PNM Resources : Order Adopting Staff's Recommendation to Accept PNM's IRP as Updated

BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION

IN THE MATTER OF PNM'S ELECTRIC	)
INTEGRATED RESOURCE PLAN FOR THE	)
PERIOD 2020-2040 IN COMPLIANCE WITH	) Case No. 21-00033-UT
NMAC 17.7.3.9	)
	)

FINAL ORDER ADOPTING STAFF'S RECOMMENDATION

TO ACCEPT PNM'S IRP AS UPDATED

THIS MATTER comes before the New Mexico Public Regulation Commission (the "Commission" or the "NMPRC") the Commission's April 6, 2022 Order requiring Public Service Company of New Mexico ("PNM") to update its Integrated Resource Plan for the period of 2020- 2040 in compliance with 17.7.3.9 NMAC; upon PNM's Update filed on April 27, 2022; and upon Staff's Updated Recommendation filed on June 29, 2022; whereupon, being duly informed,

THE COMMISSION FINDS AND CONCLUDES:

1. On January 29, 2021, Public Service Company of New Mexico ("PNM") filed its

2020-2040 Integrated Resource Plan ("IRP").

2. On February 10, 2021, a Joint Motion was filed which requested a variance from Section 17.7.3.12 NMAC of the Commission's Integrated Resource Planning Rule. The Joint Motion stated that the variance was needed to ensure the Commission and stakeholders in PNM's

2021 IRP Public Advisory Process have an adequate opportunity "to evaluate and provide input" on PNM's 2020-2040 Integrated Resource Plan ("IRP") docketed as Case 20-00033- UT and requested an evidentiary hearing.

3. On February 14, 2021, the Commission issued its Order on Joint Motion for Evidentiary Hearing which denied the Joint Motion; granted a variance of the time frame

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provided by 17.7.3.12 NMAC for the submission of public comments, utility responses and Utility Division Staff's recommendations and confirmation of its position as to the reasonableness of PNM's model inputs and assumptions to permit further review of PNM's IRP and for performance of modelling; and appointed Robert Lennon as hearing examiner to conduct a scheduling conference(s) and issue orders on information access, including the need for any protective orders, to facilitate access to PNM's modeling data and software pursuant to the process in Case No. 19-00195-UT, and to establish deadlines for the completion of the alternative modeling, the filing of comments, response comments and for Staff to perform and complete its review and recommendations pursuant to 17.7.3.12 NMAC.

1. On April 6, 2022, the Commission issued an Order, pursuant to 17.7.3.10 NMAC, which required PNM to promptly notify the Commission and participants of materials events that would have the effect of changing the results of its IRP had those events existed when the IRP was developed and requires PNM to update its IRP to reflect the changes in the IRP resulting from the material events.1
2. The April 6th Order found that material events have occurred since PNM developed its IRP filed in this docket as follows: a) the Commission's February 23, 2022 Order in Case No. 19-00018-UT2 resulted in PNM's continued operation of SJGS until September

1. 17.7.3.10 NMAC states: "OBLIGATION TO NOTIFY OF MATERIAL CHANGES AND UPDATE ACTION PLAN: The utility shall promptly notify the commission and participants of material events that would have the effect of changing the results of the utility's IRP had those events been recognized when the IRP was developed. As part of this notification, the utility shall explain how this event(s) has changed the action plan."
2. See Paragraphs 34 and 35 of the February 23, 2022 Order setting forth the material events: "34. While an evidentiary hearing is not required on PNM's Request to extend the operation of SJGS 4, the parties' opportunity to conduct discovery related to their concerns about the prudence and reasonableness of PNM's decisions and possible resulting costs should not be delayed until the contemplated rate proceeding takes place. PNM's determination to extend the use of SJGS 4 is intended to alleviate PNM's issues in securing enough capacity to meet Summer 2022 peak. The extended use of SJGS 4 will not resolve the underlying issues related to the supply chain issues that have caused the vendors of the replacement resources approved in Case 19-00195- UT to default and invoke the force majeure clauses in their contracts. There are ongoing concerns about PNM's ability to meet the 2023 Summer peak notwithstanding PNM's belief that the replacement resources will be online by then, given that the Rockmont Project remains in default and a substitute resource may need to be approved. 35. While PNM has made compliance filings related to these

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2022, and upon PNM's statements made in both its November 2021 and January 2022 Compliance Notices filed in Case No. 20-00182-UT, which both reported that some of PNM's anticipated replacement resource PPAs would not be ready by the June 2020 (date agreed to come on line) and the declaration of default due to force majeure and pandemic-related supply chain shortages. The Order ruled that these events constituted a material change that required PNM provide notice and an update to the IRP filed in this docket.

