Steve Terrell | Santa Fe New Mexican

Public Service Company of New Mexico, the state’s largest electrical utility, filed a plan with the state Public Regulation Commission to replace its coal-fired generation from the San Juan coal plant, saying the proposal would save residential customers an average of $7.11 a month in the first year and would allow the company to operate on about 42 percent renewable energy in four years.

In addition, PNM said Monday, it would be 100 percent emissions free by 2040 which would be five years sooner than the date called for by the state Energy Transition Act, which became law this year and was backed a coalition including PNM, environmentalist groups and business organizations.

The plan, according to PNM officials, also spells out how the company would spend $20 million for severance pay, retraining and education for workers at the San Juan Generating Station as well as displaced workers at an adjacent coal mine.

The Public Regulation Commission will hold hearings and eventually vote on the proposal. PNM officials said they hope the commission will approve it by the end of the year.

Ron Darnell, PNM’s senior vice president for public policy, said in a news conference that the utility has to balance several factors, including the cost of energy to customers, the impact on the environment and the cost of keeping electrical delivery reliable. He said the company understands its “responsibility to keep the lights on.”

In its filing, PNM presents four possible scenarios for replacing the power that will be lost by shuttering the two remaining coal-fired plants.

The first is the plan the company prefers, which would include a combination of new solar facilities (including a 300- megawatt installation proposed for San Juan County); a new wind farm near Estancia, which the company recently proposed to the commission; new energy battery storage facilities around the state and more natural gas from a long-planned 280-megawatt project located near the soon-to-be-shuttered coal-burning plant.

According to PNM, more than 35 percent of new generation would be within the Central Consolidated School District, which serves the vast area around the towns of Kirtland and Shiprock, among others, and which stands to lose tax revenue when the power plant closes.

Another scenario is one in which all the energy-replacement facilities would be built within San Juan County. Though this scenario would be best for keeping tax revenue in that county, it would require more natural gas for power, would result in higher carbon emissions and would cost about $54 million more than the preferred PNM plan.

A third scenario would use no new natural gas, while a fourth would use only wind and solar power. PNM says these plans, which would lead to fewer carbon emissions, would be far more costly and would not meet federal energy reliability standards.

Environmental groups gave mixed reviews to PNM’s proposal. Several expressed opposition to PNM’s preferred plan — in part due to its reliance on more natural gas, which the utility says is necessary to ensure reliable delivery of power.

But Steve Michel, deputy director of Western Resource Advocates’ Clean Energy Program, applauded the filing saying the proposal “shows how good outcomes can be achieved when people work together to solve problems.”

He added: “Going forward, we will be looking closely at the proposal to see what improvements can be made — for example, by locating more renewable energy in San Juan County.”

Ben Shelton, political and legislative director of Conservation Voters New Mexico, called Monday’s filing “a start toward meeting the goals of the Energy Transition Act.”

But Shelton also expressed skepticism of the need for natural gas in PNM’s play.

“We look forward to the Public Regulation Commission … ultimately approving a plan that includes the minimum amount of natural gas necessary to guarantee the reliable integration of the most clean energy and storage possible, especially in San Juan County,” he said.

And Mariel Nanasi, executive director of the Santa Fe-based New Energy Economy, also objected to the reliance of natural gas in PNM’s plan. She said in a news release the plan has “fundamental biases toward their ownership of replacement power resources” and that the money proposed for the displaced workers is “paid for 100 percent by ratepayers.”

The San Juan Generating Station is one of two coal-fired plants PNM uses for energy, the other being the Four Corners plant, also in San Juan County. The utility plans to get out of the Four Corners facility in 2031 when its coal supply agreement expires.