS, effective December 31, 2017, include Tri-State Generation and Transmission Association, Inc., M-S-R Public Power Agency, Southern California Public Power Authority, and the City of Anaheim, California. Participants who will retain an interest in the ongoing operation of one or more units of San Juan include PNM, Tucson Electric Power Company, the City of Farmington, NM, the Incorporated County of Los Alamos, NM, and Utah Associated Municipal Power systems. As a result of the restructuring term sheet, PNM proposed to acquire an additional 132 MW in San Juan Unit 4 to compensate for some of the loss from Units 2 and 3, and Farmington has agreed to acquire the remaining 65 MW in Unit 4, subject to the execution of final binding agreements. Additionally, the participants agreed to restructure the obligations for reclamation costs of the underground coal sales agreement, with exiting participants having no costs associated with the mining and related activities or ash disposal post the exit date.

As a result of these developments, interveners New Energy Economy (NEE), Western Resources Advocates (WRA) and Coalition for Clean Affordable Energy (CCAE) filed responses to the notice. In summary, the responses requested that the Commission issue an order bifurcating PNM’s request to abandon 418 MW of SJGS unit 2 and 3 base load capacity from all of PNM’s CCN requests for replacement capacity, pending in Case No. 13-00390-UT. WRA also requested a Commission order requiring PNM to submit any proposed coal acquisition agreement to the Commission for review, recommendation, approval or disapproval, prior to entering into such an agreement. Staff opposed the latter request, stating that current rules or statutes and any prior approval could preclude future Commissions’ consideration of the prudency of costs incurred under a Commission approved coal acquisition agreement.

On July 17, 2014, Hearing Examiner Ashley Schannauer issued an order confirming that the hearing on PNM’s Application to abandon San Juan Generating Stations 2 and 3 would remain scheduled for October 6-7, 2014, with a possible extension through the week of October 20. The order recognized that significant issues raised by WRA and others would not be resolved concerning replacement resources, the expiration of San Juan coal supply contract at the end of 2017, and the anticipated Environmental Protection Agency’s (EPA) federal coal ash remediation regulations that are expected in December 2014. While the Hearing Examiner acknowledged the concerns and the uncertainties on a number of the related issues, he found it prudent to proceed with the hearing and affirmed that PNM “still has the burden of proof to present sufficient evidence to justify the approvals it seeks.”

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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