PRC should fight EPA on haze rules

$115 million.

That’s how much of your money the Public Regulation Commission could throw away for nothing.

This is no joke. In order to comply with a recent regulation imposed by the U.S. Environmental Protection Agency, the PRC is considering a proposed settlement that would prematurely retire two coal-fired units at the San Juan Generating Station power plant, a privilege for which ratepayers would be charged $115 million and receive nothing.

How did this happen? As is the case with most capital-intensive investments, the upfront cost of building and upgrading these units was spread out decades into the future, on the expectation that the plants, built in the 1970s, would continue to produce electricity until the end of their useful life – 50 years or more.

By retiring them early, ratepayers would be on the hook for the remaining cost of the units, but they won’t get any benefit.

In sum, the proposed settlement would force PNM customers to pay $115 million for electricity generators they won’t use. What a deal!

And we’re not even talking about a public health matter.

The impetus for this disastrous plan is a 2011 EPA regulation, known as Regional Haze, intended to improve visibility. Alas, this aesthetic regulation won’t even improve the view, despite the steep compliance costs.

Computer modeling demonstrates that the emissions reductions due to the regulation wouldn’t have a perceptible impact on visibility. The rule is all pain and no gain.

New Mexico public officials considered several plans for complying with the EPA’s absurd Regional Haze rule, and wasting ratepayer money by prematurely shutting down coal units was the one constant in all of them. Indeed, the plans under consideration only differed in how many millions of dollars they would spend to replace power lost by retiring coal-fired electricity generation more than a decade too soon.

The original plan, proposed in 2012, would have replaced coal power with a new combined cycle gas plant. For their part, environmentalists support a plan that would shut down the entire San Juan Generating Station and replace it with “green” energy sources that are unreliable at best.

The state’s current plan would replace the power lost by retiring two units – out of four – at the San Juan Generating Station with existing nuclear and coal electric generating capacity.

The current proposal appears to be marginally cheaper than the alternatives because it relies on existing capital to replace lost coal power, rather than on building new electricity generating sources. But just because it’s relatively cheaper does not make it a good idea.

All of the proposals are terrible for ratepayers, because they are all based on wasting money. Thus, the current proposal is merely the least bad of several bad options.

Unfortunately, no one on the PRC is resisting this nonsense. It’s difficult to comprehend why New Mexico officials seemingly all agree that it’s necessary to spend scores of millions of ratepayer dollars to unnecessarily discard viable power plants, and then spend hundreds of millions more on replacement power.

New Mexico electricity consumers deserve better.

Rather than accept a bad deal, ratepayers should demand that New Mexico officials and PNM fight back, by pursuing all legal and administrative means of opposing the EPA’s outrageous Regional Haze regulation, which is the cause of all this trouble.