Arizona Public Service completed on Dec. 30 its purchase of Southern California Edison’s ownership in Units 4 and 5 of the coal-fired Four Corners plant located near Farmington, N.M.
As part of its plan – originally announced in November 2010 – APS said on Dec. 31 that it has permanently closed the plant’s older, less efficient Units 1, 2 and 3, and will install additional emission controls on the remaining cleaner, more efficient units.
“This is a milestone occasion,” said Don Brandt, APS Chairman, President and Chief Executive Officer. “We have completed a transaction that will benefit the environment, allow us to continue to support the economy of the Navajo Nation and surrounding community, and help electric users in the Southwest with an important, low-cost generating resource.”
With the closing of the APS-owned Units 1-3, capacity at Four Corners has been reduced from 2,100 MW to 1,540 MW. Acquiring SCE’s 48% interest in the larger Units 4 and 5 will increase APS’s total Four Corners capacity from 791 MW to 970 MW. APS now owns 63% of Units 4 and 5, which are the units that will stay in operation over the long term.
Due to this action, emissions of particulates are expected to decline by 43%, NOx by 36%, CO2 by 30%, mercury by 61% and SO2 by 24%.
SCE had been a joint owner of Four Corners, along with Arizona Public Service, El Paso Electric, Public Service Co. of New Mexico, the Salt River Project and Tucson Gas & Electric.
SCR on the surviving two units will get regional haze compliance
Closure of the three older units by Jan. 1, 2014, and the installation of selective catalytic reduction (SCR) equipment on Units 4 and 5 by July 31, 2018, will satisfy Best Available Retrofit Technology (BART) requirements for the plant issued by the U.S. Environmental Protection Agency in August 2012 under its regional haze program.
Decommissioning work, including complete the dismantling and removal of the older units and any associated structures, will begin immediately and is expected to last about three years.
The final purchase price for the Southern California Edison share is approximately $182m, which is substantially less than other generation alternatives, APS noted.
“Our plan for the plant moving forward saves APS customers nearly a half-billion dollars over other energy sources and maintains a highly reliable, cost-effective source of electricity generation for APS and other users in the Southwest,” said Mark Schiavoni, APS Executive Vice President, Operations. “Along with natural gas, nuclear, renewables and energy efficiency, coal has an important place in our company’s balanced energy portfolio.”
Schiavoni emphasized that no layoffs are planned at the plant, which employs 434 workers (82% of whom are Native American). Any required reduction in workforce will come through normal attrition. The Four Corners plant and supporting mining operations create an estimated $225m annual economic impact on the Navajo and New Mexico economies. During the next 30 years, their operation could generate more than $6.3bn in economic value for the region, at least 70% of which will benefit the Navajo Nation.
Also, APS on Dec. 30 filed an application with the Arizona Corporation Commission to recover costs associated with the purchase of SCE’s interest in the plant. The company’s 2012 rate case settlement includes a provision that allows APS to seek rate relief for those expenses prior to its next rate case. The filing amounts to a bill impact of about 2%.
The coal for the plant comes from the Navajo strip coal mine of BHP Billiton, which the Navajo Nation has been looking at buying to protect local jobs.
APS, Arizona’s largest and longest-serving electricity utility, serves more than 1.1 million customers in 11 of the state’s 15 counties. With headquarters in Phoenix, APS is the principal subsidiary of Pinnacle West Capital (NYSE: PNW).