An aerial view of the Navajo Mine, located about 12 miles south of the Four Corners Generating Station. The mine provides sub-bituminous coal to the plant via the Navajo Mine Railroad. / Don J. Usner for Searchlight New Mexico

Bad energy

The Energy Transition Act was supposed to get New Mexico away from coal, but PNM is using it to line its pockets. 

October 21, 2021


Editor’s Update: On Nov. 1, the hearing examiner charged with analyzing PNM’s merger with Avangrid recommended that regulators deny the deal. He said in his recommendation that the potential harm to utility customers outweigh the benefits of the merger. 

One of the oldest coal-burning plants in the country, Four Corners Power Plant near Farmington, is a franken-plant, marked by decades of equipment failures, forced outages and multiple attempts at pollution control. 

Rising costs have left the place so expensive to operate that PNM, the state’s largest utility, wants out — and is asking its customers to pony up and pay for the more than $300 million in investments and other costs associated with the plant.

To justify that demand, the utility is invoking the Energy Transition Act, the 2019 law heralded by environmentalists as a road map for other states to move away from fossil fuels. The landmark legislation established financial tools for New Mexico to close its coal plants and help surrounding communities transition their economies. 

But while PNM has laid claim to the financial incentives under the law, its abandonment proposal will not close Four Corners. Instead, the utility would transfer its shares to the Navajo Transitional Energy Company, an independent enterprise of the Navajo Nation, that has declared its intentions to keep the plant running as long as possible. 

Environmental groups — most of which supported the passage of the ETA — have cried foul, arguing that PNM is misusing the law by failing to push for Four Corners’ retirement. 

The New Mexico Attorney General’s Office has challenged PNM’s application, asserting that the utility is using the ETA to dodge a review of its past investments and foist irresponsible expenditures onto customers.

“We have always believed that the corporation should share in the burden of transitioning to clean energy,” said Cholla Khoury, the director of consumer and environmental protection at the Attorney General’s office. “We’re all for the transition. Climate change is happening and it’s happening now, but ratepayers shouldn’t be the only ones bearing the burden.

The fate of the abandonment application may influence how quickly Four Corners powers down. It will also determine whether New Mexico’s utilities should bear some of the cost of a renewable-energy transition or be allowed to profit entirely from it.


Doubling down on coal

During the 2010s, as utilities across the country  began ditching coal due to rising costs and environmental concerns, PNM doubled down. It reinvested in its coal resources at both the Four Corners plant and the neighboring San Juan Generating Station, spending heavily on repairs and pollution controls as required by federal law. 

In 2018, despite major investments in Four Corners just several years prior, PNM executives began looking for a way out. Executives say exiting the plant would save its customers money and help the utility meet environmental goals.

“The Energy Transition Act is supposed to be the mechanism to transition from coal plants … PNM shouldn’t be allowed to derive the benefits of securitization unless they truly were contributing to retirement.”

— Mike Eisenfeld, member of the San Juan Citizens Alliance

PNM tried to negotiate a shutdown with the plant’s other owners but was unsuccessful. In order to walk away, it has to sell off its 13% share. And that opens the door for another utility to walk in. 

Most environmental groups don’t expect the utility to close the plant immediately. They just want PNM to eliminate elements of the deal that make an early closing so difficult. 

“The Energy Transition Act is supposed to be the mechanism to transition from coal plants,” said Mike Eisenfeld, a member of the San Juan Citizens Alliance. “PNM shouldn’t be allowed to derive the benefits of securitization unless they truly were contributing to retirement.”

The Attorney General’s office now also suggests that PNM is manipulating the ETA to avoid the consequences of its poor investments. 

In 2016, utility regulators reviewed PNM’s continued investment in Four Corners — just as other utilities around the nation were pulling out of coal. In hearings at the time, PNM claimed that staying in Four Corners was the cheapest option. The hearing examiner found that the utility’s decision actually cost more. 

The finding would have put PNM on the hook for all of its investments in the plant, a major blow to shareholders. But the utility’s regulator deferred a vote, leaving the decision hanging.

With the hammer ready to fall, PNM threw its support behind legislation that would give utilities automatic reimbursement when abandoning coal plants.  The last of these bills was the ETA, which passed in 2019. 

PNM claims that this law overrides the hearing examiner’s past decision and entitles the utility company to collect all its former investments in Four Corners by charging its customers.  

“It’s clear cut,” Ray Sandoval, a spokesman for PNM, said. “If the concerns [about Four Corners] were valid concerns, they should have been brought up in the legislative process.”

Some legislators have belatedly attempted to address what they see as shortcomings in the ETA. Three state representatives who voted to pass it have since introduced an amendment to limit the utility’s ability to recover past investments.

“The idea that the Four Corners Plant would continue to burn coal and PNM would get all of its cost recovered basically means that the ETA was not achieving its goals,” said State Sen. Antoinette Sedillo Lopez, one of the amendment’s sponsors. The bill did not pass.

State Rep. Nathan Small, one of the ETA’s original sponsors, defended the law. Despite its problems, he said it is on track for getting New Mexico to a carbon-free grid by 2045. 

But along with potentially handing PNM a windfall for abandoning Four Corners, the ETA has not delivered on many of its promises.  

Four Corners, under current terms, won’t close until 2031. The San Juan Generating Station, set to close next year, may also continue running, though permits for that project have not yet been filed. Money earmarked for job-transition training for coal-mine workers is caught up in litigation.

Meanwhile, managers of fossil-fuel projects in the San Juan Basin are applying for ETA money. 

State Sen. Liz Stefanics, another sponsor of the failed ETA amendment, said she’s disappointed with what the bill has achieved.

“Sometimes you take a chance with bills,” she said. “I support the intention of the ETA, but that’s not what is happening. I’m not totally discouraged, but it doesn’t look good.”