State's high court upholds ETA, PNM's plan to abandon San Juan Generating Station

John R. Moses
Farmington Daily Times

FARMINGTON — The New Mexico Supreme Court on Monday rejected arguments made by the groups Citizens for Fair Rates and the Environment and New Energy Economy Inc. against parts of a controversial state law passed in 2019. 

The Energy Transition Act (ETA) is an environmental law that includes a timeline for utilities to replace the energy provided by coal-fired plants with greener sources of power.

The New Mexico Supreme Court decision allows for the issuance of $361 million in bonds by the Public Service Company of New Mexico (PNM) that will cover the costs of abandoning the coal-fired San Juan Generating Station and may send long-anticipated job training and other funds to communities in the Four Corners.

PNM’s customers would have to repay the bonds through a surcharge on their utility bills.

PNM said Monday the court concluded that the Legislature acted within its authority and the court “affirmed that PNM’s plan to abandon and securitize its transition out of the San Juan coal plant is consistent with the Energy Transition Act.”

More:San Juan County seeking $4.1 million in capital outlay funds for three projects

These pulverizers once crushed coal for unit 3 at the San Juan Generating Station. They have since been shut down along with the unit.

“We are pleased this decision once again confirms the legality of the Energy Transition Act (ETA), allowing PNM to continue its progress in a just transition towards a clean energy future,” the utility’s statement said on Monday. “We are also encouraged with today’s decision by the New Mexico Supreme Court rejecting claims from New Energy Economy intended to thwart PNM’s plans to implement the ETA.”

As for the issuance of bonds, PNM spokesman Raymond Sandoval said Monday the utility is still studying the issue.

“PNM is studying the court’s decision to evaluate next steps that PNM may take in potentially pre-funding portions of state agency funds authorized by the ETA for economic development and communities in the San Juan area,” he said via email. “PNM will also consider possible funding (of) the severance and job trainings for Westmoreland employees at the San Juan mine, many of whom have been laid off this past year.”

The utility, Sandoval said, was also studying whether PNM could face any further legal challenges.

An employee watches screens inside the control room to ensure operations run smoothly at the San Juan Generating Station in this Sept. 25, 2019 file photo.

Court spells out its decision

“The state Supreme Court today rejected constitutional challenges to the Energy Transition Act (ETA), which requires electric utilities to move to carbon-free power generation,” said a news release from the state’s Administrative Office of the Courts.

The court’s unanimous opinion upheld a financing order issued in April 2020 by the Public Regulation Commission regarding PNM’s abandonment of the San Juan Generating Station. It did not address two of the issues raised in the case, which the court found were based on actions the PRC might take in the future and "are not properly before the Court and are not essential to our disposition of this appeal."

The two groups challenged part of the law that let PNM issue “up to $361 million in bonds for ‘energy transition costs’ in abandoning the  power plant near Farmington,” the court’s release stated.

Among those costs were “recovery of undepreciated investments in the plant, decommissioning, assistance to coal mine and power plant workers losing their jobs and payments to state-administered funds to help communities economically impacted by the plant's retirement,” the release said.

An opinion from Justice David Thomson said that advocacy groups were unable to show that the new law results in unreasonable charges on utility bills, The Associated Press reported. The court rejected arguments that the Legislature overstepped its constitutional authority or infringed on the utility commission's responsibility for regulating utility companies.

“While the New Mexico Constitution delegates to the Commission the exclusive responsibility for carrying out public utility regulatory policy, the parameters of that policy are, in the first instance, for the Legislature to decide,” Thomson wrote.

Farmington City Manager Rob Mayes told The Daily Times on Tuesday that the court’s decision has no impact on Farmington’s plans to work with Enchant Energy and keep the generating station open after PNM moves on.

"The COF remains optimistic for the extension of the useful life of SJGS through its partnership with Enchant Energy, thereby saving over 1,600 direct and indirect jobs and preserving a clean source of affordable, dependable electricity for our state and region,” Mayes said in a prepared statement. “Through carbon capture technology, emissions levels will easily meet or exceed the requirements of the ETA. This particular court ruling was not a surprise and is fundamentally about PNM's rate structure and therefore of minimal significance to Enchant Energy or the City of Farmington."

New Energy Economy Executive Director Mariel Nanasi stands outside the San Juan Generating Station, Monday, Oct. 28, 2019, following a tour of the site in Waterflow.

Opponents weigh in

The head of one group involved in the legal challenge said the utility opened the door to further state court scrutiny through an appeal of another PRC decision involving another coal plant.

“The Supreme Court found that New Energy Economy’s appeal was rightfully before the court but declined to rule that the ETA prevents future ratemaking authority to adjust rates and deferred a ruling on the unripe challenge to the Commission’s ratemaking authority — particularly to 'determine that ratepayers must pay for imprudent costs,'” New Energy Economy Executive Director Mariel Nanasi said after the ruling in a prepared statement.  

Nanasi said that PNM’s December 2021 “appeal of the PRC’s rejection of their Four Corners Power Plant abandonment application, including the $300M in imprudent costs, however, has now placed this issue squarely before the NM Supreme Court.”

“Significantly, the Supreme Court upheld the Commission’s authority and that the ETA should be construed in harmony with existing legislation,” Nanasi said in the statement. “It did not reach New Energy Economy’s most important issue — whether ratepayers should be stuck with imprudent costs as is the case in Four Corners. It deferred making a finding on that issue which is now squarely before the NM Supreme Court in PNM’s Four Corners appeal.” 

The San Juan Generating Station is seen on Nov. 14, 2019, from the adjoining San Juan Mine.

Environmental advocates celebrated

Many national groups, as well as local and statewide groups, were keeping an eye on the case.

"This decision is welcome news. It clears away the obstacles that were keeping support from flowing to communities like Farmington, which desperately need assistance to help in the transition to post-coal economies,” San Juan Citizens Alliance Energy and Climate Program Manager Mike Eisenfeld said in a news release issued by the Sierra Club - Rio Grande Chapter. “That includes funding for innovative clean energy projects that will be such an important part of our rebuilding." 

“Today’s ruling affirms that the New Mexico state legislature can establish critical clean energy policies like the Energy Transition Act,” said Noah Long of the Natural Resources Defense Council. His comments were also included in the Sierra Club’s news release.  

Long and other activists hope the decision will help take the decarbonization issue farther in the Roundhouse.

“This legislative session, our state leaders should go even further by speeding up our transition to clean energy, setting binding pollution limits for every sector, and ensuring job opportunities and utility bill savings for working families,” said Long, who is the NRDC’s western climate and clean energy program director.

The full case, Citizens for Fair Rates & the Env't v. NMPRC, No. S-1-SC-38247, is available on the New Mexico Compilation Commission's website at https://nmonesource.com/nmos/nmsc/en/item/518898/index.do.

The Associated Press contributed to this story.

Contact John R. Moses at 505-564-4624, or via email at jmoses@daily-times.com.

Support local journalism with a digital subscription: http://bit.ly/2I6TU0e