Navajo energy company to acquire shares in coal power plant

(Susan Montoya Bryan | AP) This April, 2006, file photo shows the Four Corners Power Plant in Waterflow, N.M., near the San Juan River in northwestern New Mexico. The closure of the coal-fired power plant on the Navajo Nation sooner than expected will be a major blow to a region where coal has been a mainstay of the economy for decades. Arizona Public Service Co. now plans to shutter the Four Corners Power Plant in 2031 when its coal contract expires rather than wait until 2038.

Albuquerque, N.M. • The Navajo Nation would expand its investment in coal-fired electricity generation as part of a plan announced Monday to acquire more shares in one of the Southwest’s last remaining coal power plants.

The Navajo Transitional Energy Co. has negotiated an agreement in which Public Service Co. of New Mexico would divest from the Four Corners Power Plant in 2024 with the tribal company taking over PNM’s 13% share. The agreement would call for the utility to pay to $75 million to the tribal company for breaking current coal contract obligations at Four Corners.

If approved by state regulators, the transaction would preserve jobs at the plant and the adjacent tribally owned mine for at least a few more years as the tribe and the Four Corners region — spanning parts of New Mexico, Arizona, Utah and Colorado — adjusts to a changing energy economy and mandates for more renewable energy.

Many of the workers at the mine and the power plant are Navajo.

The deal also would allow the New Mexico utility a faster exit from coal. PNM already has regulatory approval to exit the neighboring coal-fired San Juan Generating Station in 2022. The workforce there also includes many tribal members.

[Read more: Program that provides coal to Navajos for heating resumes]

PNM said in a statement issued early Monday that it plans to file with New Mexico regulators early next year its proposal for abandonment and securitization of the unrecovered investment in the Four Corners plant.

PNM has predicted its customers could collectively save about $100 million on their bills with the utility’s exit from Four Corners seven years earlier than planned. However, customers would still pick up the costs of pending liabilities after 2031, plus the cost of replacing Four Corners electricity with other resources.

“This is a major step in our vision to create a clean and bright energy future and achieve our industry-leading goal of emissions-free energy by 2040,” Pat Vincent-Collawn, PNM Resources' chairman, president and CEO, said in the statement.

NTEC officials said the primary goal is to facilitate an orderly and successful exit by PNM, thereby preventing near-term job and revenue losses for the Navajo Nation.

Ensuring the plant remains open until 2031 is “completely aligned with NTEC’s charter and responsibility to preserve jobs and revenue for the Navajo people,” the company said in a statement. “The contemplated deal does not increase the planned operating life of the facility and does not increase liability to any of the owners, including NTEC.”

NTEC also said it has kept the Navajo leadership updated on negotiations for the past year.

In an Oct. 16 email, NTEC CEO Clark Moseley indicated that PNM would remain liable for its share of future plant decommissioning and that an audit would be performed to ensure the utility can fund its portion of final mine reclamation expenses.

PNM officials confirmed during a news conference that the utility will retain liability for coal reclamation and plant decommissioning, which could total about $45 million.

NTEC is owned by the tribal government but run independently by a non-Native executive team in Colorado. It has invested heavily in coal in recent years — acquiring the Navajo Mine in 2017, its current 7% stake in Four Corners in 2018 and three coal mines in Wyoming and Montana last year.

Arizona Public Service Co. is the owner and operator of the Four Corners plant, with a 63% stake. The Salt River Project owns 10% and Tucson Electric Power has 7%. PNM’s stake represents 200 megawatts that make up less than 10% of the utility’s generation portfolio.

Under New Mexico’s Energy Transition Act, PNM must replace its coal and natural gas plants with renewables over the next two decades.

The law also allows the utility to recover investments in abandoned fossil fuel plants through bonds that would be paid off by customers. The bonds could include about $16 million in economic development assistance for the Four Corners area to offset job and tax revenue losses.

“This is a big step for PNM and for New Mexico,” said Tom Fallgren, vice president of generation. “Our step out of coal though is not a step out of communities that we have been serving and have been a part of for so long. We will continue to identify innovative ways to support economic development in those areas impacted by this transition.”

An early exit also would meet conditions included in PNM Resources' recently announced plan to merge with Avangrid, a U.S. subsidiary of global energy giant Iberdrola.

Environmentalists have concerns about the Four Corners proposal, saying it would deepen the Navajo Nation’s reliance on fossil fuels.