NTEC will acquire PNM's share of the Four Corners Power Plant in 2024
AZTEC — The state's largest utility plans to no longer receive any electricity from coal-fired power plants after 2024 and has reached an agreement with Navajo Transitional Energy Company to facilitate that effort.
Public Service Company of New Mexico announced on Nov. 2 that it plans to exit the Four Corners Power Plant by the end of 2024, transferring its 13% ownership to Navajo Transitional Energy Company.
NTEC, which is a tribal enterprise company, had previously acquired 7% ownership in the Four Corners Power Plant from El Paso Electric.
Previous coverage: Navajo energy company in talks over coal-fired Four Corners Power Plant
The agreement announced on Nov. 2 does not mean that the power plant will continue operating past 2031. The various owners of the power plant will determine if the plant closes. Arizona Public Service Company is the majority owner of the Four Corners Power Plant.
During a press conference, PNM Vice President of Generation Tom Fallgren said the agreement achieves five main things: saves the ratepayers approximately $100 million, allows PNM to end its use of coal-fired generation in 2024, requires shareholders to pay for the release of the coal contract obligation, transfers the 13% ownership to NTEC and provides the impacted community and workers with approximately $16 million through securitization.
"This approach benefits customers, the environment and Navajo Nation and our promise to serve more than 530,000 customers reliably, safely and at a low-cost, all with environmentally sound electric generation," Fallgren said. "This is a big step for PNM and for New Mexico. Our step out of coal, though, is not a step out of the communities."
Securitization is essentially refinancing past investments into the power plant with low-interest bonds. This method was authorized under the Energy Transition Act and has only been used once previously: to finance PNM's exit from the San Juan Generating Station in 2022.
PNM will be required to file applications for securitization with the New Mexico Public Regulation Commission and must also seek PRC approval to transfer its ownership and replace the 200 megawatts it currently receives from the Four Corners Power Plant with other sources such as renewables or natural gas.
In 2018, the PRC ordered PNM to complete a cost-benefit analysis that looked at exiting the Four Corners Power Plant in 2024.
The low-interest bonds available through securitization are paid off by a non-bypassable charge on customer bills, however PNM leaders said the bills will go down for customers and exiting the Four Corners Power Plant will have no negative impacts for customers.
The company will retain liability for coal reclamation and plant decommissioning.
The Energy Transition Act requires that a portion of the bond funding be set aside in state-managed funds administered by three different state departments: the New Mexico Department of Workforce Solutions, the New Mexico Economic Development Department and the Indian Affairs Department.
Funds have been set up in each department for that money, which can only be used as specified by the Energy Transition Act.
PNM estimates that it will ask for $250 million to $280 million in securitization. Based on those numbers, PNM anticipates the Indian Affairs Fund will receive $1 million, the Economic Development Fund will receive $5 million and the Workers Assistance Fund will receive $10 million.
The economic development funding can be spent on projects within affected communities, defined as being within a 100-mile radius of the power plant and within New Mexico.
This comes about a decade before the Four Corners Power Plant is scheduled to close in 2031, but Fallgren said it is never too early to start assisting workers who could be displaced by the closure.
NTEC officials say the goal of the agreement is to prevent near-term job and revenue losses for Navajo Nation. The tribe is already facing the economic challenges caused by closing power plants, including Navajo Generating Station.
"The existing Four Corners Power Plant (FCPP) owners have previously announced an expected closure of the plant in 2031," NTEC said in an email statement. "Ensuring FCPP can continue operating successfully until 2031 is completely aligned with NTEC’s charter and responsibility to preserve jobs and revenue for the Navajo people. The contemplated deal does not increase the planned operating life of the facility and does not increase liability to any of the owners, including NTEC. NTEC and PNM have kept the Navajo leadership continually updated on the process and status for the past year."
Additionally, the tribal enterprise states that the deal will not increase the NTEC's liabilities or any of the other power plant owners' liabilities.
"The Navajo Nation is not providing any funding or assuming any liability associated with this deal," the email stated.
If the transfer of ownership is approved, it will accelerate PNM's path to being emissions free. PNM officials say the utility will phase out all fossil fuels by 2040, which is earlier than required by current state and federal laws.
"We all share one goal: an emissions-free New Mexico with a reliable power supply," Fallgren said.
Hannah Grover covers government for The Daily Times. She can be reached at 505-564-4652 or via email at firstname.lastname@example.org.
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