It was almost 8 o’clock at night at the Roundhouse. State Rep. Rod Montoya’s jacket was off and the Farmington Republican was pleading with his colleagues on the House floor to pass his bill.
At stake, he said, were nearly 1,600 jobs in and around San Juan County, $10 million a year in property tax revenue for local governments and one of New Mexico’s poorest school districts, and an estimated $140 million in local spending by the workers who hold those jobs.
It might seem like easy legislation to support, but those jobs and tax revenue are attendant to the San Juan Generating Station, a coal-fired behemoth of a power plant that is presently belching plumes into the Four Corners sky. In December, Public Service Company of New Mexico—PNM—shut down two of the four units at the plant. The company aims to abandon the other pair by the end of 2022. That’s 30 years earlier than planned, and the deadline is closing in like a locomotive.
The plant provides power for some 2 million customers, but it has also been the focal point of a feud that pits environmental and public health advocates against those who believe cheap power and good jobs trump those concerns—at least in some ways.
Facing both economic and air quality challenges, PNM wants to walk away from the plant early—as well as from 30more years of potential profits. Now, there’s a new fight over how much loss PNM should have to eat, and how much it can recoup from its ratepayers.
Normally, it would be up to the state Public Regulation Commission to strike a balance between what PNM’s investors get and what its customers pay. That’s what the law says and that’s what voters elect the PRC commissioners to do. But before the company asked the PRC, it pitched the Legislature on a plan to let it charge customers for everything.
The PRC worried PNM’s pitch was sidestepping its authority. Consumer and environmental advocates said the company knew investing in coal was expensive and risky. Some tried to negotiate with PNM to find an affordable way into renewables. But one player not at the table called the plan a Trojan horse and set to work trying to kill it. New Energy Economy took out newspaper ads (including in SFR), blasted warnings to 5,000 people on its email list and lobbied against the measure at every turn.
By the end of the legislative session, the speaker of the House would accuse New Energy Economy of “poisoning the well” of public opinion and making it virtually impossible to craft a compromise. PNM would take out a sarcastic newspaper ad criticizing the nonprofit for torpedoing the bill.
So, by the time Rep. Montoya was pleading with his colleagues, it was a last-ditch effort. His stripped-down bill would have saved some jobs and kept San Juan County and the Central Consolidated School District from being ravaged. A whopping 65 percent of the district’s property tax revenue comes from PNM and Westmoreland, which owns the coal mine nearby.
Montoya, a former union steward at the mine, had reading glasses hanging from his neck, his voice slightly raspy from four weeks of long days in the session. “Since the changes [that the bill would make] are to the abandonment regulations … and the PRC will be taking up the abandonment of the San Juan Generating Station later this year, unfortunately we do not have the opportunity to wait another year and go at it again. … We have to do this now,” he said.
The House passed the bill 44-25, but Montoya was right: He was out of time. The bill died in a Senate committee. His rescue attempt, however, tells only part of a story that started with a different, much bigger bill that detailed the PNM plan.
For weeks this winter, a group of Republicans and Democrats, environmental advocates, power plant workers, utility lobbyists and others gathered to map a way out of coal for PNM, bolster renewable energy requirements for the state’s largest utility and provide a safety net for the boom-and-bust economy of northwestern New Mexico.
They met in empty committee rooms at the Capitol, in conference rooms at PNM’s Santa Fe offices and in the headquarters of nonprofits near downtown. Sens. Jacob Candelaria, D-Albuquerque, and Steven Neville, R-Aztec, agreed to shepherd the proposal through the Legislature with Montoya.
The massive effort would have allowed PNM to own the power projects that replaced the San Juan Generating Station and required they be located in the same school district. It mandated a 50 percent renewable portfolio standard for the state’s largest utility by 2030 and injected $19 million into an economic recovery fund for San Juan County.
The key piece was PNM’s plan to cover the cost of closing the plant early. It would sell at least $320 million in highly rated bonds backed by the state’s promise to let the company pass along all those costs to consumers. Because the bond interest would be much less than the interest PNM would have to pay to retire the coal plant on its own, the utility said, customers would actually save money.
