New Mexico court weighs fight over coal-fired power plant

ALBUQUERQUE, N.M. — New Mexico's largest electric provider wants the state's highest court to overturn a 2021 decision by regulators, who rejected a proposal to transfer its shares in a coal-fired power plant to a Navajo energy company.

The state Supreme Court heard arguments March 28 in a case that could determine how long the Four Corners Power Plant will continue to operate. Providing power to customers in Arizona and New Mexico, it's one of a handful of remaining coal-fired plants in the Southwestern U.S. that are slated for closure over the next decade.Navajo Transitional Energy Co. had sought to take over Public Service Co. of New Mexico's shares, saying that preventing an early closure would help soften the economic blow to communities that have long relied on tax revenue and jobs tied to coal-fired generation.

The arrangement was proposed as PNM looked for ways to remove coal from its portfolio. A condition of a multibillion-dollar merger with a subsidiary of global energy giant Iberdrola required the New Mexico utility to show that it was taking steps to do so.

In rejecting the plan, the New Mexico Public Regulation Commission said PNM had failed to specify how lost power would be replaced to ensure the lights would stay on for the utility's more than 500,000 customers. The concerns were amplified at the time since the utility already was warning about delayed solar and battery storage projects that were meant to replace the capacity lost with the closure of another major coal-fired power plant in the region.

Jason Marks, an attorney for the Sierra Club, told the court Tuesday that the New Mexico utility had rushed to submit the application to abandon the Four Corners Power Plant because of the pending merger with Avangrid.

"If this was a normal case, they could have developed their replacement resource portfolios. There was more than enough time to do that but they came in with what they had on the shelf. They repackaged it and they came in with a case of hypotheticals," said Marks, a former commissioner.

PNM attorney Rick Alvidrez argued that the Navajo energy company was the driver of the filing, not the merger. He asked the court to declare that the commission was wrong in dismissing the application since it had decided in an earlier case to approve the abandonment of the other power plant — the San Juan Generating Station — based on modeling and potential replacement power sources.

PNM's abandonment request sought to recover $300 million it has invested in Four Corners using bonds that would be paid off by utility customers. While considering the application, commissioners had raised questions about what costs the utility should be allowed to recover and how much authority regulators have to determine whether those costs are prudent.

PNM had argued the arrangement would benefit its customers as well as the Navajo Nation.

The plant is located on tribal land between Shiprock and Farmington in northwestern New Mexico. The majority owner — Arizona Public Service Co. — hasn't indicated any plans to end operations before 2031 because doing so could undermine the reliability of that utility's network.

Marks told the court Tuesday that the purpose of New Mexico's Energy Transition Act — passed in 2019 — was to shift from coal to renewable resources and to forbid regulated utilities from using transactions to move coal plants off their books to an unregulated entity.

"This form of the abandonment was against public policy and that really needs to be considered," he said. "It definitely goes head on into what the Legislature wanted with the ETA."