October 20, 2022

Rising costs, delays continue to impact projects to replace San Juan Generating Station

The costs of replacing the electricity that Public Service Company of New Mexico will pay has increased and solar projects have been delayed.

On Friday, PNM asked the New Mexico Public Regulation Commission to approve amendments to the San Juan Solar project’s power purchase agreement and energy storage agreement. These amendments include both a new completion date and new price with project developer D.E. Shaw Renewable Investments, or DESRI.

Commissioners approved on order on a 4-1 vote on Wednesday allows for a hearing should any of the intervenors file an objection. Because of the time constraints, objections must be filed by noon this Friday. Should a hearing occur, it will take place on Oct. 26 during the PRC’s weekly meeting. If no objections are filed, then the amendments will be deemed approved without a hearing.

Commissioner Theresa Becenti-Aguilar, who represents the northwest corner of the state where the projects will be built, supported holding a public hearing to provide additional transparency. She cast the sole dissenting vote against approval of the amendments.

DESRI is also the developer of the Arroyo Solar and Rockmont Solar projects, which have also faced delays. 

Both the San Juan and Rockmont projects are located in San Juan County and fulfill the goal set out in the Energy Transition Act that some of the replacement power be located in the school district where the San Juan Generating Station is located.

The amendments come less than a month after operations ceased at the coal-fired power plant.

The amendments include a new date for when the San Juan project will begin providing PNM with electricity as well as a 24 percent price increase. PNM states that the price increases are in line with current industry pricing and are at the lower end of the price increases utilities are seeing for similar projects.

The original plan was that it would be completed by summer 2022, however supply chain problems led to them missing that date. The project has not yet had an official groundbreaking.

In its filing, PNM states that solar project delays are due to a variety of factors including worldwide shipping delays, U.S. customs protocols and tariffs.

“These industry disruptions have delayed, and in some cases threatened the viability of, renewable resource projects,” the utility states.

PNM’s filing states that the project’s commercial operation date is now May 1, 2024.

PRC General Counsel Michael Fisk told commissioners that these delays are not a surprise. Last summer, PNM informed the PRC that the solar projects would not come online this year. 

Should the projects be completed, DESRI will pay PNM $6 million—$2 million for San Juan, $2 million for Rockmont and $2 million for Arroyo—to compensate for the delays.

This $6 million depends on the PRC approving the amendments quickly. DESRI must receive approved amended agreements by Nov. 25.

The delays come amid concerns about potential power shortages next year. PNM prevented shortages this summer by operating the San Juan Generating Station unit one for about three months beyond the original closure date. That will not be an option in 2023.

PNM is looking at ways to meet the demand such as short-term power purchase agreements.