Update on San Juan Generating Station and New Mexico Public Regulation Commission Hearing

Update on San Juan Generating Station and New Mexico Public Regulation Commission Hearing

Post on City of Farmington Website, February 1, 2019.

Public Service Company of New Mexico (PNM) has proposed to close San Juan Generating Station (SJGS), and effectively San Juan Mine in 2022. Your local leaders have proactively been advocating to preserve the jobs and extend the life of the plant and mine. This includes vigorous intervention in the Public Regulation Commission (PRC) regulatory process, Legislature, and through Farmington’s efforts to market the plant to a new private owner. These measures to market the plant are ongoing, aggressive, and while uncertain, have a reasonable chance of success.

While we did not avoid the commencement of the abandonment case by the PRC, there was a beneficial outcome. The PRC validated many of our concerns regarding closure of SJGS and is providing all stakeholders with the ability to participate in a process that we hope will ultimately implement a balanced solution that mitigates impact to ratepayers and the region while also adapting to changing energy market conditions. The PRC order confirms our impact from the Integrated Resource Plan (IRP) case, essentially importing our central arguments on the need for community hearings, due process, economic impact modeling, stranded costs, and reliability. PNM has stated publicly that closure of the SJGS will increase customer rates. Closure of the plant and mine will also have a devastating economic impact on the state and region.

SJGS was recently retrofitted with millions of dollars of pollution control equipment— and along with the closure of 2 of 4 units, brought the plant into compliance with the stringent emissions standards proposed by President Obama in 2014. In fact, SJGS has lowered its overall emissions by over 60% and is one of the cleanest and most technologically sound coal plants in the Country and has several decades of functional life remaining.

The issue for the region doesn’t center simply on protecting coal, it centers on finding a balanced solution that mitigates the impacts a potential closure of the plant and mine will have on our families, our children, our schools, and our economy. The region embraces a responsible transition and would welcome large scale renewable power to be constructed locally and exported utilizing existing transmission infrastructure. The City of Farmington and the broader San Juan County are open for business and are committed to growing our economy and contributing to the quality of life of our citizens.

Representing you at the PRC hearings were Mayor Nate Duckett, City Councilors Jeanine Bingham-Kelly and Janis Jakino, and City Manager Rob Mayes. With them were Commissioner GloJean Todacheene and Doug Echols from San Juan County, Germaine Chappelle, as outside counsel, and Greg Allen of San Juan Safe Communities Initiative. A special thank you to State Representative Rod Montoya and Senator Bill Sharer, who also attended.

Are PNM’s Stranded Costs of Their Own Making?

Are PNM’s Stranded Costs of Their Own Making?

The rationale for utility stranded cost recovery is controversial. This rationale for recovery is predicated on the concept of the “regulatory compact.” The specifics of such a “regulatory compact” is not explicitly defined nor generally agreed upon by the various stakeholders (company, shareholders, regulators, customers, legislators, environmental advocates, etc.).

However, the general idea is that because public utility prices are set by regulators, utilities are entitled to recovery of cost that become stranded (unable to be recovered through rates because of changing market or regulatory conditions). Whether utilities are indeed “entitled” to recovery all or even a portion of their stranded costs is hotly debated on all sides.

PNM argues that it is entitled to recover its stranded costs in the San Juan Generating Station based on the analysis in PNM’s most recent Integrated Resource Plan. This is despite a dramatic change in strategy by PNM relative to the San Juan plant over the past few years. During these years, PNM invested large amounts of money in the plant which has made the amount of stranded costs much larger. Whether these recently expended costs by PNM are subject to stranded cost treatment is particularly controversial.

Another difficult issue for PNM as it seeks the ability to recover stranded costs related to the San Juan Generating Station is whether this plant has value in the hands of another owner (likely an unregulated wholesale power producer). PNM is so completely convinced by the conclusion of its recently filed Integrated Resource Plan that San Juan Generating Station has no value that the company has made no attempt to seek willing buyers for the plant.

Whether a buyer could be found and what price they would be willing to pay is currently not known due to PNM’s sole focus on shut-down and stranded cost recovery. If the plant were sold even at a very low price, it would provide an arm’s length verification of the plant’s value. The valuation in a sale would be much more reliable that the potentially self-serving assumptions and analysis done by PNM in its Integrated Resource Plan calculations.

Shutting down the plant when it could be sold, also provides the potential for an additional windfall to PNM. By structuring its exit from the San Juan Generating Station as a plant shutdown with stranded cost recovery, PNM will reap the long-term benefit of a wholesale power market void of the power from the San Juan Generating Station, thereby making its remaining generating assets and any future investments in replacement power more valuable than they would have otherwise been.

