Challenges loom as Farmington works to keep San Juan Generating Station open

FARMINGTON — As Farmington officials celebrate a plan that would keep San Juan Generating Station open after 2022, majority owner Public Service Company of New Mexico reiterated its plan to close the power plant.

Farmington officials signed an agreement Saturday with New York-based Acme Equities LLC. The agreement paves the way to keeping the power plant open even as the other San Juan Generating Station owners plan to close the plant.

"Nobody thought that this could even happen," said Mayor Nate Duckett when reached by phone today.

He said the city was told that no one would be willing to buy the power from the coal-fired power plant, however Acme Equities LLC believes it can sell the power and has a plan to do just that. The majority of power generated at the power plant will be sold on the power market.

Duckett said the agreement with Acme Equities is a huge win for San Juan County, which faces job losses and lost tax revenue if the power plant closes.

PNM says Farmington's announcement came as a surprise

The announcement Saturday evening came as a surprise to the majority owner of the power plant, Public Service Company of New Mexico.

“After interacting with the City of Farmington for almost two years, including a meeting last week that included the City of Farmington and Acme Equities LLC, we were surprised to hear of an announcement to keep San Juan Generating station open," PNM said in a statement released this afternoon.

A partnership agreement between the owners states that Farmington can acquire these shares at zero cost because it is the only owner that wants to continue operations at the plant. However, Farmington will be required to pay for the coal inventory and fuel oil at book value. It also states if the city cannot reach agreements with the four other owners of the power plant, the generating station will close in 2022.

In addition, every time a public utility like the majority owner Public Service Company of New Mexico decides it will no longer use a generation asset, it must be approved by the New Mexico Public Regulation Commission in an abandonment case.

PNM stated the current contract calls for an orderly shutdown of the power plant in 2022.

"PNM will continue to work with the other four (San Juan Generating Station) owners in accordance with their agreements to plan for a shutdown of the coal plant in 2022, subject to necessary regulatory approvals," the utility company said in its statement. "The anticipated shutdown is consistent with the current PNM Integrated Resource Plan (IRP) and the resource plans of the three other joint owners, with the exception of the city of Farmington."

Sierra Club chapter director: Market pressures could impact San Juan Generating Station

Sierra Club Rio Grande Chapter Director Camilla Feibelman said market forces could cause the coal-fired power plant located in Waterflow to close regardless of the city’s intervention.

The number of utilities that might purchase that power is shrinking and the future of energy in the Southwest looks different than just a few years ago, Feibelman said.

While she acknowledged that closing the power plant will lead to job losses, she said coal is now the most expensive source of energy.

“This plant is going to shut down sooner rather than later,” she said.

Regardless of when the plant closes, the City of Farmington is already taking measures to prepare for a future without coal generation.

While the agreement with Acme Equities paves the way to keeping San Juan Generating Station open past 2022, Duckett acknowledged the power plant will someday close. He said the city is already taking steps to diversify the economy.

Last year the City Council voted to raise the gross receipts tax and created a Community Transformation and Economic Diversification fund. Farmington has already used that fund for projects like tearing down dilapidated buildings near Boyd Park and to increase opportunities for outdoor recreation.

Related:Farmington demolishes old gas station, plans for transformation

Related: Farmington looks at outdoor recreation assets it could market to the world

Renewable portfolio standards may increase in New Mexico

The same day the City of Farmington signed its agreement with Acme Equities, the New Mexico Senate Conservation Commission heard debate about a bill that would require investor-owned utilities like PNM to provide 100-percent carbon-free energy by 2045.

The bill made it through the committee with a “do pass” recommendation.

In the statement released today, PNM voiced its support for the bill, known as the Energy Transition Act or Senate Bill 489.

"Senate Bill 489 provides a path to a cleaner energy future for our state, while ensuring energy affordability to our customers, and providing needed assistance to workers and the San Juan area communities," PNM said in the statement.

The bill would create funds to assist with economic diversification in San Juan County and to help displaced workers.

Duckett said the agreement with Acme Equities retains current salaries and benefits and is a better deal than the senate bill. He said the Energy Transition Act gives the Santa Fe-based state Economic Development Department control of the money for economic diversification rather than giving that control to local governments.

Mayor: Study needed to evaluate economic impacts of transitioning to renewable energy

“The idea that New Mexico should be a leader in solar is 100 percent true,” Duckett said.

He said while New Mexico has plenty of sunlight, solar cannot replace the number of jobs that would be lost if the San Juan Generating Station closes.

Duckett said Farmington, the New Mexico Municipal League and others have passed resolutions encouraging the state to perform a study to learn about the economic impacts of transitioning to renewable energy. Duckett said that study should address how the state can replace the funding schools receive from oil, gas and coal industries.

“You have to strike a balance,” he said.

Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652 or via email at hgrover@daily-times.com.

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