Salt River Project nearly there on purchase of extra share of Navajo coal plant

Salt River Project (SRP) and the Los Angeles Department of Water and Power (LADWP) have completed three years of negotiations and are seeking final approval from their respective Boards of Directors for the sale of LADWP’s share of the coal-fired Navajo Generating Station (NGS) to SRP.

The sale would remove a significant obstacle to enabling SRP to implement a U.S. Environmental Protection Agency (EPA) rule to significantly reduce emissions from the plant by 2020, said SRP in a May 14 announcement.

SRP’s Board of Directors on May 14 approved the agreement. LADWP’s Board is scheduled to vote on the agreement May 19. If approved at that level, it would then go to the Los Angeles City Council and the Mayor of Los Angeles for consideration. This is part of an LADWP campaign to eliminate coal from its system in order to cut its greenhouse gas emissions and comply with California climate change mandates.

NGS provides nearly all of the energy needed to move water in the Central Arizona Project canal from the Colorado River near Lake Havasu through central Arizona and then to Tucson. NGS also provides electricity to hundreds of thousands of customers in the Southwest and is one of the most affordable and reliable resources used by SRP to serve its customers in the greater-Phoenix metropolitan area, SRP noted.

The EPA’s final rule incorporates major elements of the proposal by the Technical Work Group (TWG) that had recommended alternatives for the plant with greater emissions reductions than the Best Available Retrofit Technology (BART) initially proposed by EPA under its regional haze rule. The TWG consists of representatives from the Environmental Defense Fund, the Navajo Nation, the Gila River Indian Community, Western Resource Advocates, the Central Arizona Water Conservation District, SRP (on behalf of itself and the other NGS owners) and the U.S. Department of the Interior.

John Sullivan, SRP’s Deputy General Manager and Chief Strategic Initiatives Executive, said 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 NGS 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.

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

Sullivan said that the agreement does not alter SRP’s commitment to renewable energy.

“SRP is currently well ahead of schedule to meet our Sustainable Portfolio goal to provide 20 percent of our retail energy demand through sustainable resources by 2020,” said Sullivan. “We have always sought innovative energy-efficiency options and cost-efficient ways to provide our customers with renewable energy products such as our Community Solar program and as the only customer of Arizona’s first utility-scale wind farm.”

NGS 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.

The other owners of NGS are Arizona Public Service, Tucson Electric Power and NV Energy. Notable is that NV Energy is also looking to get out of coal-fired power. Under federal statutes, a portion of the electricity generated by NGS is committed to federal purposes, including the operation of the Central Arizona Project and financial support of certain Arizona Indian water settlements. The federal interest in NGS is managed by the U.S. Bureau of Reclamation.

Generally, the alternative operating scenarios under the EPA’s regional haze plan require the closure of one unit at NGS (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%
  • SRP, 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%

SRP is a community-based nonprofit public power utility, serving about 1 million customers in Maricopa and Pinal counties.

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.