REGULATION

Will politics ‘mess around with’ N.M.’s cautious approach to the Clean Power Plan?

New Mexico power companies last month started staking out their hopes for the state's plan to cut greenhouse gas emissions under the Clean Power Plan, according to public records obtained by ClimateWire.

In a private meeting with representatives from 13 utilities and rural electric cooperatives on Nov. 13, the New Mexico Environment Department's Air Quality Bureau (NMED) heard that most of the companies are leaning toward a mass-based standard, in which the state would cap total emissions rather than adhere to an average rate of CO2 produced by the power fleet.

The companies also may want New Mexico to allow interstate emissions trading, so that fossil fuel generators that fall short of their standards can purchase allowances to comply. And they are concerned about whether those allowances will be allocated for free or auctioned off to the highest bidder.

The group expressed worries that politics could get in the way of NMED writing an approvable state plan, according to meeting notes paraphrased by agency staff.

New Mexico Gov. Susana Martinez (R) has opposed the regulation, but the state's Democratic attorney general is supporting EPA against legal challengers. Even with political leadership split on the merits of the Clean Power Plan, New Mexico is working to write a blueprint to submit to EPA to avoid getting stuck with a federal plan.

In September, NMED will request a two-year extension to submit a final plan to EPA in 2018. The agency's draft must gain approval from the Environmental Improvement Board, a regulatory oversight panel that consists of seven members appointed by the governor and approved by the state Senate.

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Power companies asked whether the EIB might "mess around with" NMED's proposal.

"If the Board tries to mess around with it, NMED may withdraw the request or strongly advise the Board not to do it as it may make the plan disapprovable," staff noted.

The city of Albuquerque and Bernalillo County also have a say in the final plan as the permitting authority for one of the affected facilities, according to notes. The Albuquerque-Bernalillo County Air Quality Control Board -- with four members appointed by the city mayor and three by the county -- must sign off. Representatives from Albuquerque's Environmental Health Department, who are part of the New Mexico CPP team, also attended the November meeting.

In a separate private meeting with the same state officials on the same day, environmental groups asked how the state Legislature might become involved.

"The Cabinet Secretary and other senior staff discuss issues with the legislature but legislative decision could affect our ability to create a plan, so we need to follow legislative issues closely," a meeting summary from NMED said.

New Mexico in 'good shape'

NMED will present a proposal to both boards by May 2018 at the latest but may finish it by December 2017 to leave time for approval and any necessary legislative action. EPA's deadline for a final plan is September 2018.

In PowerPoint slides for a presentation used at both meetings, NMED outlined the decisions the state must make, including: whether to allow emissions trading, whether to adhere to an average rate of emissions or cap CO2 at a specific level, and whether to include new sources of power in that cap.

New Mexico must achieve an emissions rate of 1,146 pounds of CO2 per megawatt-hour of power by 2030, which amounts to a 36 percent reduction below 2012 levels.

New Mexico is in "good shape to meet the mass goal," NMED noted in a response to questions from the environment groups. And the state may have surplus allowances to sell if it chooses a trade-ready plan, the agency added.

NMED said the state could work with others, but "most states are in the same position we are ... in that they haven't decided on a plan approach yet; they are still in their stakeholder processes."

"We need to know what makes sense to New Mexico and why," staff added.

In notes paraphrased by agency staff, the utility Public Service Company of New Mexico (PNM) said planned retirements of units at the San Juan coal plant are a huge step toward state compliance. Those closures were finalized last week.

PNM wants to receive allowances in perpetuity for shutting down the San Juan units. The Tri-State Generation and Transmission Association Inc., a co-op that owns part of a retiring unit at the plant, also wants allowances in perpetuity for retiring the coal assets.

Tucson Electric Power noted it operates in three jurisdictions -- New Mexico, Arizona and the Navajo Nation. Consistency in approaches across those jurisdictions is key, and so is having the ability to trade emissions credits or allowances, TEP said.

It would be tough for the Navajo Nation to handle anything other than a mass-based plan, TEP added. PNM also thinks a mass-based system would work best, although the utility said the state would need to work out whether to allocate allowances for free or auction them.

Several of the power companies said they are against auctioning allowances, while many environmental advocates prefer auctions with proceeds going to environment- and consumer-focused programs.

Watching other states struggle

Each of the power generators is on a different trajectory to meet its share of state carbon cuts.

In one chart, NMED demonstrated how far above or below each of the state's 10 affected coal- and natural-gas-fired plants are from meeting an average state rate assigned by EPA.

Tri-State's Escalante Generating Station is the furthest from complying with the state's assigned standard. According to emails exchanged after the meeting, NMED agreed to tour the Escalante plant.

Some of the companies might be able to balance their coal generation with changes to make their overall power fleet greener. Those working across state borders must also consider the impacts of disparate plans from the multiple jurisdictions in which they operate.

Xcel Energy Inc., which operates in eight states and has no coal in New Mexico, said it is concerned that Texas may refuse to write a plan. Similarly, in Colorado, the attorney general is suing but the governor is supportive, which is a strange scenario, according to staff notes about Xcel's comments.

The Western Farmers Electric Cooperative and Interwest Energy Alliance are both tracking the CPP process in Oklahoma, where the attorney general is suing EPA and the governor doesn't want to write a plan at all.

"OK is softening, and will likely develop at least an initial submittal," according to meeting notes of WFEC's comments. "They are starting to see that the parallel path is smarter."

Using 'informal meetings' and lots of models

New Mexico is one of five states awaiting Clean Power Plan modeling from the firm Energy Strategies LLC (ClimateWire, Dec. 7). But that tool will not look at economics, and NMED "needs help from utilities on cost & reliability," a meeting summary noted.

Other states, including Virginia, have expressed a need for reliable and affordable modeling on the CPP.

Modeling can be quite expensive, and according to the meeting notes, PNM hesitated to carry the "whole tab."

NMED could consult with EPA on modeling from ICF International and M.J. Bradley & Associates LLC, environmental groups noted. The Electric Power Research Institute also offers a model, and Arizona is using data from Pace Global Energy Services to see how the state fares under rate- and mass-based approaches, utility meeting attendees said.

The Western Electricity Coordinating Council and Southwest Power Pool also do modeling, they noted.

The power company meeting also included representatives from El Paso Electric, Roosevelt County Electric Cooperative Inc., the New Mexico Rural Electric Cooperative Association, Springer Electric Cooperative Inc., Lea County Electric Cooperative Inc. and the Farmington Electric Utility System, according to logs.

The nongovernmental organizations' meeting involved Western Resource Advocates; the Sierra Club; the Natural Resources Defense Council; the Coalition for Clean Affordable Energy; Citizens' Climate Lobby; New Mexico Interfaith Power and Light; and Donna House, a consultant to NGOs.

In addition to the initial meetings to answer questions and solicit input from the two groups, NMED held a number of public hearings around the state over the last month. Environmental advocates stressed in their November meeting that those hearings can come across as too technical.

In their meeting with NMED, they argued the state should form a technical working group consisting of both advocates and utilities to discuss the Clean Power Plan more transparently. NMED told power companies it would "rather have informal meetings and conversations," according to that meeting's summary.

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