Public Service Co. of New Mexico (PNM), the principal asset of Albuquerque-based PNM Resources, sits at the distant southeast corner of the western power grid, unruffled by many of the competitive forces that are roiling much of the country. Indeed, there is a remote feeling about the state, one of the nation’s poorest and one of its most beautiful. The state’s colorful license plates advertise its nickname – “Land of Enchantment” – but also identify it as “New Mexico USA,” lest visitors be confused by its apparent foreignness.
Tensions between business interests in the state and its passionate environmental community are nothing new. But the latest eruption, recounted in the March 5 decision of the New Mexico Supreme Court in New Energy Economy v. New Mexico Public Regulation Commission et al., harkens back to disputes of decades past that pitted environmental groups against allegedly ethically compromised state regulators.
Last week’s decision by the court was prompted by Environmental Protection Agency actions to enforce visibility requirements under the federal Clean Air Act to regulate emissions of haze-causing substances. EPA’s action led to a New Mexico state implementation plan under which PNM would close units 2 and 3 of its four-unit, coal-fired San Juan Generation Station in the Four Corners area. The multi-year proceeding, the court noted, had amassed nearly 50,000 pages of material.
The question before the court, on appeal of the Pubic Regulation Commission’s approval of the PNM resource plan, was: What resources should replace San Juan units 2 and 3, which ceased operation in December 2017?
In the cooling embers of the hotly contested PRC case can be seen PNM’s and regulators’ desire not to summarily shutter the San Juan plant, harming the economy of the Farmington, NM, area. Keeping two units at the plant operating for at least a few years and adding a slice of a nuclear plant with a good operating record overcame New Energy Economy’s advocacy for a lower cost, more environmentally benign, and lower risk option.
Santa Fe-based NEE favored replacement of Unit 2 and 3 largely with new, low cost wind and solar. But the PRC favored PNM’s plan to acquire the replacement power largely from two existing plants: 132 MW from San Juan unit 4, which California utilities were willing to sell on an attractive basis; and 134 MW of carbon-free nuclear power from Palo Verde unit 3, with a capacity factor in the mid-90% range.
The Supreme Court’s unanimous decision upholding the PRC’s decision (also unanimous) in favor of the PNM’s plan could have been overturned by the court had it been inclined to delve into the details, but the court deferred to the PRC at every turn. NEE was “surprised and disappointed” by the decision, NEE counsel Mariel Nanasi told The Quad Report. But it’s apparent that NEE’s challenge to PNM’s plan had been lost in the CCN proceeding.
Indeed, NEE may have anticipated as much, given its recusal filing in the CCN proceeding in September 2015. NEE’s motion unabashedly asked that four of the five sitting PRC commissioners recuse themselves from the proceeding on the basis that their participation would be improper, due to their statements prejudging the case and their questionable ethical behavior. They refused to do so.
Three of the commissioners, NEE’s motion alleged, had stated publicly that they would approve the PNM proposal, though no hearing on its costs and lawfulness had yet been held.
In addition to their prejudicial public statements, NEE cited one commissioner’s request that PNM’s Political Action Committee support a candidate for another state office, which the PAC in fact did. The same commissioner had also asked PNM to prepare public presentations for her to use.
Still another commissioner was alleged to be “in regular phone, email and in-person contact with PNM,” having enjoyed a VIP tour of the Palo Verde nuclear plant and regular meetings with PNM’s chief executive. PNM “consistent and nefarious contact” with the commissioners, NEE argued, meant that a fair determination of the matter on the merits was impossible.
Before the court, NEE said that “PNM failed to consider or reasonably assess resources such as wind, solar and [natural] gas, which are less costly and less risky than coal or nuclear.” But the court concluded that PNM had considered renewable resources in assessing the most cost-effective replacement generation resources. The evidence presented, the court said, persuaded the PRC hearing examiner and the PRC that using power from Palo Verde unit 3 and from San Juan unit 4 was the most cost-effective choice. “We will not second-guess this determination,” it concluded.
The cost the examiner and the commission assign to a given resource, the court said, “is a paradigmatic fact inquiry that requires technical expertise to comprehend and resolve. NEE’s arguments give us no reason to second-guess” the commission’s cost assessment for any given resource.
— Robert Marritz