Arizona Public Service files Four Corners changes with FERC

While its buy of Southern California Edison‘s share of the Four Corners coal plant is on hold while the Arizona Corporation Commission looks at deregulation options for the state electricity market, Arizona Public Service is moving ahead on needed regulatory approvals.

Arizona Public Service (APS) on July 9 submitted to the Federal Energy Regulatory Commission amendments to the following four agreements that are on file with the commission: the Four Corners Project Co-Tenancy Agreement; the Four Corners Project Operating Agreement; the Four Corners Project Emission Abatement System Operating Power Agreement; and the Principles of Interconnected Operation for Four Corners Interconnection Agreement. Each of these four agreements is being amended in connection with APS’s planned acquisition of Southern California Edison’s (SCE) 48% ownership interests in Four Corners Units 4-5.

APS is a wholly-owned subsidiary of Pinnacle West Capital (NYSE: PNW). 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 (SRP), El Paso Electric (EPE) and Tucson Electric Power (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 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 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. “Although at this time, APS does not know the exact date on which the Four Corners purchase transaction will close, APS currently anticipates that it may be as early as October 1, 2013,” said the July 9 filing with FERC.

APS had been hoping to close this deal around July 1. But in May the Arizona Corporation Commission said it wanted to look over the next few weeks at deregulation, which threw into doubt the merits of buying the Four Corners stake from SCE in the meantime. So, APS has delayed the buy for the time being. The U.S. Environmental Protection Agency, at the request of APS, has agreed to delay a decision until the end of this year on a regional haze plan for the plant that might see the closure of Units 1-3 to reduce air emissions.

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. This would 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.