Public Service Company of New Mexico wants out of the Four Corners Power Plant so badly it’s willing to pay $75 million to give its share to another company.
The “buyer” is the Navajo Transitional Energy Co., which has ties to the Navajo Nation. NTEC would pay PNM $1 in the transaction.
PNM’s plan to abandon its part ownership of the coal-fueled plant in northwestern New Mexico is being heard this week and next before the state Public Regulation Commission. The polluting power plant has ceased to appeal to PNM, but the plant and its nearby coal mine provide hundreds of jobs for people in the Navajo Nation, prompting NTEC’s interest.
Gideon Elliot, representing the Attorney General’s Office, said Wednesday PNM’s part in the proposed transaction reminded him of the 1986 movie The Money Pit, in which a young couple sign a bad deal for a home.
Tom Fallgren, vice president for energy generation at PNM, disagreed with Elliot. “And I would object to the Money Pit analogy, honestly,” he said.
PNM’s agreement with NTEC includes a pledge that PNM will not vote for closure of the plant before turning over its 13 percent share at the start of 2025.
Four Corners, which isn’t expected to close for 10 years, has several owners, including primary owner Arizona Public Service.
Fallgren said PNM included the clause about not voting for closure because that would have a “material adverse effect” on the transaction. NTEC wouldn’t have interest in the deal if the status of the plant changed considerably before the transaction took effect.
PNM, the largest utility company in New Mexico, has denied it was required to get out of Four Corners after it started merger negotiations last year with Avangrid of Connecticut and Iberdrola of Spain, companies that don’t want to be involved in power generated by coal. Hearings were held on the proposed merger, but the Public Regulation Commission hasn’t yet ruled on it.
Avangrid wanted PNM to make progress in getting out of the coal plant, but there was no requirement to have a sale completed, PNM has said. The utility also has said it began efforts to pull out of the plant before it started conversations with Avangrid.
PNM has pointed out the merger proposal is not tied to its Four Corners case before the Public Regulation Commission. But it’s unclear whether the proposed merger would proceed if the commission shot down PNM’s abandonment of the plant.
The commission could deny PNM’s plan to leave Four Corners for a couple of reasons. One is that NTEC has given no indication it would want the coal plant to shut down before 2031, so there might be little environmental benefit in the transaction. PNM argues, however, NTEC’s plan to run the plant seasonally would reduce emissions by 20 percent to 25 percent.
The other reason is that $300 million, mainly in PNM capital costs at Four Corners, would be passed on to customers in the abandonment plan.
PNM contends various factors would actually produce a savings for customers and that they wouldn’t suffer from the abandonment plan. PNM also said the $75 million that would go to NTEC would be paid by shareholders, not customers.