The New Mexico Supreme Court on Thursday upheld the decision by utility regulators to reject a proposal by the state’s largest electric provider to transfer shares in a coal-fired power plant to a Navajo energy company.

The court also confirmed the Public Regulation Commission’s denial of a financing order requested by the Public Service Co. of New Mexico. This order would have allowed the utility to issue bonds to recover the costs of abandoning the Four Corners Power Plant in northwestern New Mexico.

Navajo Transitional Energy Co. aimed to acquire PNM’s shares, arguing that keeping the power plant open for longer would help mitigate the economic impact on communities that rely on tax revenue and jobs associated with coal-fired generation.

However, environmentalists opposed the transfer, fearing that the plant, which serves customers in Arizona and New Mexico, would continue to operate for an extended period.

Earlier this year, the Supreme Court reviewed the case and concluded that the regulators’ decision was reasonable and aligned with the state’s Energy Transition Act.

In rejecting PNM’s plan in 2021, the commission pointed out that the utility failed to outline how it would replace the power generation lost from the Four Corners plant. Their concerns stemmed from PNM’s delayed completion of solar and battery storage facilities intended to replace the closed San Juan Generating Station.

The Supreme Court highlighted the limitations of PNM’s modeling, as testified by Nicholas Phillips, PNM’s director of resource planning. PNM had relied on prior bids for San Juan replacements instead of identifying new resources for the Four Corners plant.

Phillips also acknowledged the unexpected delays in replacing the lost capacity from the closure of the San Juan plant.

 The Four Corners Power Plant

The Four Corners Power Plant in Waterflow, New Mexico, is pictured in April 2006. (AP Photo/Susan Montoya Bryan, File)

Considering the delays and the inadequate information provided by PNM, the court concurred that “a reasonable mind could conclude that Phillips’ testimony and PNM’s modeling, on its own, was inadequate” to meet the utility’s obligations under the Energy Transition Act.

PNM expressed disappointment with the court’s ruling.

Raymond Sandoval, a spokesperson for the utility, stated that the commission’s order would postpone PNM’s exit from the power plant until possibly 2031, delaying emissions reductions.

Sandoval added, “Our commitment to providing our customers with zero-carbon electricity remains steadfast. While an early exit from the Four Corners coal plant would have propelled us forward, we remain dedicated to transitioning to affordable, carbon-free electricity.”

The Four Corners plant, located on the Navajo Nation, is operated by Arizona Public Service Co., which owns the majority of shares in the remaining units.

Initially, PNM proposed the arrangement with the Navajo company as part of its efforts to remove coal from its portfolio. It was a condition of a proposed multibillion-dollar merger with a subsidiary of global energy giant Iberdrola that PNM demonstrated progress in this direction.

The court also acknowledged that PNM was aware of the commission staff’s concerns regarding its modeling for replacement resources.

Sandoval confirmed that the utility is still working on bringing online replacement resources for the San Juan plant and for power that will be lost when leases expire at the Palo Verde nuclear plant in Arizona. However, no specific dates for the commencement of these projects have been provided. Sandoval did mention ongoing testing of a 150 megawatt battery installation that can supply electricity during the current heatwave, ensuring no rolling outages.

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