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FARMINGTON — A settlement agreement between the Public Service Company of New Mexico and other key parties in a case before state regulators to keep the San Juan Generating Station open was reached Thursday.

The settlement paves the way for a vote by the New Mexico Public Regulation Commission in the coming weeks on the future of the Waterflow power plant, a decision that will close one of the more controversial and complicated cases in state regulatory history.

The five-member commission is considering a plan by PNM that involves retiring two units at the coal-fired generating station by the end of 2017, and replacing the lost power with additional coal-generated power from another unit at the plant, power from the Arizona-based Palo Verde nuclear plant, and some additional natural gas- and solar-generated power. The plan was developed as a compromise after plant officials said meeting federal haze regulations under the federal Clean Air Act at the plant would be too expensive and result in the utility closing the station.

After weeks of settlement discussions ordered by the PRC on June 26, the settlement announced on Thursday represents good news for the utility, its customers, environmental regulators and the Four Corners economy, according to Pat Vincent-Collawn, PNM Resources' chairman, president and CEO.

"This is a win for customers, the environment and for jobs," Vincent-Collawn said in a statement issued late Thursday. "I appreciate the willingness of the parties to collaborate to reach a fair settlement that incorporates the best interests of electric customers, addresses federal environmental regulations, and protects the economy of the Four Corners region and the state."

The key parties include state Attorney General Hector Balderas, Western Resource Advocates and the New Mexico Coalition for Clean Affordable Energy, and all three have signed on to the agreement. Other parties to the case may join the agreement at a later date, according to Vincent-Collawn.

District 4 Commissioner Lynda Lovejoy, D-Crownpoint, said the signing of the agreement documents will take place before regulators vote on the case.

Lovejoy, whose district includes Farmington and the power plant, said that while approval of the case by the PRC is not guaranteed, the settlement is a good sign. The regulators' focus, she said, will be on the key terms and conditions included in the plan and settlement.

She said that reaching a final vote on the San Juan case would be a challenge for the PRC.

"This is probably going to be one of the hardest jobs, the hardest decision, by the commission in its history," Lovejoy said in a phone interview on Thursday evening. "I want the ratepayers in Farmington and the areas in the northwest region to be patient and look forward to a more positive result."

James Fenton is the business editor of The Daily Times. He can be reached at 505-564-4621 and jfenton@daily-times.com. Follow him @fentondt on Twitter.

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