LADWP works to exit Navajo coal plant, convert Intermountain to gas

A final 2012 integrated resource plan released in December by the Los Angeles Department of Water and Power, like a draft plan it put out last fall, recommends that the department get rid of its share of the Navajo coal plant in Arizona by 2015 and convert the Intermountain coal plant in Utah from coal to natural gas.

This effort by LADWP to get rid of coal is being pushed by California legislative initiatives to reduce greenhouse gas emissions, including SB 1368. While under that law imports of coal-fired power can legally continue until 2019, LADWP recommends divestiture from Navajo four years earlier, in 2015. There are many strategic advantages to early divestiture, said the IRP, including:

  • Better sales terms and conditions than waiting until the 2019 deadline.
  • Avoiding the risk of pending federal regulations that could potentially encumber the plant with expensive mitigation requirements.
  • Better availability and pricing for replacement generation (including existing plants), and lower fuel costs.
  • Reduced CO2 emissions, preventing LADWP from subsequently having to purchase emission credits for native load.
  • Transmission network now handling the Navajo power can be used for importing additional solar and geothermal resources.
  • Low load growth and increased renewable energy place less reliance on the plant for energy.
  • Provides time to handle contingencies, and to ensure that competition for replacement resources is going to benefit LADWP ratepayers.

Intermountain plant the subject of coal-to-gas conversion talks

Regarding the 1,800-MW, coal-fired Intermountain Power Project (IPP), LADWP recommends modeling and planning to be compliant with SB 1368 by 2027. However, LADWP, the Intermountain Power Agency, and the other 36 participants in the project are considering the conversion of IPP from coal to natural gas.

“A new contractual arrangement is in process, which will establish a firm conversion date that will be no later than, and possibly sooner, than 2027,” said the final IRP. “Until a firm conversion date is established and for analysis purposes, Case 4 was developed for this IRP which has IPP coal replacement in 2023. Once a firm date is determined, it will be incorporated into the IRP base case model runs. Strategically, it is important for LADWP to remain a participant at IPP to retain geographic diversity in its resource mix, access the regional fuel supply, and retain the project’s transmission lines to access renewable energy from the region.”

The amount of capacity available to LADWP is 477 MW from Navajo and up to 1,200 MW from IPP. LADWP is one of 36 purchasers of IPP energy, and any future plans must be agreed to by all parties involved. Proposed amendments to the existing contracts are being considered by the purchasers which would require IPP to switch fuel from coal to natural gas no later than July 1, 2025 (two-years before the legal deadline). These amendments require unanimous approval and final purchaser decisions are expected by the end of 2013.

IPP consists of two generating units with a combined capacity of 1,800 MW. LADWP is the operating agent. LADWP is also the largest single purchaser and has a power purchase agreement for 44.617% (803 MW) of IPP’s total output. LADWP has additional purchase obligations for up to 22.168% (399 MW) of additional output. These additional obligations are dependent on the power usage of the Utah and Nevada participants. The power sales contract for IPP expires in 2027.

In addition to the generating units, IPP includes four important transmission lines:

  • a 500-kV DC transmission line from the generating station to Adelanto, Calif. (a distance of 490 miles);
  • two parallel 345-kV AC transmission lines from the generating station to Mona, Utah, 50 miles away; and
  • a single 230-kV AC transmission line from the generating station to the Gonder Switchyard near Ely, Nev., about 144 miles away.

At IPP, LADWP has no ownership rights in the generating station or the transmission lines. Rather, LADWP has a long-term power purchase contract which expires in 2027 and which also includes renewal option rights. The owner of IPP is the Intermountain Power Agency, a separate entity and a political subdivision of the state of Utah.

U.S. Energy Information Administration data shows the Intermountain plant getting coal in 2012 from several Utah mines, including the SUFCO longwall operation of Arch Coal (NYSE: ACI), the Bear Canyon deep mine of Rhino Resource Partners LP (NYSE: RNO) and the Coal Hollow surface mine of Alton Coal Development.

Federal agencies to look at future power options related to Navajo

The Navajo Generating Station (NGS) is a coal-fired station located near Page, Ariz. It consists of three units with a combined capacity of 2,250 MW. Salt River Project is the operating agent. As one of six owners, LADWP has a 21.2% ownership share in the station’s generation. NGS operates under a co-tenancy agreement which shall remain effective throughout the initial term of the land lease with the Navajo Nation and throughout the lease extension thereafter. While LADWP is contractually committed to NGS until Dec. 31, 2019, significant progress has been made to exit from the project by 2015, the final IRP noted.

Notably, the U.S. Department of the Interior, Department of Energy and the Environmental Protection Agency on Jan. 4 released a joint statement that lays out the agencies’ shared goals for the NGS and energy production in the region served by NGS. In the statement, the three agencies said they agreed to work together to support Arizona and tribal stakeholders in finding ways to produce “clean, affordable and reliable power, affordable and sustainable water supplies, and sustainable economic development, while minimizing negative impacts on those who currently obtain significant benefits from NGS, including tribal nations.”

NGS is located on the Navajo Indian reservation approximately 15 miles from the Grand Canyon and owned partially by Interior’s Bureau of Reclamation. Power from the facility is distributed to customers in Arizona, California, and Nevada. Reclamation’s share of the power is used to move water to tribal, agricultural, and municipal water users in central Arizona. The Department of the Interior, DOE and the EPA oversee other federal responsibilities or interests that relate to NGS. These include tribal trust responsibilities, protection of national parks and wilderness areas, visibility and public health protection, and clean energy development.

Reclamation is the plant’s largest single owner, owning 24.3% of the plant. Five utilities own the remaining 75.7%: SRP, Arizona Public ServiceTucson Electric PowerNV Energy and LADWP.

Over the last few decades, NGS has invested in several pollution control technologies to reduce its emissions, but it remains one of the largest sources of NOx in the country, the joint agreement said. Emissions from NGS affect visibility at 11 National Parks and Wilderness Areas, and contribute to ozone and fine particle pollution in the region.

Under the direction and coordination of the NGS Working Group, Interior, EPA, and DOE intend to jointly support, through funding or other means, and working together with other NGS owners, tribes and stakeholders, the DOE National Renewable Energy Laboratory’s “Phase 2” Navajo Generating Station report will analyze a full range of clean energy options for NGS over the next several decades. This Phase 2 NGS report is scheduled to be initiated in 2013 and will build on preliminary findings from the last chapter of the 2011-2012 NREL “Phase 1” report titled “Navajo Generating Station and Air Visibility Regulations: Alternatives and Impacts.”

The Navajo plant’s coal comes via train from the Kayenta strip mine in Arizona of Peabody Energy (NYSE: BTU).

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.