Dive Brief:

• State regulators have approved a compromise plan that will allow Public Service Co. of New Mexico (PNM) to continue burning coal at its San Juan Generating Station while also shutting down a pair of units.
• PNM will shutter more than 900 MW at the plant, but will replace it by burning more coal in the other two, retrofitted units. The plan also calls for some natural gas and a small amount of solar generation.
• Before the 4-1 vote, Public Regulation Commission Chairwoman Karen Montoya called the compromise a "vast improvement" over the original plan, according to the Santa Fe New Mexican, which she said would have cost consumers more while doing less for the environment.

Dive Insight:

It was a long road to the approval of PNM's plan – more than two years, the New Mexican points out – and even now, not all the parties are satisfied. Critics say there's nothing to ensure consumers are protected, and the way PNM figured the costs is complicated, meant to create "deliberate confusion."

The commissioner with the dissenting vote, Valerie Espinoza, said she expects consumers will wind up paying more than anticipated, about $10 annually. And she noted that the utility is also involved in a rate case where it has requested an almost 17% increase.

Under the agreement, PNM will retire San Juan’s 375 MW unit 2 and its 544 MW unit 3 by December 31, 2017, and retrofit units 1 and 4 in early 2016. They will be operated until 2052, and the utility will also add natural gas and solar generation.

As part of a deal struck this spring, Westmoreland Coal Co. will purchase the coal mine that supplies the San Juan plant from BHP Billiton and take over operations in 2016. According to PNM, the arrangement will save customers 15% to 20%.

PNM will also have to conduct a review in 2018 for alternative energy sources to determine the cost-benefit of replacing additional coal-generated power at the power plant as part of a stipulation signed earlier this year with environmental groups, excluding local advocacy New Energy Economy (NEE).

“The reason we support the modified stipulation is because it will provide less coal and more renewable energy than any litigated outcome will achieve,” Steve Michel of Western Resource Advocates told the news outlet. 

New Energy Economy Director Mariel Nanasi has indicated her organization will appeal the case to the state's Supreme Court, calling the “convoluted, contorted, wrapped up in a hornet’s nest of deliberate confusion." 

"The evidence in this case is that no utility is investing in coal, except PNM," she told the New Mexican. "Does this not give you pause?”

Also this year, NEE cast doubt on PNM's data, saying the utility used a "fictitious baseline" and "fabricated" data to support its plan for the San Juan coal plant. At issue was how much PNM's demand would grow. PNM defended its data, with an official calling NEE's assertations "a baseless affront to the integrity of the PNM resource planning team.”