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Attorney General Hector Balderas P.O. Drawer 1508 Santa Fe, NM 87504-1508 CC: Cholla Khoury, Esquire Dear Attorney General Balderas, On February 15, 2013, Governor Susana Martinez, the Public Service Company of New Mexico (PNM), and the Environmental Protection Agency (EPA) announced an agreement to close two units at San Juan Generating Station in order to comply with Regional Haze requirements. The Stipulation Agreement submitted to the Public Regulation Commission (PRC) on October 1, 2014, in docket No. 13-00390-UT, includes requests for approval of key elements of the PNM/EPA/NMED agreement (also known as the “Revised State Implementation Plan”), but also requests certificates of convenience and necessity for the purchase of 132 megawatts from remaining SIGS Unit 4 and 134 MWs of nuclear power at Palo Verde 3 ‘On March 26, 2014, the Santa Fe City Council, after notice and hearing, adopted a Resolution against PNM’s replacement power plan and request for stranded assets, and called for an alternative based on renewables. After a similar process, the City of Albuquerque also adopted a Resolution opposing PNM’s replacement power plan in June of 2014, We are writing to request that the Office of the Attorney General withdraw its support of the Stipulated Agreement in PRC Case 13-00390-UT in response to int and ‘material uncertainties and risks to ratepayers that have emerged after the Stipulated ‘Agreement was negotiated including: 1) An increase of over 1 billion dollars in the cost of the Stipulated Agreement from the time of the negotiated agreement to the present to the detriment of ratepayers. The cost at the time of the negotiated agreement was $6,640,253,862 however after errors in the cost modeling and fuel cost omissions were addressed, the average and present value of the assets presented in the Stipulation Agreement increased significantly to $7,588.515,567. 2) Evidence that the Stipulation DOES NOT provide the most cost-effective energy resource portfolio, as required by NMAC. In this regard, PNM originally proposed its plan as “least cost” or “most cost-effective.” Based on the evidence before the PRC, PNM'’s Stipulation is neither the least cost overall nor most cost effective. There are at least four Strategist” scenarios run by PNM, which were disclosed or run after the Stipulation was signed that are more cost-effective for ratepayers that have less regulatory and financial risk, and have a superior environmental (including water use) and health outcome when compared with the Stipulation. 3) The recent revelation by the State of New Mexico that balanced draft improvements are contained within PNM’s permit at PNM’s request and not due to compliance issues. The cost (approximately $70 million assuming PNM’s current ownership interest) and prudence of such balanced draft improvements directly impact ratepayers and appear to be undecided and /or deferred to another Commission ease, 4) The Remaining SIGS Unit 4 owners recent rejection of the SNCR project, (including costs for balanced draft) for SIGS Unit 4. 5). The lack of a SJGS participation agreement, which, PNM has alleged since the initial filing in this matter, that it intended to have in place in sufficient time for the Commission's evaluation. The hearings have now concluded and no such agreement has been reached. 6) On January 7, 2015 afier 18 months of study, the City of Farmington decided against acquiring an additional 65 MWs in SJGS Unit 4 given “capaci acquisition economics”, “uncertainty and likely unfavorable economics regarding future fuel supply, uncertainty pertaining to operations and ownership structure post-2022 and other evaluated liabilities unacceptable to the City” and continued “unresolved issues including the already protracted negotiations and on-going status of negotiations to the detriment of the City's ability to develop alternate generation resource options”. The City of Farmington also cited plant reliability as one of their reasons to not add the 65 MW: “significant degradation in SIGS Unit 4 reliability performance.” Seventy-five percent reliability at SIGS means that it is down for one quarter of every year and is not a dependable energy resource, 7) PNM recently announced its intention to acquire the San Juan Unit 4 plant rejected by the City of Farmington, thereby increasing its interest in San Juan Unit 4 from 132 MWs to 197 MWs. PNM informed its shareholders that the acquisition would result in operating losses. 8) Uncertainty regarding both the source of supply and cost of coal, ineluding uncertainty regarding mine ownership and coal quality. Since January 20, 2015, three (3) other parties have also withdrawn their support for the ipulation Agreement including the: Renewable Energy Industries Association of New Mexico, New Mexico Independent Power Producers, and Western Resource Advocates. The same considerations caused the Albuquerque Bernalillo County Water Utility Authority to indicate its opposition to the Stipulation Agreement on January 27, 2015. ‘The Albuquerque City Council is in the middle of a bi-partisan effort to withdraw its support of the Stipulation as well The Attorney General's Office participated in the negotiated Stipulation Agreement based on representations that the Stipulation Agreement represented the least cost plan to rate payers. However, since the filing of the Stipulation Agreement, the costs and economics of certain elements of the Agreement have changed significantly to the detriment of New Mexican ratepayers presenting unnecessary and imprudent costs and risks that New Mexican ratepayers cannot afford. Therefore, we respectfully request that the New Mexico Attorney General withdraw it support for the Stipulation Agreement relating to the RSIP based on costs to ratepayers, increasing risk considerations, and the availability of alternate generation resources that are more economic and better for the public’s health and welfare. ‘Thank you for your consideration on behalf of New Mexicans. Sincerely, Fo Flin _—NM Tom Solomon 202 Harvard Dr NE Albuquerque, NM 87106 505.350.6000 Earth Care Bianca Sopoci-Bd{knap 6600 Valentine Way Building A Santa Fe, NM 87507 505.983.6896 Santa Fe Green Chambgf“of Commerce Glenn Schiffbauer PO Box 2796 Santa Fe, NM 87504 505.428.9123 a inta Fe Home Bi Kim Shanahan 1409 Luisa St, Suite A Santa Fe, NM 87505 505.982.1774 lers Association