PSNM announces new financial arrangements for San Juan Generating Station

Written By: Stratton Report
December 16, 2015


On December 16, PNM Resources’ Public Service Co. of New Mexico received approval from the New Mexico Public Regulation Commission to retire two units at San Juan Generating Station.

In addition to closing two of the four coal-fired units at SJGS by Dec. 31, 2017, PSNM will install emissions control technology on the remaining units and other environmental and customer benefits to address compliance with federal visibility regulations under the Clean Air Act. In addition, the agreement will aid New Mexico’s ability to comply with the U.S. Environmental Protection Agency’s (EPA) Clean Power Plan, which imposes limits on carbon emissions.

The financial arrangements will include:

• The recovery of and a return on 50% (currently estimated to be ~$127.5 million) of the undepreciated value of the SJGS Units 2 and 3 assets at Dec. 31, 2017.
• A Certificate of Public Convenience and Necessity for 132 megawatts in SJGS Unit 4 with an initial book value of zero plus additional capital investment, including SNCR equipment, allowing for the continued operation of Units 1 and 4 and implementation of the beneficial new coal supply agreement.
• A CCN for 134 megawatts of the Palo Verde Nuclear Generating Station Unit 3 to be used as replacement power with an initial rate base value based on the book value as of Dec. 31, 2017 (currently estimated to be ~$1,118/kW).
• Accelerated recovery of SNCRs on SJGS Units 1 and 4 so they are fully recovered by July 1, 2022.
• The acquisition of 65 megawatts of SJGS Unit 4 as excluded utility plant by PNM.
• Beginning in January 2020, PNM will acquire and retire one megawatt-hour of Emission Rate Credits or Allowances or Renewable Energy Certificates for every megawatt-hour produced by 197 megawatts of PNM’s share of SJGS Units 1 and 4. This will also help New Mexico achieve compliance with the EPA’s Clean Power Plan. The associated costs cannot exceed $7 million per year and will be recovered in rates.

Pat Vincent-Collawn, PNM Resources’ chairman, president and CEO, commented:

“We are very pleased to have Commission approval of the agreement. The record for this case over the last two years has demonstrated our continued commitment to customers to provide reliable, affordable and environmentally sustainable power. This plan not only represents the least-cost alternative for compliance with federal environmental regulations, but also protects the economy of the Four Corners region and the state.”