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New Mexico court upholds decision keeping utility from transferring shares of coal-fired power plant

The Four Corners Power Plant in Waterflow near the San Juan River in northwestern New Mexico, is viewed in April 2006. (AP Photo/Susan Montoya Bryan, File)
Navajo Transitional Energy Co. had sought to take over PNM's shares,

ALBUQUERQUE – The New Mexico Supreme Court on Thursday affirmed a decision by utility regulators who rejected a proposal by the state’s largest electric provider to transfer shares in a coal-fired power plant to a Navajo energy company.

The court also upheld the Public Regulation Commission's decision to deny a request by the Public Service Co. of New Mexico for a financing order that would authorize the utility to issue bonds to recoup the costs of abandoning the Four Corners Power Plant in northwestern New Mexico.

Navajo Transitional Energy Co. had sought to take over PNM's shares, saying that preventing an early closure of the power plant would help soften the economic blow to communities that have long relied on tax revenue and jobs tied to coal-fired generation.

Environmentalists have protested the transfer over concerns that the plant – which serves customers in Arizona and New Mexico – would be allowed to operate longer.

The Supreme Court heard arguments in the case earlier this year. In its order, it ruled that the decision by regulators was reasonable and consistent with the state's Energy Transition Act.

In rejecting PNM's plan in 2021, the commission said the utility failed to specify how it would provide replacement power for electricity it would no longer produce at the Four Corners plant.

Commissioners had raised concerns, given that the utility has yet to complete solar and battery storage facilities meant to replace another coal-fired plant – the San Juan Generating Station that closed last September.

The Supreme Court pointed out that PNM's director of resource planning, Nicholas Phillips, had testified about the limitations of the utility's modeling. PNM had relied on prior bids for San Juan replacements rather than identifying new resources to replace the Four Corners plant.

Phillips also acknowledged that PNM had encountered unexpected delays in replacing the lost capacity from San Juan's closure.

Given those delays and the generic information provided by PNM, the court said it agreed that “a reasonable mind could conclude that Phillips’ testimony and PNM’s modeling, on its own, was inadequate” to meet the utility's burden under the Energy Transition Act.

PNM officials said they were disappointed with the ruling.

Utility spokesman Raymond Sandoval said the commission's order delays PNM's exit from the power plant from 2024 until possibly 2031 and thus postpones reductions in emissions.

“Our commitment to serving our customers with zero carbon electricity doesn’t end,” he said, “and while an early exit from the Four Corners coal plant would propel us forward, we remain strong in our transition to affordable carbon-free electricity.”

Located on the Navajo Nation, the Four Corners plant is operated by Arizona Public Service Co. That utility owns a majority of shares in the plant's two remaining units.

PNM had initially proposed the arrangement with the Navajo company as a way to remove coal from its portfolio. One of the conditions of a proposed multibillion-dollar merger with a subsidiary of global energy giant Iberdrola had required the New Mexico utility to show that it was taking steps to do so.

The court also noted that PNM was aware that commission staff had concerns about its modeling with regard to replacement resources.

Sandoval confirmed Thursday that the utility is still working to bring replacement resources online for the San Juan plant as well as replacements for the power that will be lost when leases expire at the Palo Verde nuclear plant in Arizona.

PNM does not have dates for when any of the projects will begin commercial operations. However, Sandoval said a 150 megawatt battery installation is being tested and can provide electricity to customers during the current heat wave.

The utility said it doesn't anticipate any rolling outages during these hot days since it purchased power in anticipation of peak summer demands.