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Changes in electric utilities impact coal

Renewable energy and natural gas are growing while coal declines

Hannah Grover
Farmington Daily Times
From left, From left, Ryan Flynn, executive director of New Mexico Oil and Gas Association, Ken McQueen, New Mexico Secretary of Energy, Minerals and Natural Resources Department and Clark Moseley, chief executive officer of Navajo Transitional Energy Company participate in a discussion on the outlook of New Mexico's energy industry, Wednesday, July 19, 2017 during a  the Legislative Finance Committee, meeting at San Juan College's School of Energy in Farmington.
  • Three of the owners of local power plants have announced plans to move away from coal.
  • Both the San Juan Generating Station and the Four Corners Power Plant could close by 2031.
  • Regulations, incentives and market forces are driving an increase in renewable energy development.
  • Closing the coal-fired power plants will have economic impacts on San Juan County.

FARMINGTON — San Juan County faces job losses and reduced revenue from taxes as the electric utility industry changes. 

These effects will be spurred by closures of two coal-fired generating stations in San Juan County.

Utilities across the country are increasing their reliance on renewable energy and moving away from coal. This spring, three major owners in local coal-fired power plants announced plans to move away from coal in favor of renewable energy and natural gas.

New Mexico Public Regulation Commission Chairman Sandy Jones compared the current electric utility changes to the changes in the telecommunications industry caused by cell phones, during a legislative finance committee and revenue stabilization and tax policy committee meeting on July 19 in Farmington.

Legislators described the closures as devastating to the local economy.

"We've seen what happened to Pittsburgh when the steel industry took a big hit," said Rep. Rod Montoya, R-Farmington.

Ken McQueen, New Mexico Secretary of Energy, Minerals and Natural Resources Department addresses members of the Legislative Finance Committee, Wednesday, July 19, 2017 during a meeting at San Juan College's School of Energy in Farmington.

Concerns about closures of coal-fired power plants were echoed by both Republicans and Democrats at the joint committee meeting.

"I am very, very concerned about the economic impact," said Rep. Patricia Lundstrom, D-Gallup, who chairs the legislative finance committee.

From left, Rep. Patricia Lundstrom, D-Gallup, chairwoman of the Legislative Finance Committee, Legislative Finance Committee Director David Abbey and Pam Stokes, a staff attorney for the Legislative Council Service participate in a conference,  Legislative Finance Committee meeting, Wednesday, July 19, 2017 at San Juan College's School of Energy in Farmington.

Several legislators said state and federal regulations and incentives for renewable energy are contributors to the closures.

Incentives and regulations

Jones said renewable energy has now become competitive with the fossil fuels generation partially due to incentives but also due to market forces. The market forces behind growth in the solar industry include improved efficiency and affordability, according to the U.S. Energy Information Administration.

But market forces are not the only reasons for the change. In Tucson Electric Power Company's integrate resource plan, the company states that Arizona's clean energy standards initially "provided the catalyst for these dramatic changes." The company owns 20 percent of San Juan Generating Station and a portion of Four Corners Power Plant.

From left, State Rep. George Dodge Jr., D-Santa Rosa., Rep. Eliseo Lee Alcon, D-Milan and Rep. Randal S. Crowder, R-Clovis confer, Wednesday, July 19, 2017 at San Juan College's School of Energy in Farmington.

TEP and Arizona Public Service Electric CompanyFour Corners Power Plant's majority owner — are required by the state of Arizona to have 15 percent of their electricity generated by renewable energy sources by 2025. New Mexico has even stricter regulations. By 2020, all investor owned utilities, like Public Service Company of New Mexico, must have 20 percent of their electricity generated by renewable sources.

"We're picking winners and losers," said Rep. Rod Montoya, R-Farmington. "That's what we've done. It so happens that we've picked communities as one of the losers."

Sen. William Sharer, R-Farmington, said the energy industry is suffering because of "death by a thousand cuts" due to regulations.

"People in San Juan County used to make a lot of money," he said.

While jobs have been decreasing in the energy industries, Farmington has seen increased development of retail businesses and fast food restaurants. Sharer said these minimum wage jobs cannot replace the energy jobs.

"That's just not good for our economy," he said. "That's not good for our schools. That's not good for New Mexico."

Participants in a Legislative Finance Committee meeting leave for a break, Wednesday, July 19, 2017 at San Juan College's School of Energy in Farmington.

Industry changes

While renewable energy is a factor impacting coal power plants, the price of natural gas and its ability to be paired with renewable energy sources have also impacted the industry.

Pat O'Connell, PNM's planning and resources director, said natural gas provides more flexibility than coal. At night or during cloudy times, the natural gas plants can be quickly started to supplement or replace solar energy, he explained.

Coal production fell to a 35-year low last year, according to the U.S. Energy Information Administration.

As coal has declined, natural gas and renewable energy have increased. According to the annual energy outlook report released in January by the U.S. Energy Information Administration, natural gas will increase over the upcoming decades while coal consumption decreases. Renewable energy will experience the fastest growth, the report predicts.

These changes are caused by several factors, including federal and state regulations, incentives, technology changes and public opinion.

Another factor is the change in consumption. The annual energy outlook report by the U.S. Energy Information Administration predicts electricity use in 2040 will be half what it was in 2016. At the same time, the growing rooftop solar industry will decrease the demand for energy from the power grid.

Rep. James Townsend, R-Artesia, said he has an issue with the rooftop solar because it allows customer generation to use the utility infrastructure at no cost in some areas.

"You and I don't leave our doors open so our neighbor doesn't have to install plumbing in his house, he can just come over and use ours," he said.

To address similar concerns, Farmington added a standby service rider — which charges the customers to have electricity on standby if the solar panels are not working. The customers pay about $7 for each kilowatt of power their solar array can generate. Solar proponents say the rider discourages solar development. At the same time, Aztec placed a moratorium on new solar agreements until the City Commission approves a new rate structure.

At center, Public Relations Commission  Commissioner Sandy Jones answers  questions during a Legislative Finance Committee meeting, Wednesday, July 19, 2017 at San Juan College's School of Energy in Farmington.

The the nature of wind and solar energy is currently the limiting factor with those renewable energy sources.

"Renewable energy is intermittent," said PRC Economics Bureau Chief John Reynolds. "The sun shines when it shines. The wind blows when it blows."

Natural gas generation provides the flexibility needed to fill in the gaps when the renewables are not producing energy. Coal-fired generating stations take longer to ramp up.

This could change in the future based on energy storage, Jones said.

"If the storage becomes a reality, it's the game changer in the electric industry," Jones said.

Coal-fired power plants

APS, PNM and TEP own shares in either the San Juan Generating Station or the Four Corners Power Plant, or both. All three companies included retiring assets at the generating stations in their integrated resource plans.

"I truly understand the impact that this has to this community," said Sayuri Yamada, a PNM lobbyist, during the joint committee meeting on July 19.

At the same time, she said the electric utility industry is changing.

"Over the next 10 years, we're going to see more changes than we've seen over the past 100 years," she said.

As the companies announced their decisions to move away from coal, they also acknowledged the economic blow their plans will have on San Juan County.

"The (Four Corners Power Plant) and the supporting mining operations have a $225 million annual impact on the Farmington and Navajo economies and provide more than $100 million per year in taxes, fees and royalties to Navajo Nation and state, local and federal entities," the APS integrated resource plan states.

Hannah Grover covers government for the Daily Times. She can be reached at 505-564-4652.