The Federal Energy Regulatory Commission on Oct. 7 approved the acquisition by Nevada Power of a 67.8% stake in the coal-fired Unit 4 of the Reid Gardner power plant in Nevada.
On April 22, Nevada Power had applied for authorization to acquire the California Department of Water Resources’ (CDWR) 67.8% ownership interest in Unit 4, which is a 257 MW (net) coal-fired unit located near Moapa, Nev. Nevada Power currently owns the remaining 32.2% interest in Unit 4. CDWR wanted out of the plant due to California regulatory restrictions about greenhouse gas emissions.
In addition to operation, maintenance and dispatch responsibilities, Nevada Power states that the 1979 participation agreement with the department gives Nevada Power the right to call upon the entire output of Unit 4 as peaking capacity for up to 1,500 hours per year. Nevada Power states that it also has the ability to control, at a minimum, 100 MW of output from Unit 4 throughout all hours of the year.
Nevada Power stated that, in conjunction with parent NV Energy’s (NYSE: NVE) plans to merge Nevada Power and Sierra Pacific, which was announced in October 2011, and to consolidate the balancing authority areas (BAAs) of the two companies upon completion of a 235-mile 500 kV transmission line (ON Line project), NV Energy has spent considerable time evaluating the presence of coal-fired generation in the companies’ fleet. In addition to its ownership interest in Reid Gardner Unit 4, Nevada Power owns 100% of Units 1, 2, and 3 at the plant, which have a combined output of 330 MW.
Nevada Power also told FERC that NV Energy had proposed legislation in the Nevada Legislature (Senate Bill 123) that would facilitate the early retirement of Units 1-3, as well as Unit 4 at Reid Gardner. Nevada Power noted that Senate Bill 123 would require Nevada Power and Sierra Pacific to file with the Nevada commission a plan for reducing emissions by retiring coal-fired units and replacing the capacity of those units with other resources. According to Nevada Power, the early retirement of Units 1-3 is based on the assumption that Nevada Power will continue to control the entire output of Unit 4 upon termination of the participation agreement and transfer of CDWR’s ownership interest to Nevada Power.
Nevada PUC said too many moving parts right now for a FERC decision
On Aug. 2, the Nevada Public Utilities Commission filed a motion to lodge an order, issued Aug. 1, which, among other things, addresses revised requirements for Nevada Power’s integrated resource plan as it relates to the retirement of Reid Gardner Units 1-4 following the passage of Senate Bill 123, which came after the initial application with FERC was filed.
Under Section 7 of the bill, Nevada Power and Sierra Pacific would be required to file a comprehensive plan for the reduction of emissions from coal-fired electric generating capacity and for the replacement of the capacity of those plants with increased capacity from renewable energy and natural gas-fired generation. Section 7(2)(a) of the bill provides that the emissions reduction and capacity replacement plan must provide, at a minimum, for the retirement or elimination of not less than 300 MW of coal-fired electric capacity on or before Dec. 31, 2014.
FERC noted that the Nevada commission asserts that there are too many relevant factors in flux at present and in the near future to determine whether state regulation will be impaired by the proposed transaction. The Nevada commission said that the most recent retirement date that the Nevada commission has approved for Units 1-3 is 2020, and the question of early retirement of these units is dependent on a large number of factors to be considered in Nevada Power’s resource plan amendment filed in August. The Nevada commission questioned Nevada Power’s assertion that if FERC were to deny approval of the application, Nevada Power would have no choice but to enter into more expensive power purchase agreements, otherwise dispatch more expensive resources, and/or delay the retirement of Units 1-3. The Nevada commission states that it will examine these assertions in Nevada Power’s ongoing amendment to its resource plan.
FERC responded in its Oct. 7 approval order: “We affirm that our approval of the proposed transaction under section 203 of the [Federal Power Act] does not affect or preempt any state proceedings under Nevada law, and that the timing of our determination does not have any impact on state jurisdiction. We also note that it is not our policy to delay ruling on an application when there are parallel proceedings.”
With Reid Gardner Units 1-3 due to shut in 2014, and Reid Gardner Unit 4 to shut in 2017, Nevada Power plans to zero out the coal inventories for those units by the end of each of those shutdown years. That is according to an updated Electric Supply Plan for the 2014-2015 period that Nevada Power filed on Aug. 30 at the Nevada commission.
U.S. Energy Information Administration data shows the primary coal supplier to Reid Gardner earlier this year was the SUFCO longwall mine in Utah, recently bought from Arch Coal (NYSE: ACI) by Bowie Resources LLC. Coal operator Robert Murray’s West Ridge mine in Utah also supplied some coal to the plant earlier this year, according to the EIA data.