NV Energy plan accelerates some coal closures, but not Valmy

NV Energy (NYSE: NVE) has agreed to a plan, that has been included in a bill in the Nevada Senate, with the officially called NVision, for the phase-out of some of its coal-fired capacity ahead of a prior schedule, but with no accelerated schedule for the coal-fired Valmy Units 1-2.

“Environmental regulatory uncertainty and aging coal generation facilities have intersected at this point in time to necessitate forward thinking innovative plans and solutions to address Nevada’s future energy needs,” said NV Energy in a fact sheet on this plan made available to GenerationHub. “NVision sets the framework for the future of energy in Nevada, by accelerating the retirement of coal facilities and providing consumers with a reliable, cost-effective and environmentally sound energy future. NVision mandates a comprehensive 10-year plan reviewed outside the Integrated Resource Plan, though with [Public Utilities Commission of Nevada] review of plan costs and implementation.”

The plan accelerates retirement of the coal-fired Reid Gardner and Navajo units:

  • Reid Gardner #1, scheduled 2020, accelerated 2014
  • Reid Gardner #2, scheduled 2020, accelerated 2014
  • Reid Gardner #3, scheduled 2020, accelerated 2014
  • Reid Gardner #4, scheduled 2023, accelerated 2017
  • Navajo #1-3, scheduled 2026, accelerated 2019

Reid Gardner Generating Station has four operating units. The first two (#1 and #2) nearly identical units went into service in 1965 and 1968. A third similar unit (#3) was added in 1976. Each of these units produces 100 MW with Foster Wheeler boilers and General Electric turbine-generators. The plant’s largest generating unit (#4) is jointly owned by NV Energy and California Department of Water Resources. This 257-MW unit was commissioned in 1983 and uses a Foster Wheeler boiler to drive a Westinghouse turbine generator.

NV Energy’s Nevada Power unit has two long-term coal supply contracts for the Reid Gardner Generating Station with Arch Coal Sales, a subsidiary of Arch Coal (NYSE: ACI), that extend through Dec 31, 2013, said NV Energy’s Feb. 26 annual Form 10-K report. Coal shipped under these contracts is supplied from an Arch mine in Central Utah. These contracts represent 73% of the current forecasted coal requirements of Reid Gardner Generating Station for 2013. However, as of Dec. 31, 2012, Reid Gardner’s coal inventory level was a bloated 357,915 tons, or approximately 97 days of consumption at full capacity. A take-or-pay transportation services contract with the Union Pacific Railroad that extends through 2014 provides for unit train coal deliveries from various mines in Utah, Colorado and Wyoming as well as from the Provo, Utah interchange to the Reid Gardner Generating Station in Moapa, Nev.

Navajo co-owned with other parties, gets its coal from Peabody

The Navajo Generating Station in Arizona is jointly owned by Nevada Power (which has 255 MW nominal of capacity in this plant) along with five other entities and is operated by the Salt River Project. Coal is obtained from Peabody Western Coal under a deal that extends through 2019. Coal is supplied from the Kayenta surface mining operations conducted on Navajo Nation and Hopi Tribe reservation lands on the Black Mesa in Arizona. Peabody Western is a unit of Peabody Energy (NYSE: BTU).

While the NVision fact sheet says “retire” in relation to Navajo 1-3, that apparently means that NV Energy would exit the plant by 2019 and doesn’t necessarily mean that the units themselves would be retired. An NV Energy official was unavailable for comment on that point. The Navajo Nation and the owners of the Navajo plant said in February that they have a tentative agreement for an amendment to the plant site lease that could allow operation of the plant until 2044.

Nevada Power has an 11.3% interest in Navajo in Units 1-3. The total capacity of the plant is 2,250 MW. The other partners are Salt River Project (21.7% interest); U.S. Bureau of Reclamation (24.3% interest), Los Angeles Dept. of Water & Power (21.2% interest), Arizona Public Service (14% interest) and Tucson Electric Power (7.5% interest). Notable is that the Los Angeles Department of Water & Power plans to exit its stake in the plant in the next couple of years due to greenhouse gas mandates from the state of California.

The NVision legislation does not affect the currently planned retirement dates of other coal units, which are:

  • Valmy #1, 2021
  • Valmy #2, 2025

Valmy, also known as North Valmy, is a coal-fueled plant with two operating units. The plant and complex are jointly owned (50/50) by NV Energy and Idaho Power. NV Energy is the operating company. Unit #1 went into service in 1981 and produces 254 MW with a Babcock & Wilcox boiler and Westinghouse turbine/generator. Unit #2 went into service in 1985 and produces 268 MW with a Foster Wheeler Boiler and General Electric turbine/generator.

NV Energy’s Sierra Pacific Power unit has a long-term coal supply contract with Black Butte Coal or the Valmy Generating Station that extends through Dec. 31, 2015. Coal shipped under this contract is supplied from Black Butte’s surface mine in southern Wyoming. This contract represents 98% of the current forecasted coal requirements of Valmy for 2013, 132% for 2014, and 64% for 2015. However, as of Dec. 31, 2012, the coal inventory level at Valmy was 395,061 tons or whopping 131 days of consumption at full capacity. A take-or-pay transportation services contract with Union Pacific that extends through 2014 provides for unit train coal deliveries from various mines in Utah, Colorado and Wyoming as well as from the Provo, Utah interchange to Valmy near Battle Mountain, Nev.

More renewables and gas are NVision-ed

The agreed NVision plan mandates development of 600 MW of new in-state renewable capacity: 100 MW in 2014, 100 MW in 2015, 100 MW in 2016, 100 MW in 2017 and 50 MW in 2018. There would need to be 150 MW of renewables that will be in construction or acquired by the company by 2017.

The plan also accelerates NV Energy’s construction or acquisition of natural gas generation, with approximately 1,000 MW by 2018, 500 MW by 2021 and 500 MW by 2025.

This generation is already planned to meet projected need but accelerated due to retirement of coal assets.

Construction of all of the facilities included in NVision is estimated to create 4,700 jobs. Operation and maintenance of the facilities identified in NVision could provide as many as 200 or more jobs.  Job estimates, however, depend on the size, type, location and ownership of facilities.

NVision is estimated to increase rates over the base 20-year plan by 3.84%, with an estimated compound annual growth rate in electricity prices of 1.65%, which includes the effects of inflation.

The plan also implements programs that assist customers in reducing peak electric demand, at 100 MW by 2017, split between 80 MW commercial and 20 MW residential.

The Public Utilities Commission of Nevada will review plan cost prudency prior to, during, and after implementation. The plan must be submitted to the commission by April 2014, and it will have 210 days to review the plan.

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.