March 29, 2023

NM Supreme Court hears arguments in Four Corners ownership transfer case

The New Mexico Supreme Court heard oral arguments Tuesday in the Public Service Company of New Mexico’s appeal of the New Mexico Public Regulation Commission’s rejection of an application to transfer the utility’s share of the Four Corners Power Plant to Navajo Transitional Energy Company. 

The PRC rejected the utility’s request to transfer its ownership shares in the Four Corners Power Plant in 2021, going against the recommendation of the hearing examiner to approve the application.

Related: PRC denies PNM’s application to transfer power plant ownership to NTEC

The arguments focused on whether PNM had met requirements for presenting options for replacing the power generated by the coal-fired power plant.

PNM’s attorney, Richard Alvidrez, argued that the utility had presented models for replacing the electricity from the Four Corners Power Plant, but Carolyn Glick, representing the PRC, described those models as hypotheticals that were not enough to convince the commission that there would be adequate power to meet customer energy demands. 

Alvidrez argued that models have been allowed in the past, but Glick said that supply chain challenges had delayed the replacement resources for the San Juan Generating Station and that contributed to the PRC wanting more detailed information about replacement resources for the Four Corners Power Plant.

“The commission has a duty to keep the lights on,” she said.

She said the details that PNM provided about replacement resources for Four Corners were vague and did not even include how much of each type of replacement generation source PNM planned to use.

Related: State’s largest electric utility seeks new generation sources amid energy transition

The Four Corners Power Plant case came after the PRC had approved the closure of the San Juan Generating Station. 

By the time the PRC ruled on the Four Corners case, Sierra Club attorney Jason Marks said that it was already apparent that the replacement resources for the San Juan Generating Station were not going to be available when the San Juan plant closed.

The San Juan Generating Station was originally scheduled to close last summer, but one unit was kept running through September out of concerns that there would not be enough electricity generated to meet demands during the peak summer usage.

PNM has entered into short-term power purchase agreements for this coming summer to make sure there is enough energy to meet demands. That includes purchasing additional electricity generated by the Four Corners Power Plant.

The Four Corners Power Plant is the last coal generation asset in PNM’s portfolio.

Environmental groups have concerns that PNM transferring its shares to NTEC will lead to the plant remaining open longer than if PNM maintained ownership of those shares. That is because NTEC has a vested interest in keeping the power plant open. The company owns the Navajo Mine, which supplies the Four Corners Power Plant with coal. It has also heavily invested in coal resources.

NTEC first acquired shares in the Four Corners Power Plant from El Paso Electric and the acquisition of PNM shares would make it the plant’s second largest owner behind Arizona Public Service Company.

NTEC currently owns seven percent of the power plant and PNM owns 13 percent.

The proposed transfer of assets also comes as PNM has been attempting to merge with utility giant AVANGRID, which has said it does not want to have any coal generation assets. 

Marks argued that the merger with AVANGRID led PNM to file the application to transfer its assets to NTEC prior to evaluating the replacement resources and that if PNM had held off for a few months it could have presented a more robust application that would have included plans for replacing the electricity the utility currently receives from the Four Corners Power Plant.

But Alvidrez said it was the contract with NTEC that dictated when the application was filed rather than the AVANGRID merger. He said that PNM had been looking to leave the Four Corners Power Plant since 2018. Additionally, he said PNM filed the application so early because of the time constraints that the state regulators had bumped up against in the San Juan Generating Station case.

Alvidrez said that the PRC could have approved the transfer of the Four Corners shares upon condition that the replacement resources were adequate to meet demands. He pointed to the San Juan case as an example of how that could work.

But Glick said that PNM’s application in the San Juan case included replacement resources that were not just hypothetical. The PRC then chose to hear the replacement resource in a separate docket than the closure docket, but those were considered at the same time.

PNM had sent out requests for proposals and received bids for replacement resource projects including the solar projects that were ultimately approved prior to submitting the application to the PRC to close the San Juan Generating Station.

The court case will also be a test of the state’s Energy Transition Act.

Related: PNM wants customers to pay $300m to exit a coal plant

PNM’s request to transfer the Four Corners assets also included a financing request based on the Energy Transition Act. That would have allowed the utility to essentially refinance past investments in the plant with low-interest bonds as was approved for the San Juan Generating Station.

But Marks argued that the Energy Transition Act does not allow for the transfer of assets to another entity as it is intended to assist in closing coal plants.