In the Matter of the Public Service Company of New Mexico’s Abandonment of San Juan Generating Station Units 1 and 4

Nine entities owned four coal-fired generating units at San Juan Generating Station. The Public Service Company of New Mexico (PNM) operated the units on behalf of the owners pursuant to a participation agreement. After the United States Environmental Protection Agency (EPA) required that pollution-control technology be installed at the units to comply with the Clean Air Act, four of the owners exited the participation agreement so they would not have to pay for installing the technology. PNM then negotiated with the EPA to close two of the units. Four of the five remaining owners subsequently announced that they did not plan to continue in the participation agreement past July 2022. The final owner, the City of Farmington (the city), wanted to continue operating the plant’s two remaining units (Units 1 and 4) and sought to acquire the exiting owners’ interests. The city agreed with developer Enchant Energy LLC and other entities to investigate retrofitting the units with carbon-capture and utilization-storage (CCUS) technology that would allow the plant to continue operating in compliance with statutory pollution limits specified in New Mexico’s Energy Transition Act (ETA). The city began negotiating with PNM and the other owners for the transfer of their interests. At the same time, PNM applied to the New Mexico Public Regulation Commission (the commission) seeking approval to abandon Units 1 and 4 and replace the units with a mix of alternative energy resources. PNM also sought approval to finance the plant abandonment with $361 million in bonds to be paid for through customer charges. PNM asserted that abandoning Units 1 and 4 and transitioning to cleaner energy sources would provide PNM’s customers economic and environmental benefits and allow PNM to replace the plant with resources that would be better suited to the anticipated increased use of renewable energy in the state and region. PNM also stated that the ETA’s emissions standards would make the coal-fired units more costly to operate than the proposed replacement resources and that the other owners’ decisions to exit the participation agreement also supported closing Units 1 and 4. Evidence before the commission demonstrated that abandoning Units 1 and 4 and replacing them with alternate generating resources would cost ratepayers less than if PNM continued to operate the plant and would also cost less than retrofitting Units 1 and 4 with CCUS technology. The commission considered PNM’s application and issued a decision.