AZ Public Service To Buy Edison's Share In Four Corner's Coal Plant

Three Units Close If Deal Is Inked. Cleaner Energy – Jobs?
By Kathy Helms
Dine Bureau
Gallup Independent

WINDOW ROCK – Arizona Public Service Co announced Monday that it has entered into an agreement to purchase Southern California Edison’s ownership in Units 4 and 5 of the Four Corners Generating Station near Farmington for $294 million.

If approved by state and federal regulators, APS will close Four Corners’ older, less efficient Units 1, 2 and 3, and install additional emission controls on the remaining units. APS, the plant operator, owns 100 percent of those three units, which are subject to significant environmental upgrades under rules proposed by the U.S. Environmental Protection Agency in October.

“These rules would present a major economic challenge for continued operation and require us to look at alternatives for Units 1, 2 and 3,” Mark Schiavoni, APS senior vice president of Fossil Generation, said. “This course of action represents the best alternative for APS and its customers and provides a cleaner environment while preserving a needed reliable and affordable supply of energy for the Southwest.”

There will be no layoffs at the plant, which employs 549 workers, 74 percent of whom are Navajo, Schiavoni said. The Four Corners plant and the supporting mining operations at BHP Billiton have a $225 million annual impact on the New Mexico and Navajo economies, according to APS.

“This proposal enables us to continue to support the Navajo Nation and the Farmington area with high-quality jobs that are important economic drivers for the region,” Schiavoni said. Continued operation of Units 4 and 5 is expected to provide more than $6.3 billion in economic value to the region over the next 30 years, at least 70 percent of which will benefit the Navajo Nation and its citizens, APS said.

As a result of the anticipated shutdown of Units 1, 2 and 3, capacity at the coal-fired station, one of the nation’s largest, would be reduced by 560 megawatts, to 1,540 megawatts, of which APS would own 970 megawatts. Emissions of nitrogen oxides would decline by 36 percent, mercury by 61 percent, particulates by 43 percent, carbon dioxide by 30 percent and sulfur dioxide by 24 percent.

APS would replace the energy lost through the closure of the three older units with 739 megawatts from Southern California Edison’s 48 percent share of the newer, more efficient Units 4 and 5. APS currently owns 15 percent of the two units. Other owners include Public Service of New Mexico, Salt River Project, El Paso Electric and Tucson Electric Power. California state law requires Southern California Edison to end participation in the plant by 2016, when the current lease with the Navajo Nation expires.

“Closing the three smaller, less efficient units and keeping the cleaner, more efficient Units 4 and 5 in operation would dramatically reduce the carbon footprint in the region and enable the plant to remain compliant with state and federal environmental standards,” Schiavoni said.

APS’ transaction requires approval from the Arizona Corporation Commission, the California Public Utilities Commission and the Federal Energy Regulatory Commission. In addition, the acquisition is contingent on the Navajo Nation approving a lease extension for the plant beyond 2016. It also requires successful negotiation of a new fuel contract with mine-operator BHP Billiton for the post-2016 period. Assuming timely receipt of required approvals and extensions of the land-lease and fuel contract, the companies are targeting closing the purchase by the end of 2012.

APS will submit a filing with the ACC in mid-November followed shortly thereafter with a filing at FERC.

George Hardeen, spokesman for Navajo Nation President Joe Shirley Jr., said, “The Navajo Nation is negotiating a lease extension and we want to do everything we can to ensure jobs and revenue to the Nation are preserved. We do know it’s an old power plant, but it’s got a few more years of life, and the Navajo people are depending on the employment that they have there.”

Budget and Finance Committee Chairman LoRenzo Bates said his committee, the Navajo Nation Council and others had been made aware of the cost to retrofit the older units, built in the 1960s. “It didn’t pencil out, so rather than expending those dollars, I’m going to assume that it was a business decision on APS’ part.”

As for Navajo, it definitely will impact revenue, Bates said. “I would imagine that Minerals Department people, as we speak, are crunching those numbers. You’re looking at maybe as high as 30 percent.” With the Nation’s current annual budget at $146 million, if the shutdown took place today, assuming a 30 percent loss of revenue, that would be $12 million to $15 million, he said. “That’s severe.”

In addition, services funded by virtue of BHP and APS also will get cut, he said. “It has a trickle-down effect. The Nation is going to have to adjust itself. We’ll feel the hurt in terms of the people that could get laid off or early retirement; we’ll feel it in the lost revenue and the direct services that are funded by this revenue.

“To add insult to injury, we as the Navajo Nation from the Investment Committee on several occasions have asked APS to consider the Nation to be a part-owner. To hear that they’re going to take full ownership of Southern Cal’s share without coming to the Nation to see if we would consider being part owner is disappointing,” Bates said. “That door is still open. I’m sure the Nation would like to at least look at it and see if that’s what we want to do.”

Not everyone was disappointed at APS’ decision, however. “It’s a good start and we look forward to Four Corners power plant transitioning to renewable energy that would go a long way in significantly curtailing health problems created by the pollution by Four Corners power plant,” Lori Goodman of Dine Citizens Against Ruining Our Environment, said upon hearing the news. “For too long our Navajo people are left with asthma and heart diseases from coal dust and power plant emissions,” Anna Frazier, also of Dine CARE, added.

Brad Bartlett of the Energy Minerals Law Center in Durango, who has represented the group along with San Juan Citizens Alliance in various lawsuits, said, “After spending 40 years as one of the nations dirtiest polluters, APS now recognizes that it is going to have shut down significant portions of this facility in order comply with Clean Air requirements which have been in place for decades. Whether these minimum efforts will be enough to protect human health and the environment in the Four Corners from the long term regional effects of coal development remains to be seen.”

Roger Clark of Grand Canyon Trust, which has been advocating for nitrogen reductions and pollution controls on all five units, said the EPA haze rule is the driving regulatory action; and though APS said it would install additional pollution controls, it is not committing to what those controls will be.

“It looks like this is step in the right direction in the transition to clean energy. We’re glad that APS is thinking about preserving Navajo jobs. We’re interested in seeing how they intend to replace Four Corners coal capacity. We think it’s important to begin to look at opportunities for Navajo ownership of renewable energy replacement power.”

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