That’s a controversial move, though, because in recent similar cases, the state has only allowed PNM to raise rates enough to cover 50 percent of its costs, not the 100 percent the bill mandated. To many skeptics, the proposal was dubious.
Gerard Ortiz, PNM’s head of regulatory affairs, says the financing isn’t some swashbuckling attempt to loot ratepayers for the good of investors, but a tool that isn’t available to the PRC under current law.
“That’s normal ratemaking,” he tells SFR. “Especially in a situation where the [coal plant] retirement is cost-effective, because customers are already saving money.”
In the rate case PNM filed with the PRC when it asked to close the first two San Juan units, Ortiz says his company agreed to cover 50 percent of its investment because a proposed settlement provided other benefits. PNM chose not to push for 100 percent, he says, so it’s not fair for skeptics to assume the PRC would reject a full-cost proposal like the one in the bill.
The proposal is beyond complicated. The fiscal impact report—a sort of legislative SparkNotes prepared by staff to summarize each bill—is 30 pages long. The title of the bill, which is supposed to be a short declaration of its purpose, takes up more than a page.
Sen. Joe Cervantes, D-Las Cruces, is an accomplished attorney who served 11 years in the House of Representatives before his current six years in the Senate. He knows his way around paperwork, and still calls the bill the most complex piece of legislation he’s ever come across. Cervantes chairs the Senate Conservation Committee, the panel that ultimately stalled the proposal.
Sen. Peter Wirth, D-Santa Fe, balked at a provision that allowed PNM to own all the replacement power facilities. Those would likely include renewables like solar and wind and the bill could, he reasoned, artificially restrict the market for renewable power.
Though the bill required PNM to get half of its replacement power from renewable resources by 2030 (it’s just 20 percent by 2020 right now), it would have let the company charge consumers for the cost to do that. While both the Natural Resources Defense Council and Western Resource Advocates had been part of the negotiations to get to that standard, neither group was satisfied with the bill as a whole.
At a Saturday hearing that lasted three and a half hours, Sen. Jacob Candelaria presented the bill as the last best chance to get PNM out of coal now, create more renewable energy, and save the jobs and tax payments that worry everyone in San Juan County.
A 33-year-old electrician workingat the SanJuan mine, Travis Hutchinson has the best job of his life.
The son of a Farmington oil field worker, he spent a year taking courses at San Juan College before deciding he’d rather start making a living. After seven years in the oil field, he was making $20 an hour when the mine called. He’d applied two years earlier and was told that within a year on the job, he’d be making $33 an hour—almost $70,000 a year. He’d get a month of vacation and free health insurance premiums for his wife, Crystal, and three kids.
He tells SFR taking the job “was a no-brainer.”
Last year, including overtime, Hutchinson figures he made about $132,000. There’s hardly anything comparable around San Juan County, certainly not for a guy with one year of community college under his belt.
“We moved up, definitely, in the world. We were living okay before. But we bought a new house, new vehicles. … My income basically doubled,” he says.
Since PNM closed two units at the power plant, some families with jobs at the mine have sold their homes and decided to lease, figuring they’ll throw away less on rent than they’ll lose on a sale if property values tank when the company walks away in five years.
Hutchinson, a quick study who’s spent hours poring over the proposed legislation and ideas for keeping the mine open, is working toward his journeyman’s license. There’s probably work for him in Farmington even if the plant and mine close, but he knows most of his coworkers will have to move or take a huge pay cut, if they’re lucky enough to find work at all.
He feels like some environmental groups know they have the plant on the ropes and, rather than try to find a more reasonable compromise, they’re moving in for the knockout.
On the Saturday he spoke in favor of the bill at the Senate Conservation Committee hearing, he woke up at 3:30 in the morning to make the drive to Santa Fe.
If there’s a villain in all this, as some people seem to wish there were, it might be tempting to slap that label on the company that sends the utility bills and uses the coal-fired plants.
To Mariel Nanasi, executive director of New Energy Economy, the designation certainly fits. She says the bill was an end-around by a monopoly utility that knew it was unlikely to recover all of its investment in an outdated coal plant and that refuses to take responsibility for its toll on air quality and human health.
“I think it was a PNM bailout bill and it was masked in concern for San Juan County families. It was a disingenuous proposition in every way,” she tells SFR after the session.
