September 30, 2021

PRC concerned about supply chain impacts leading to power shortages

Global supply chain challenges may make it hard for the state’s largest utility to meet electricity demands next summer and the New Mexico Public Regulation Commission is concerned that these could include unanticipated problems.

These supply chain challenges were sparked by the COVID-19 pandemic, which had impacts like slowing manufacturing and changing consumer demands. This has delayed a couple major solar projects in New Mexico that are intended to replace the electricity from the San Juan Generating Station.

The PRC is concerned that this could lead to challenges meeting electricity demand next summer after the San Juan Generating Station is scheduled to stop providing power to the state’s largest electric utility.

Commissioner Joseph Maestas raised the topic during the regular meeting on Wednesday. Maestas brought it up in connection to solar projects that are intended to replace the San Juan Generating Station and have been delayed. But Maestas is concerned that more utilities and projects could be impacted.

During the summer, Public Service Company of New Mexico informed the PRC that the supply chain problems caused by COVID-19 have delayed two solar projects intended to replace the San Juan Generating Station. This led to concerns over whether  PNM will have enough electricity to meet demand next summer, as the utility plans to end its operations of the coal-fired power plant on June 30. 

Maestas said PNM may have as little as a 5 percent reserve margin next summer, which means the utility will only have 5 percent more power than it needs to meet peak demand. Ideally, there would be an 18 percent reserve margin.

“I think so far we’ve only really heard about these issues impacting replacement power projects in PNM’s service area, but I’m wondering what impact is this going to have on the industry across the state,” Maestas said.

He said he would like to know how the issues with the supply chain are impacting other utilities, including both investor-owned and rural electric cooperatives.

“I do think as a commission we need to be aware of the extent of this problem and even get an idea what the other impacts could be besides replacement power projects for San Juan Generating Station and get a sense for the duration of this,” he said. “I mean, how long is this going to take, will these supply chain issues nullify power purchase agreements where prices were secured for replacement power, will that trigger a renegotiation? Because, I assume, if there’s a lack of supplies, may likely go up.”

The PRC may issue a bench request to gather more information about how the global supply chain problems are impacting both investor-owned and rural electric cooperative utilities.

Commission Chairman Stephen Fischmann said if the commission decides to issue a bench request, it may want to ask for monthly updates until the supply chain issues are resolved. He said that would allow them to “be sure everybody is up to date on what’s happening and we don’t find ourselves caught by surprise at the last minute.”

Meanwhile, PNM is exploring ways to increase the amount of electricity it will have available to meet customer demands in the summer of 2022.