If it can be show that San Juan Generating Station could have been sold, and PNM chooses not to do so, the increased market value of PNM’s existing and any future electric generating capacity due to lessened competition should offset any stranded costs to be recovered. Under such a scenario the value of this reduced competition could potentially serve as the sole form of stranded cost recovery to which PNM would be “entitled.”

PNM will no doubt craft arguments against attempting to sell the San Juan Generating Station to a potential willing buyer. However, unless the company pursues such an action, its arguments for being entitled to stranded cost recovery are dramatically weakened, likely to the point of justifying no stranded cost recovery from rate payers.

The Impact of PNM’s Plans on Tipping Point New Mexico

The Impact of PNM’s Plans on Tipping Point New Mexico

Listen to Germaine Chappelle’s discussion on the Rio Grande Foundation’s Tipping Point New Mexico Podcast. Germaine addresses a variety of issues with hosts Paul Gessing and Dowd Musca. Hear about the issues related PNM’s plan for San Juan Generating Station including “stranded costs”, the cost of adding “renewables”, how electric rates will be impacted, and how the plan will hurt the Four Corners region.

Tom Steyer’s Energy Orders – The Californian seeks to raise costs for the hoi polloi in other states

Tom Steyer’s Energy Orders – The Californian seeks to raise costs for the hoi polloi in other states

Wall Street Journal
By The Editorial Board
Updated Oct. 19, 2018 7:32 p.m. ET

Progressive money man Tom Steyer has many causes—impeaching Donald Trump, electing Senate Democrats, and this year ballot initiatives to impose renewable-energy mandates on voters who don’t realize how their electricity bills will rise.

Mr. Steyer’s NextGen Climate Action first targeted Michigan, where utilities agreed to higher renewable quotas if Mr. Steyer dropped his initiative. Next was Nevada, where referenda need to pass twice to become law. Nevada utilities are rolling over this year to save for a ballot brawl in 2020.

This year’s ground zero is Arizona, where Mr. Steyer’s Proposition 127 would require utilities to produce 50% of electricity from renewable sources by 2030. This would more than triple Arizona’s current mandate of 15% by 2025. The Steyer mandate would also bar utilities from counting obvious forms of renewable energy, such as nuclear (now 29% of the state energy mix) and most hydropower (6%).

The latter provision shows that Prop 127 is really one more subsidy for solar and wind power. Sunny Arizona is third in the country for solar power, according to the Solar Energy Industries Association, while it’s in the middle ranks for wind power. The strange hostility to nuclear would probably require the closure of the Palo Verde nuclear plant—the nation’s largest clean energy facility. Nuclear would have to be replaced with natural gas plants necessary to backstop intermittent wind and solar.

Hardest hit would be Arizona pocketbooks. Since the state adopted its current mandate in 2006, Arizona utilities have expanded renewable electricity to 7% from 1% of their electricity mix. But according to Energy Information Administration data, this has raised Arizona electricity prices by 30%—compared with 19% for the nation over the same time period. The Heartland Institute says that “at that pace, ramping up the mandate to 50 percent would cost the average household an additional $2,179 per year compared to present electricity costs.”

Read Entire Story Here

Prop. 127, Arizona’s renewable energy initiative, comes down to just 4 words

Prop. 127, Arizona’s renewable energy initiative, comes down to just 4 words

Editorial board, Arizona Republic Published 6:08 a.m. MT Oct. 25, 2018

Opinion: The debate surrounding Arizona’s Prop. 127 has been needlessly complicated. The clean energy mandate comes down to just four words: Right idea, wrong tool.

One day Arizona will be powered by the sun.

We enjoy such abundant natural light that we seem destined to throw a harness around the sun and use it to pull the greater share of our state economy.

But that day is not here. Not yet.

For now we are moving in the direction of the sun with new knowledge and new technology.

Crusaders for clean power have put on this year’s ballot a proposal to massively accelerate Arizona’s ascension to virtually 100-percent clean energy. But there are reasons to doubt it.

What would Proposition 127 do?
Utilities are now under Arizona Corporation Commission mandate to produce 15 percent of their electricity from renewable sources by 2025.

Proposition 127 would bump up those requirements to 50 percent by 2030, an increase the utilities say would greatly increase costs that would then be passed on to ratepayers.

Opponents, led by APS, contends the proposal’s economics would force the closure of Palo Verde Nuclear Generating Station, which produces power for about 4 million people.

Read Entire Story Here

PNM plant closure will raise rates

PNM plant closure will raise rates

This appeared as a guest column in the Albuquerque Journal | By Nate Duckett / Mayor, City of Farmington, and Kim Carpenter / County Executive Officer, San Juan County, Saturday, October 6th, 2018

We are responding to PNM executive Ron Darnell’s “for the children”-themed op-ed (Sept. 14 Journal). We believe PNM is using this angle to misguide the public on a number of issues surrounding its decision to close the San Juan Generating Station 30 years early.

