Plan calls for shuttering part of PNM power plant

ALBUQUERQUE, N.M. -- Months of wrangling over the best way to curb pollution from a PNM Resources Inc. coal-fired power plant that serves more than 2 million customers in the Southwest have given way to a proposal that could see New Mexico transition to cleaner sources of energy to meet its electricity demands.

Republican Gov. Susana Martinez's administration on Tuesday unveiled details of a proposed settlement involving pollution controls at the San Juan Generating Station in northwestern New Mexico.

It calls for retiring two units at the plant by December 2017 and installing less costly equipment for cutting pollution on the plant's remaining units.

At issue is an order from the U.S. Environmental Protection Agency that calls for PNM unit Public Service Company of New Mexico to equip the plant with certain technology to cut pollutants that cause regional haze and visibility issues in national parks and wilderness areas. The rule, issued in August 2011, gave PNM and the plant's other owners five years to come into compliance.

The utility and the Martinez administration challenged the order in federal court. They favored a state plan for trimming haze that would have been less costly.

The proposal unveiled Tuesday is a compromise meant to address pollution concerns while ensuring the costs of environmental upgrades are not unbearable for ratepayers, said Ryan Flynn, general counsel for the New Mexico Environment Department. He called it a "long-term vision."

"We could invest in some really costly proposals and keep the state bound to coal for the next 45 to 50 years or we can take a step toward transitioning the state to other sources of energy like natural gas," Flynn told The Associated Press in a phone interview.

It will be up to the EPA to clear the way for the proposal to be formally considered in a process that would include public comment and input from state regulators. PNM also has to buy in.

PNM chairwoman, president and CEO Pat Vincent-Collawn said she hoped the state's announcement will serve as the basis for a new plan.

While environmental groups have yet to endorse the alternative, some groups that have been pushing for PNM to retire the plant describe the proposal as a positive first step.

"The economic realities are really starting to come to a head," said Jeremy Nichols of the group WildEarth Guardians. "Businesses and the Martinez administration are recognizing that this is a major liability, and we need to deal with it more effectively. We can't just keep putting Band-Aids on these problems and slapping on additional air pollution controls."

The 1,800-megawatt plant is New Mexico's single largest source of electricity, and also provides power to customers in California, Arizona and Utah.

Regulatory pressures have been mounting against coal-fired power plants in recent years. An Associated Press survey found last year that more than 32 plants in a dozen states will be forced to close because of federal pollution regulations.

Those pressures have already affected the Four Corners Power Plant just a few miles from San Juan. Operators of that plant are working on decommissioning three units by 2014.

To prepare for the economic fallout of retiring San Juan's two units, the state's proposal calls for PNM to build a new peaking unit and natural gas pipeline. The utility would also have to make up the loss of power by purchasing electricity from existing gas-fired plants in New Mexico.

PNM would also have to provide $1 million to the neighboring Navajo Nation for job training.