Nanasi says only the PRC has the expertise to truly evaluate the proposal, and no version of the bill ever assumed anything other than PNM passing 100 percent of its costs to consumers, even for the replacement power facilities. It forced the hand of regulators, she says, at the expense of the people who pay power bills every month.
“It’s just cruel,” she says. And so she spent time and money to make sure the public knew her side of the story.
If PNM was the villain to her, the utility made clear the feeling was mutual.
“CONGRATULATIONS NEW ENERGY ECONOMY ON YOUR DEFEAT OF SB47,” begins the full-page ad the utility took out in The Santa Fe New Mexican during the final week of the legislative session. It sarcastically praises Nanasi’s group for “tireless work to undermine the coalition of environmental organizations.”
Speaker of the House Brian Egolf says Nanasi’s effort was a big part of what killed the bill; nobody wanted to touch something labeled as a PNM bailout.
“There were a couple of organizations outside the Legislature that, I think, poisoned the well and made it too hard for legislators and advocates on both sides of the issue to have that kind of open dialogue and communication,” says Egolf, a Santa Fe Democrat.
Montoya says it’s impossible to negotiate with someone who is only trying to kill a bill.
“We’d have to burn down the power plant and hang every PNM executive for New Energy Economy to be happy,” Montoya tells SFR.
While neither of the two environmental groups that negotiated the bill ultimately supported it, they weren't willing to go as far as Nanasi.
"I think we came pretty close to finding a way that we could get PNM out of coal in a way that doesn't undermine their business model, was friendly to consumers and ensures they're on a path toward significant clean and renewable energy for the state," says Noah Long, legal director for western energy at the NRDC.
Steve Michel, who heads policy development at Western Resource Advocates, tells SFR compromise became untenable once the public relations battle began.
"And that's kind of worrisome," he explains. "One of the things we probably lost as a result of this bill failing was production tax credits for renewable development. PNM would have had the certainty it needed to develop renewables."
PNM has promised to file an abandonment plan with the PRC later this year, but it's not clear if that's the last step.
"I guess we'll have to see where we go from here," PNM's Ortiz says. "It's also true that there's another legislative session next year. So, I guess that's a long way of saying I don't really know."
Air quality and cost of coal are twin factors
Since 1963, the ghostly prow of Shiprock jutting above the horizon in northwestern New Mexico has been joined by the Four Corners Power Plant and, 10 years later, by the nearby San Juan Generating Station. At their peak, the two coal-fired power plants cranked out nearly 4,000 megawatts of electricity. They also pumped thousands of tons of toxic pollutants into the sky above the Navajo Nation every year.
Part of the reason PNM is abandoning San Juan in 2022 and leaving its share at Four Corners by 2031 is economics; coal has become increasingly expensive not only in terms of its cost to obtain as a raw fuel, but also because environmental standards require aggressive treatment of emissions to scrub the white smoke that pours out of the stacks.
As the haze in the Four Corners grew, it obscured the vistas the Navajo, Ute, Hopi and others had prized for centuries. Looking out from Colorado’s Mesa Verde, one of our most unique national parks, was an exercise in trying to make out landmarks that were once clear.
A 2012 Environmental Protection Agency rule and the federal Clean Air Act aim to restore vistas to a natural state, and are another reason PNM is getting out of coal-fired generation.
Getting Out of Coal
2013 As the cost of coal and meeting environmental restrictions increases, PNM applies to the Public Regulation Commission to abandon two units of the 40-year-old San Juan Generating Station.
2015 PNM agrees with the federal government and regulators to shut down units 2 and 3, promising no layoffs.
Dec. 2017 The San Juan Generating Station abandons units 2 and 3, leaving two units functioning.
Feb. 2018 PNM asks the Legislature to change state law, allowing it to finance the plant’s abandonment with bonds backed by ratepayers. The plan fails.
Late 2018 As part of the 2015 agreement, PNM expects to file an abandonment plan with the Public Regulation Commission. The PRC will decide how much rates may increase as part of the plan.
2022 Units 1 and 4 of the San Juan Generating Station are slated to be abandoned by the end of the year.
2031 PNM’s coal purchase agreement at the Four Corners Power Plant runs out. PNM ends its coal-fired electricity generation.