UPDATED: April 2, 2020: New Mexico regulators on Wednesday approved the Public Service Company of New Mexico's (PNM) request to abandon the San Juan coal plant, financing the exit through securitization.

"Our customers, communities, and environment will benefit as we move to exit all of our coal-fired generation and replace it with lower-cost, cleaner energy resources," PNM Chairman, President and CEO Pat Vincent-Collawn said in a statement.

Dive Brief:

• New Mexico's landmark clean energy law will apply to the retirement of the San Juan coal plant, the state's Supreme Court ruled on Wednesday.

• State utility regulators in July ruled to effectively bypass New Mexico's Energy Transition Act (ETA), which officially became law June 14, 2019, by placing a portion of the San Juan retirement proceeding in a January docket. The move prompted outcries from the governor, state legislators and clean energy groups that had supported the ETA, which will bring the state to 100% carbon-free power by 2045.

• But although the ETA now must apply to the plant's abandonment proceedings, giving the facility's majority owner PNM opportunity to securitize their stranded debt in the plant, the city where the plant resides may still have a say in its future. Local carbon capture company Enchant Energy and Farmington, New Mexico, on Thursday signed a Memorandum of Understanding as a first step in a coal supply agreement with Westmoreland Coal Holdings in response to the order.

Dive Insight:

The question of whether the ETA applies to the San Juan plant has been a contentious battle between regulators, environmentalists, carbon capture advocates and local interests. 

"It's a great relief to have some clarity, one way or another. That's the main thing," state Commissioner Cynthia Hall told Utility Dive. Hall voted in favor of moving part of the plant's abandonment proceeding into an earlier docket, but was not opposed to the ETA, rather cast the vote in order to preserve her ability to seek reconsideration.

Now, state regulators are ordered by the New Mexico Supreme Court to apply the ETA to PNM's "proposed abandonment, financing, and replacement of units one and four of the San Juan Generating Station​" and abandon other proceedings inconsistent with the court's ruling.

State leaders and clean energy advocates were pleased with the decision, including Democratic Gov. Michelle Lujan Grisham, who made climate change and clean energy central to her 2018 campaign and was a strong advocate of the legislation. Following the state's Public Regulation Commission's (PRC) July decision, the governor threatened to restructure the regulators and a legislator began examining a proceeding to impeach state regulators.

"Today's unambiguous ruling by the Supreme Court underscores what we have said all along: the Energy Transition Act is the law of the land," she said in a statement. "I am grateful for the court's quick and impartial action, and I look forward to continuing New Mexico's push into a thriving clean energy future."

"The Energy Transition Act is nation leading legislation that moves quickly to renewables and saves money, while still transitioning workers and impacted community," Sierra Club Rio Grande Chapter Director Camilla Feibelman​ told Utility Dive. "The idea that the PRC would ignore legislation that was supported by the Navajo Nation" and many other stakeholders "was just difficult to understand."

But Farmington and Enchant said the ruling does not deter their plans for the plant — which include retrofitting the facility with carbon capture technology and taking over 95% of its ownership. The ETA leaves the door open for carbon capture until 2045 and PRC staff advocated for this method in November testimony on the proceeding.

PNM plans to abandon the plant in 2022, and Enchant said it would take over operations and get it retrofitted by 2023. The utility has said elongating the plant's life through carbon capture would cost $1.3 billion more than its current long-term plan.

"City of Farmington and Enchant Energy agree that the recent New Mexico Supreme Court decision on the applicability of the Energy Transition Act will have no adverse impact on a successful [carbon capture] project at SJGS, especially because the CCUS project complies with the emissions limitations for SJGS imposed by the ETA," the city and company said in a statement announcing their next steps with Westmoreland.

While most clean energy advocates supported the ETA, one environmental group raised concerns that the law would negatively impact customers, criticizing in part the securitization portion of the law​ that would allow PNM stakeholders to come out even on their initial investment in the plant, despite its early closure. New Energy Economy tried to argue last year that the act was unconstitutional, and Executive Director Mariel Nanasi has called the legislation "corporate politics." 

And though many groups hail the law's commitment to community transition — which includes $60 million in grants to help workers laid off after the closure of the plant — the city of Farmington remains critical.

"I don't know if you can really compare … a facility that produces $70 million a year in salaries and benefits to its workforce and a one time handout from the state that … is not going to be nearly as impactful as what they tried to sell it as," Farmington Mayor Nate Duckett told Utility Dive, when the city first announced the agreement with Enchant in August.

Despite its many hurdles though, many say the law's broader efforts are critical to the state's energy transition.

"The bill, like most bills, represents a compromise, or numerous compromises," said Hall. "It's not a perfect bill but it's an important policy of moving forward with renewables in our state, which is paramount with climate change approaching."

Part of the act mandates PNM, the state's largest utility, get 20% of its power from renewable energy by the end of this year, and on Thursday the PRC approved a 120 MW wind project that will allow the state to meet its 2020 goal. 

"PNM will still have to significantly clean up its energy portfolio in 2025 and 2030 and then again when it exits" its other coal-fired plant, the 2,040 MW Four Corners plant, by 2031, the Sierra Club noted.