On Wednesday afternoon, Farmington's Public Utility Commission approved a plan that calls for the Farmington Electric Utility System to negotiate the purchase of up to 65 megawatts of additional electric generation at the power plant's fourth unit. The plan is subject to final review by city administration, city council and the commission.
Out of the nine owners at San Juan Generating Station, all three California-based owners and one Colorado-based owner are leaving, said Jim McNicol, electric utility generation manager, at Wednesday's monthly commission meeting.
After they leave, there will be 119 megawatts of unsubscribed generation, he said.
"This is excess generation capacity for the remaining owners in the plant," McNicol said.
Farmington owns about 8 percent of the shares at the plant's fourth unit.
The city's current electric generation assets are 160 megawatts with all capacity online, but the typical useful capacity is 120 to 140 megawatts, McNicol said.
"The city is a net purchaser of power," McNicol said. "We look at difference scenarios for future load growth. You want to maintain diversity of fuel so you don't have all your eggs in one basket."
If Farmington decides to purchase more shares in unit four, it will also own a greater percentage of terminal liability, which includes costs of environmental cleanup when the plant eventually closes, he said.
But for McNicol and other electric utility officials, the opportunity to buy more shares could be a deal too appealing to pass up.
"The city of Farmington has an opportunity to get new capacity in unit four without (up front) costs," McNicol said.
Real costs moving forward would be between $200 per kilowatt and $400 per kilowatt, according to McNicol's presentation.
Building a new natural gas plant would have a building cost of about $1,400 per kilowatt, according to the presentation.
"Those are costs that we would pay for our share already," said Mike Sims, electric utility director. "The more likely scenario for the 119 megawatts if no one steps up is that someone else will. It's too good of a deal."
The plan to buy 65 of the 119 megawatts that will be available at unit four is part of a larger, long-term plan to expand the city's energy production portfolio. That could include building a 65 megawatt gas-fired plant around 2022, and an option to add solar power in the 2020s, according to a concurrent presentation made at Wednesday's meeting by Pat Augustine of Pace Global, a consultant hired by the city to evaluate its energy portfolio.
"The argument might be made that here's an opportunity to get away from dirty coal, but if it's going to be produced anyway, that sheds a different light on it," said Mayor Tommy Roberts.
Under the state implementation plan adopted to keep San Juan Generating Station in operation, units two and three will be shut down and pollution control technology will be installed on units one and four, Sims said.
This will cut down significantly on regional production of greenhouse gasses, he said.
"I don't think that's going to be a plant killer," Sims said. "This plant is probably in better shape than most coal plants for meeting future risks."
Unit four at San Juan Generating Station was built in 1982, McNicol said.
"This plant has a physical remaining life out to 2052," he said. "In the worst case scenario, it would close in 2025."
Wednesday's proposal also calls for phasing out production on aging 1950s equipment at Animas Power Plant.
City officials and utility commissioners said Wednesday afternoon's proposal could provide Farmington a secure path toward future economic growth.
"I can feel, that gut feeling we've got to do this now," said Commissioner Carol Cloer.
City Manager Rob Mayes echoed Cloer's comment and added that it is essential for the city to look at building a new gas-fired plant.
"We have to do something now," he said. "There's a five-year lead to build a combined cycle plant. This way, we allow ourselves time. We have to make the commitment now. The wait is too risky. When the need's here, we'll need the power."
Greg Yee can be reached at email@example.com; 505-564-4606. Follow him on Twitter @GYeeDT.