6. On April 27, 2022, PNM filed an update to its IRP in this docket ("April 27th

Update") which included updated loads and resources tables and other tables, contained in the IRP, and an update of all other relevant portions of the IRP, to explain the material events that have occurred since the IRP was developed. PNM stated its Update explained the projected changes to the IRP due to the default and the invocation of force majeure by the anticipated replacement generation for SJGS and due to the Order in Case No. 19-00018-UT. PNM stated on page 2 of the April 27th Update, "PNM notes that the longer-term impacts of the recent material events identified by the Commission and discussed in the Second Addendum will be analyzed and encompassed in the recently initiated 2022-2023 public advisory process for PNM's 2023 IRP." PNM's April 27th Update provides its Notice of Material Event regarding the global supply chain delays affecting the projects the Commission approved to replace the San Juan coal plant and the leases in the Palo Verde nuclear plant that PNM proposes to end. In addition, the April 27th Update what it has done to remedy the San Juan replacement project delays such as: extending the life of Unit 4 of the San Juan coal plant through September 2022; issued market RFPs that failed to produce any bids for resources that would be timely and

replacement resources in the dockets for Cases 20-00182-UT and 19-00195-UT, the parties responding to PNM's compliance filings have raised a number of questions and concerns, they have not had the opportunity to engage in discovery and pose requests to PNM directly."

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materially effective; and entering into contracts with neighboring entities including Tri-State Generation and Transmission Association ("Tri-State"), El Paso Electric Company ("EPE"), and Uniper (regarding the Four Corners coal plant). Based upon these efforts, PNM asserted that it has been able to acquire generation to replace the delayed San Juan replacement projects for Summer 2022. PNM also asserted it is pursuing remedies for Summer 2023 and is reporting progress bi-monthly. PNM's Update did acknowledge that transmission constraints are a key critical impediment to market resource access: "[w]hile some utilities may have some additional capacity, transmission constraints have rendered some of those potential resource transactions infeasible," and "[t]he most significant hurdle to [resource] options is the availability of transmission resources and available transmission interconnection rights to facilitate the shortened timeframe." 3 PNM also explained that there were specific constraints regarding access to resources located on the Eastern grid across AC-DC converters but did not specifically address other transmission constraints.

7. On June 8, 2022, the Commission issued an Order that stated that, no later than June 15, 2022, the parties to this matter may file written Responses to PNM's April 27th Update;

no later than June 22, 2022, PNM may file its Reply to any Responses; no later than June 29, 2022, Staff shall file its update to its Recommendation filed in this docket on November 21, 2022, updating all sections of that Recommendation, in light of PNM's April 27th Update, responding to any filed Responses and PNM's Reply to Responses.

8. On June 15, 2022, New Mexico Affordable Reliable Energy Alliance ("NM AREA") filed its Comments and Recommendations and stated that the Commission should accept PNM's 2020 IRP and adopt NM AREA's Initial Comments recommendations that were

3 April 27th Update, page 6.

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filed on September 30, 2021 because, although Commission acceptance of PNM's 2020 IRP does not bind either PNM or the Commission, the assumptions that PNM used in developing its 2020 IRP are critical as they provide the basis for how the PNM plans to operate, and add to, its system on a going-forward basis. On September 30, 2021, NM AREA stated: "PNM's IRP in this docket provides a clear, but generally flexible, pathway toward achieving its 2040 carbon emissions-free goal and also meeting the other requirements of the ETA. Additionally, NM AREA appreciated the conservative approach PNM has taken in its resource modeling with respect to its overall goal of reducing carbon emissions from its generation facilities on an ongoing and consistent basis." Also on September 30, 2021, NM AREA recommended that the Commission require PNM to address six issues in its subsequent resource acquisition cases and in its next IRP as follows: (1) transmission planning; (2) market assistance import limits related to LOLP studies and the reliability of the Most Cost Effective Plans ("MCEP"); (3) regional opportunities for reserve pooling coordination; (4) quantification and modeling the risks of extreme weather events; (5) diversity values of wind, solar, and storage resources; and; (6) cost assumptions. In its June 15th filing, NMAREA stated that out of these 6 recommendations, the most critical issue remains transmission planning because the development of a comprehensive transmission plan is an essential component of identifying the most feasible resource options and determining the MCEP as stated in the Commission's authority under its current IRP Rule to require PNM to develop a comprehensive transmission plan as part of its next IRP filing. NMAREA pointed out that the factors listed in PNM's Second Addendum relating to the failures of its planned projects to come on line in a timely manner make transmission planning more, not less, important. In addition, NMAREA informed that PNM is already in the process of developing its 2023 IRP and, for this reason, PNM needs guidance and direction from the

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