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Plan Submitted for Closure of Four Corners Region Coal Power Plant

New Mexico’s largest electric utility has submitted to state regulators its plan for shutting down a coal-fired power plant in the Four Corners region.

The filing with the state’s Public Regulation Commission will determine the future of the San Juan Generating Station.  The move comes as a new state law dictates more aggressive renewable energy requirements while allowing Public Service Company of New Mexico to recoup from customers some of the expenses.

The application for abandonment of the plant and the building of replacement power includes the utility’s preferred option, which it describes as the most cost-effective plan, as well as three alternatives.

The costs range from nearly $4.7 billion to more than $5.4 billion, but utility executives say residential customers would end up saving about $7 a month in the first year after the plant closes under its preferred proposal. They couldn’t say what, if any, savings customers would see after that given fluctuations in the costs related to producing electricity. The preferred option includes a mix of natural gas-fired power plants, solar and wind farms and new battery storage facilities.

Tom Fallgren, the utility’s vice president for generation, said PNM’s first commitment is to the environment but that its system has to be reliable and that it intends to keep costs low for customers. “We all share one goal — an emissions-free New Mexico — and there are many ways to get there,” he said.

Under the state’s new landmark energy law, investor-owned utilities and rural electric cooperatives are required to get at least half of their electricity from renewable sources by 2030. That would jump to 80% by 2040. A 100% carbon-free mandate would kick in five years later for utilities. Electric co-ops would have until 2050 to meet that goal. Public Service Co. of New Mexico officials reiterated Monday that they intend to be emissions-free by 2040, news that won accolades from environmentalists and the state’s top elected Democrats when it was first announced in April.

Environmentalists were more cautious Monday and questioned the utility’s preferred proposal, which includes 280 megawatts of natural gas. They argued that to meet the state’s renewable energy standards, the investments that would be made now in natural gas would evaporate when the utility is forced to close those plants in the future. They also raised questions about the modeling used to select the four options, suggesting that the findings discourage more investment in renewable resources despite the volatility of natural gas prices. “There’s a lot of complicated math that goes into some of this modeling and some of these projections. We definitely look forward to getting some more eyes on this,” said Ben Shelton, the policy and legislative director with Conservation Voters New Mexico.

Utility executives say the proposals were 18 months in the making and resulted from a review of competitive bids as well as the recommendations of industry experts and engineers. The utility has scheduled public meetings this month in Farmington, not far from where the San Juan power plant is located, and in Albuquerque.

It will be up to the Public Regulation Commission to consider the proposals, a process that’s expected to take months and involve teams of lawyers and experts. As part of the energy transition law, Public Service Co. of New Mexico and other owners of San Juan can recover investments in the coal-fired plant by selling bonds that are later paid off by utility customers. The law also calls for setting aside millions of dollars in job training funds to ease the economic effects of shuttering the plant and the adjacent coal mine.

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