July 1 closing set for APS deal to buy Four Corners capacity

Arizona Public Service on May 17 filed an interconnection agreement amendment with the Federal Energy Regulatory Commission related to its pending buy of the shares of Units 4 and 5 of the coal-fired Four Corners power plant owned by Southern California Edison.

The proposed amendment is to the Shiprock-Four Corners Project 345-kV Switchyard Interconnection Agreement, Service Agreement No. 209. Southern California Edison is a unit of Edison International (NYSE: EIX).

APS, a wholly-owned subsidiary of Pinnacle West Capital (NYSE: PNW), noted that the Four Corners plant is a coal-fired facility located on the Navajo Nation in Fruitland, N.M., about 25 miles west of Farmington. Four Corners is a joint participant project owned, in varying shares by SCE, APS, Public Service Co. of New Mexico (PNM), Salt River Project Agriculture Improvement and Power District (SRP), El Paso Electric (EPE) and Tucson Electric (TEP) as tenants in common.

The plant consists of five generating units. The first three units, each of which is wholly-owned by APS, went online in 1963-1964 and have a combined capacity of 560 MW. Units 4 and 5, each of which is co-owned by APS, SCE, PNM, SRP, EPE and TEP, commenced commercial operation in 1969-1970 and have a combined capacity of 1,540 MW. APS operates Four Corners on behalf of all the participants.

In 2010, SCE stated that, due to rules established by the California Public Utilities Commission to implement a state greenhouse gas law, it would no longer make “life extending” capital investments in Four Corners and would divest or otherwise terminate its ownership interests in Four Corners Units 4 and 5 by 2016. In November 2010, APS and SCE entered into an agreement pursuant to which SCE, upon closing, will sell and transfer to APS 100% of its ownership interests in Four Corners Units 4 and 5 and the associated 500 kV and 345 kV switchyards located at, and adjacent to, the Four Corners plant. Closing on this transaction is currently anticipated to take place on July 1, 2013, APS told the commission.

The Shiprock-Four Corners Project 345-kV Switchyard Interconnection Agreement, i.e., Service Agreement No. 209, originally entered into between APS, SCE, EPE, PNM, SRP, TEP and Public Service Co. of Colorado, Tri-State Generation and Transmission Association and Western Area Power Administration, provides for the interconnection and operation of the Shiprock-Four Corners Transmission Line into the 345-kV switchyard associated with Four Corners. The Shiprock-Four Corners Project 345-kV Switchyard Interconnection Agreement has been amended to update the ownership percentages of the Four Corners plant and associated switchyards to reflect the transfer of SCE’s ownership interests in Four Corners to APS and remove SCE as a party to the agreement.

Pinnacle West noted in its May 3 Form 10-Q report: “APS has announced that, if APS’s purchase of SCE’s interests in Units 4 and 5 at Four Corners is consummated, it will close Units 1, 2 and 3 at the plant. APS owns 100% of Units 1-3. These events will change the plant’s overall generating capacity from 2,100 MW to 1,540 MW and APS’s entitlement from the plant from 791 MW to 970 MW.”

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.