Groups Reach Deal to Keep New Mexico Coal Plant Open

A private New York-based real estate investment company that focuses on North American energy projects has reached an agreement with officials in Farmington, New Mexico, to keep the coal-fired San Juan Generating Station open beyond 2022.

The city is part-owner of the 847-MW plant, and the other owners—which include Tucson Electric Power, Los Alamos County, and Utah Associated Municipal Power Systems, along with majority owner Public Service Company of New Mexico (PNM)—have said they do not plan to receive power from the SJGS after 2022. The agreement with Acme Equities LLC, a hedge fund founded by Jason Selch in 2012, was reached late February 23, according to a news release from the city.

Farmington officials have worked to find a new operator for the plant after PNM in 2017 said it would close the plant’s two remaining units in 2022, 30 years ahead of schedule. According to a plant fact sheet, PNM owns 46% of the SJGS.

Several California-owned utilities formerly owned some of the plant’s generation, but they ended their ownership agreements in 2017 after 2015 legislation in California required them to divest from coal-fired generation.

Two SJGS Units Retired in 2017

San Juan entered commercial operation in 1973. At its peak, the station had almost 1,700 MW of generation capacity with its four units, according to PNM, with Units 1 and 2 each with 340 MW of capacity. Unit 3, which along with Unit 2 was retired at the end of 2017, had 497 MW of generation capacity. Unit 4 can produce up to 507 MW.

“After two years of what feels like a nearly full-time focus on a single issue, we have reached a milestone that few people thought remotely possible.” Rob Mayes, city manager for Farmington, wrote in a text message to the Farmington Daily Times newspaper late Saturday.

The newspaper reported that Mayes said the new ownership agreement means the power plant and its associated San Juan Mine will continued to operate beyond 2022. The paper said Mayes said the agreement could save up to 1,600 jobs that are vital to the area’s economy.

A study commissioned by Four Corners Economic Development last year estimated closing the San Juan Generating Station and the accompanying mine, which supplies the plant’s coal, would lead to more than $105 million in lost wages. The study said the average annual salary of power plant and mine workers is $86,000. It said the average of workers at the facilities is 47 years old.

The New Mexico Public Regulation Commission on January 10 ordered regulatory proceedings on the shutdown of the San Juan plant to begin immediately, rather than wait for PNM to file for approval to close the plant later this year. PNM planned to seek official PRC approval to abandon San Juan and acquire replacement resources in a single filing by mid-2019.

PNM in 2017 said it wanted to close San Juan and replace electricity from the plant with cheaper and cleaner power resources, including solar, wind, natural gas, and nuclear generation. PNM in fall 2017 issued a request for proposals for replacement power, and said about 40 bidders submitted 345 potential projects that the utility is reviewing.

‘Decades of Service Life Remaining’

“The (SJGS) is environmentally responsible, even meeting the stringent emission standards proposed by President (Barack) Obama,” Mayes told the newspaper. “It is economically viable as a lowest cost producer of electricity to New Mexicans, and it has decades of service life remaining with minimal capital investment. Prematurely scrapping it at the expense of tax payers and rate payers is simply irresponsible and unnecessary.”

Farmington began receiving electricity from the SJGS in 1982 when the fourth unit of the plant was completed.

Mayes said the agreement still needs to be finalized. “Make no mistake, there is work yet to do,” he said. “But this is a momentous milestone in the process.”

The city in a news release earlier this month, in which it argued the plant should not be closed, said, “SJGS was recently retrofitted with millions of dollars of pollution control equipment— and along with the closure of 2 of 4 units, brought the plant into compliance with the stringent emissions standards proposed by President Obama in 2014. In fact, SJGS has lowered its overall emissions by over 60% and is one of the cleanest and most technologically sound coal plants in the Country and has several decades of functional life remaining.

“The issue for the region doesn’t center simply on protecting coal, it centers on finding a balanced solution that mitigates the impacts a potential closure of the plant and mine will have on our families, our children, our schools, and our economy. The region embraces a responsible transition and would welcome large scale renewable power to be constructed locally and exported utilizing existing transmission infrastructure. The City of Farmington and the broader San Juan County are open for business and are committed to growing our economy and contributing to the quality of life of our citizens.”

Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).