FERC approves Tucson Electric buy of most of Springerville Unit 1

The Federal Energy Regulatory Commission on May 15 signed off on the acquisition by Tucson Electric Power of a financial stake in the coal-fired Springerville Unit 1 that it did not already control.

On Feb. 26, Tucson Electric filed an application under the Federal Power Act for the acquisition of jurisdictional facilities resulting from a transaction by which Tucson Electric will acquire some or all of the 85.86% fee interest in the Springerville Unit 1 and associated common facilities. The jurisdictional facilities associated with the transaction are Tucson Electric’s tariff and lease agreements.

“Although Tucson Electric states that the Transaction may not require Commission approval under FPA section 203, it nevertheless asks the Commission to approve the application,” FERC noted. “This order approves the Transaction without making any determination of jurisdiction and without making any determination as to the proposed accounting entries.”

Tucson Electric owns or leases 2,496 MW of generating capacity. It also owns certain electric transmission facilities which are used primarily to transmit power generated at the coal-fired Four Corners, Navajo, Springerville, and San Juan stations to Tucson Electric’s service territory for use by its retail customers.

Springerville 1 is a coal-fired, 424.8-MW facility located near Springerville, Ariz., which forms part of the Springerville Generating Station. The Springerville station consists of four coal-fired units with total capacity of 1,750 MW and two photovoltaic generating units with total capacity of 5.1 MW. Tucson Electric holds leasehold or ownership interests in two of the coal-fired units (Units 1 and 2) and both photovoltaic units.

Tucson Electric currently holds a 14.4% interest in Springerville 1 and leases the balance from an owner-trustee. Legal title in Springerville 1 is held in trust by Wilmington Trust Co. and William Wade, an attorney. Wilmington and Wade are parties to certain trust agreements with five entities: Daimler Capital Services LLC, Alterna Springerville LLC, LDVF1 TEP LLC, MWR Capital Inc., and Pacific Harbor Capital Inc. (collectively called the Owner Participants).

Tucson Electric leases Springerville 1 under the terms of seven separate lease agreements, with Wilmington and Wade in their capacities as Owner Trustee and Co-Trustee. Each lease provides Tucson Electric with an option to purchase Wilmington and Wade’s undivided interest in Springerville 1 at fair market sales value upon the expiration of the primary term of each lease on Jan. 1, 2015. To exercise such an option, Tucson Electric must provide irrevocable notice under each lease by Sept. 1, 2013, that it is electing to purchase the subject interest.

According to the application, Tucson Electric will acquire some or all of the remaining 85.86% of fee interests in Springerville 1 that it does not presently hold.

“With respect to competition, Applicant states that Tucson Electric fully controls the generation output of Springerville 1 through its 14.14 percent ownership interest and leasehold interest for the balance of the unit,” FERC noted. “Applicant also states that following the Transaction, Tucson Electric will continue to control Springerville 1 just as it does presently. Applicant asserts that the Transaction will not result in any change in market concentration and therefore, will have no adverse effect on competition.”

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.