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NM regulators deny permit for El Paso gas plant already under construction

The New Mexico Public Regulation Commission on Dec. 16 denied a request by El Paso Electric Co. to build a 228-MW natural gas-fired plant because it will not meet the state's 2045 net-zero goal, even though the company has already started construction on the facility.

The commission's hearing examiner, Elizabeth Hurst, recommended denying EPE's request because it was in the best public interest for New Mexico, and the five-member commission agreed during the Dec. 16 meeting. (PRC Docket No. 19-00349-UT)

The Public Utility Commission of Texas approved the proposal Oct. 16, as EPE's jurisdiction is split between the two states. The Newman CT plant, also known as Newman 6, is in El Paso County, Texas, adjacent to two older plants.

EPE's proposal does not meet requirements under New Mexico law, commission associate general counsel Russell Fisk said, noting that 80% of the company's customers are in Texas so the utility follows the priorities of Texas.

"Any multi-jurisdiction utility must plan to comply with laws of both jurisdictions," Fisk said. "They asked the [New Mexico] commission to simply follow a Texas decision based on Texas law" and ignore New Mexico law. "This is really troubling because Texas has different laws."

EPE's request to built the Newman Unit 6 plant, at a site northeast of El Paso, Texas, has an estimated cost of $159.3 million, according to the case history. The utility included the Newman 6 unit along with solar and storage resources it selected through a request for proposals to meet customer demand by 2023. The New Mexico commission in May approved two power purchase agreements the utility had proposed, one for 100 MW of solar and one for 50 MW of storage capacity, but rejected third.

The additional capacity was needed, EPS said, because the utility plans to retire units at the existing Newman, Newman CC and Rio Grande plants, all older gas-fired facilities.

New Mexico's renewables legislation

New Mexico's Energy Transition Act, signed into law in March 2019, sets a statewide renewable energy standard of 50% by 2030 for investor-owned utilities and rural electric cooperatives, bumping up to 80% by 2040, then 100% carbon-free power for IOUs by 2045 and rural electric cooperatives by 2050.

Building a gas turbine itself is not in violation of New Mexico law because the proposed unit would improve emissions from the current plant and work toward the state's zero emission goal, Commissioner Jeff Byrd said.

"I think it's in the public interest to keep power reliable with the current system while increasing renewables," Byrd said about improving existing facilities in addition to adding renewables. "Anytime we can decrease emissions, it should be a good thing."

However, EPE's proposal was misleading in terms of cost to consumers because it was based on a 40-year life unit, Commissioner Cynthia Hall said. If EPE plans to comply with New Mexico's Energy Transition Act, the proposed gas plant couldn't have a 40-year life. Yet, the cost was presented over a 40-year time to appear less to consumers, Hall said.

Case participant arguments

Commission staff was the only case participant that agreed with EPE's request, although staff's review was not as thorough, Hurst said. Staff accepted EPE data and had no independent analysis.

The other participants in the case, nearly a dozen parties, disagreed that the unit needed to be built, Hurst said, adding some disagreed with the bidding process, which was viewed as skewed to favor the project being self-built by EPE.

Numerous intervenors opposed the building request as "not something that was a good choice for consumers in New Mexico," Hall said.

Staff had very limited testimony and did not look at the full picture, Commissioner Stephen Fischmann said, adding all other intervenors had similar arguments.

"I don't recall looking at a record where the intervenors were so in agreement on so many items," Fischmann said.

Kassia Micek is a reporter for S&P Global Platts. S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.