As fathers and community leaders we care deeply for our youth and are gravely concerned about the impact PNM’s closure of the San Juan Generating Station will have on the well-being, education and future opportunities of our state’s children. Our state already struggles with one of the highest rates of childhood poverty in the country. We take it personally that PNM is willing to so cavalierly turn a blind eye to the real impact its plans will have on our children.

PNM has already publicly stated its plan to close the San Juan Generating Station will increase electric rates. Skyrocketing electric rates in California have already been created by actions like those proposed by PNM. Increased electric rates disproportionately impact those on fixed or low incomes.

PNM’s plans, as advanced by Darnell, will cost all of us, especially our children, in the state of New Mexico plenty in the form of fewer jobs, higher electric rates, reduced tax revenues for schools and diminished ability of parents to support their families. Furthermore, this closure will no doubt lead to further migration of our working class to states that have more robust job opportunities and diversified economies.

PNM has admitted publicly there will be statewide and regional impacts caused by its decision to close the San Juan Generating Station. PNM has also admitted in a proceeding before the Public Regulation Commission that delaying the closure will decrease costs to customers and mitigate impacts. If PNM cares so much about our state’s children, please ask yourself why it isn’t interested in working to create a more workable and prudent transition plan that mitigates these impacts?

In 2015, PNM initiated its plan to close two units of the San Juan Generating Station. PNM asserted that in order to keep the remaining two units open decades longer, extremely expensive pollution control equipment was needed. In reliance on PNM’s stated commitment to continue operations, over $37 million in bonds benefitting schools in our area were issued.

In 2017, after installing this equipment and using assumptions that have been aggressively challenged and largely discredited, the company stated its intention to close the remaining two units of San Juan Generating Station.

Why the sudden change in strategy by PNM? We believe this decision is profit-driven:

• Even though PNM has volunteered to close the plant prematurely, it wants customers to pay PNM shareholders for shutting down a completely viable resource.

• PNM also wants customers to pay for brand-new replacement generation resources, which guarantees dramatic increased profit to PNM and its shareholders.

• PNM wants the state Legislature to expand the amount of renewable energy it uses to 50 percent. This creates a legislative mandate to overbuild resources, which further increases profit to PNM and its shareholders at the expense of ratepayers.

PNM is advocating that the California approach be adopted by New Mexico public officials. Under California’s approach, electric rates have skyrocketed and utility profits have soared. If New Mexico goes along with PNM’s plan, rates in New Mexico will also skyrocket.

Higher electric bills hurt poor families the most. However, higher electric rates do support increased executive bonuses and dividends to mostly wealthy, out-of-state shareholders.

Does New Mexico really want to go along with PNM’s plan to increase electric rates? We need economic growth and to diversify our economy.

With PNM’s plan, higher electric rates will give businesses fleeing California’s disastrous business climate another reason to keep driving straight through New Mexico on Interstate 40 to Texas. Meanwhile, huge numbers of New Mexicans will be forced to pay unnecessarily higher electric bills, impacting government, business, families and yes, our children.

California Climate Policies Facing Revolt from Civil-Rights Groups

California Climate Policies Facing Revolt from Civil-Rights Groups

By ROBERT BRYCE
National Review
September 15, 2018 6:30 AM

Hugely expensive green mandates will hit poor Californians the hardest.

In April, civil-rights groups sued to stop some of California’s policies designed to address climate change. Then on Monday, California governor Jerry Brown signed into law SB 100, which requires the state’s utilities to obtain all their electricity from carbon-free sources by 2045. Before signing the bill, Brown said the legislation was “sending a message to California and to the world that we’re going to meet the Paris agreement.” In fact, it will only increase the hardships that California’s climate policy imposes on the poor, as detailed in the lawsuit.

High electricity prices should be a concern for California policymakers, since electric rates in the state are already 60 percent higher than those in the rest of the country. According to a recent study by the Berkeley-based think tank Environmental Progress, between 2011 and 2017 California’s electricity rates rose more than five times as fast as those in the rest of the U.S. SB 100 will mean even higher electricity prices for Californians.

In addition to cost, the all-renewable push set forth in SB 100 faces huge challenges with regard to energy storage. Relying solely on renewables will require a battery system large enough to handle massive seasonal fluctuations in wind and solar output. (Wind-energy and solar-energy production in California is roughly three times as great during the summer months as it is in the winter.) According to the Clean Air Task Force, a Boston-based energy-policy think tank, for California to get 80 percent of its electricity from renewables would require about 9.6 terawatt-hours of storage. This would require about 500 million Tesla Powerwalls, or roughly 15 Powerwalls for every resident. A full 100 percent–renewable electricity mandate would require some 36.3 terawatt-hours of storage, or about 60 Powerwalls for every resident of California.

Read Entire Article Here

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