Los Angeles agrees to divest its share of Navajo coal plant in Arizona

The Los Angeles Department of Water and Power (LADWP) on May 19 took a major step toward a goal of eliminating coal from its power mix by 2025 by approving an agreement to sell its 21% share in the coal-fired Navajo Generating Station outside of Page, Arizona.

The sale would reduce LADWP’s greenhouse gas emissions by 5.39 million metric tons over the next 3.5 years. The May 19  action by the Board of Water and Power Commissioners will also put LADWP on a path to end power deliveries from the plant by mid 2016, about 3.5 years ahead of the date mandated by California climate change legislation.

“This is an important step toward cleaner air, addressing climate change, and creating a clean energy future for Los Angeles,” said Los Angeles Mayor Eric Garcetti. “The sale of the Navajo Generating Station is just the latest example of LA’s national leadership in carbon reduction and climate change action, taking us one step closer to my goal of getting LA off coal by 2025.”

“This is another important step on the road to increasing clean renewable energy and eliminating coal power from our City’s future,” said Energy and Environment Committee Chair and Los Angeles City Council member Felipe Fuentes.  “I applaud LADWP and Salt River Project for reaching an agreement and look forward to reviewing this matter fully when it comes before the City Council.”

The deal with SRP is due to close in mid 2016

Under the agreement with the Salt River Project (SRP), LADWP would stop receiving its 477-MW share of coal power from Navajo when the sale closes on July 1, 2016. The agreement with SRP requires an escrow period of approximately one year before the sale can be finalized. 

Mel Levine, President of the Board of Water and Power Commissioners, said the Board had made a strategic decision to eliminate Navajo coal power earlier than required. Early elimination of coal power will ensure compliance with SB 1368 and the Global Warming Solutions Act of 2006 (AB 32), which created the state’s Cap and Trade Program to reduce greenhouse gas emissions.

SRP’s Board of Directors on May 14 approved the agreement to buy the LADWP share of the Navajo plant. John Sullivan, SRP’s Deputy General Manager and Chief Strategic Initiatives Executive, said in a May 14 statement that the purchase of LADWP’s share of the plant is an appropriate balance to its commitment to the Navajo Nation and its customers and will not result in any additional emissions from Navajo and that SRP’s short-term increase in ownership share of the plant will revert back to its current amount in 2020 when one of the units is shut down to meet regional haze-compliance needs.

“This agreement is critical to facilitating the EPA’s final rule to reduce NOx emissions from NGS,” Sullivan said about the deal with LADWP. “By assuming LADWP’s ownership share of the plant, we can make the necessary approvals that will ensure significant emission reductions from [Navajo].”

Navajo directly employs approximately 500 people, approximately 90% of whom are Native American. Peabody Energy‘s (NYSE: BTU) Kayenta coal mine, which exclusively supplies the plant, has more than 400 employees, more than 90% of whom are also Native American.

Generally, the alternative operating scenarios under the EPA’s regional haze plan require the closure of one unit at Navajo (or the curtailment of electricity generation by a similar amount) in 2019, and compliance with a NOx emission limit that is achievable with the installation of selective catalytic reduction (SCR) on two units in 2030. The NGS consists of three 750-MW units built in the 1970s.

The SRP website shows these current ownership shares for Navajo:

  • U.S. Bureau of Reclamation, 24.3%
  • Salt River Project, 21.7%
  • Los Angeles Department of Water and Power, 21.2%
  • Arizona Public Service, 14.0%
  • NV Energy, 11.3%
  • Tucson Electric Power, 7.5%

LADWP’s other major coal commitment is a share in the 1,800-MW Intermountain Power Project (IPP) in Utah, with plans underway for some time to build a gas-fired plant at the site as a replacement. Said a December 2014 integrated resource plan issued by LADWP: “An amendment to the IPP power purchase contract has been drafted to construct a natural gas replacement facility located at the IPP site. The amendment establishes an in-service date of July 1, 2025, for the new facility. The IPP Coordinating Committee and the IPA Board could move the date up if a super majority of the participants support the decision. As of October 1, 2014, 30 of 36 participants have approved the amendment.”

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.