Council OKs San Juan Generating Station Agreement

PNM San Juan Generating Station. Courtesy/wikipedia

Staff Report

Los Alamos County Council voted Tuesday evening to approve San Juan Generating Station Restructuring Agreements in order to allow four partners to exit the plant.

Councilors Pete Sheehey and Susan O’Leary expressed support for the motion but Sheehey offered an alternate motion adding language to further move that Council request the Board of Public Utilities and staff to prepare a phased plan by which this generating capacity can be economically replaced with renewable carbon-minimized energy when these agreements expire in 2022. O’Leary then offered a friendly amendment to ask the Utlities Board to come back with a plan for public involvement in this decision, which Sheehey accepted.

Councilor James Chrobocinski then moved to accept the original motion as stated in the agenda to simply accept the restructuring aggreements, which passed 5-2. Sheehey and O’Leary voted against it.

The San Juan Generating Station Restructuring Agreements incudes the Amended and Restated Mine Reclamation and Trust Funds Agreement, the San Juan Decommissioning and Trust Funds Agreement, the Restructuring Amendment Amending and Restating the Amended and Restated San Juan Project Participation Agreement and the Exit Amendment Amending and Restating the Amended and Restated San Juan Project Participation Agreement.

As background, in January 2011, the U.S. Environmental Protection Agency issued a proposed Federal Implementation Plan (FIP) under the Clean Air Act that included a Best Available Retrofit Technology (BART) determination for emissions of nitrogen oxides from San Juan Generating station. 

This FIP would have required installation of Selective Catalytic Reduction (SCR) technology at the plant at a cost of approximately $750 million. Negotiations with the EPA were initiated in an attempt to find a less expensive way to achieve the same goal.

In February, 2013, agreement was reached on a proposal to install selective non-catalytic reduction (SNCR) technology on Units 1 & 4 by Jan. 31, 2016, and shut down Units 2 & 3 entirely by Dec. 31, 2017. So while the cost for this alternative plan was estimated to be approximately 20 percent that of the previous FIP, half the generation capacity would be lost.

This agreement was then proposed by the New Mexico Environment Department, and ultimately approved by EPA as a revision to the New Mexico State Implementation Plan (SIP) in May, 2014.

During the negotiations with EPA over the SIP revision, four of the participants in the San Juan Generating Station, MSR Public Power Agency, Southern California Public Power Authority, the City of Anaheim, California and Tri-State Generation and Transmission Association decided it was in their interests to withdraw from participation in the plant.

With the loss of half of the station generation capacity and the departure of four of the nine participants, a restructuring of the Plant Participation Agreement then became necessary.

Restructuring the ownership of the SJGS presents an opportunity for Los Alamos County to secure a clear off-ramp from the project that is both economical and aligns with DPU’s goals of being carbon neutral by 2040.

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