Tucson Electric does deal to buy rest of Springerville 1 coal unit

As part of a planned lawsuit settlement, Tucson Electric Power applied March 29 at the Federal Energy Regulatory Commission for all authorizations necessary to permit it to acquire, through a series of related transactions, the 50.495% fee interest that it does not already own in the coal-fired Springerville Generating Station Unit 1.

The purchase deals also cover certain associated interests in non-jurisdictional common facilities of the overall Springerville Generating Station.

This transaction will resolve fully the ongoing disputes between Tucson Electric and the present owners of these interests regarding transmission rights out of Springerville 1. Approval by the commission of the transaction and its subsequent consummation will render moot the ongoing complaint proceeding brought against Tucson Electric in a case now on appeal to the U.S. Court of Appeals to the Ninth Circuit.

The transaction will also result in the dismissal of three related matters pending in the New York Supreme Court and one matter in arbitration.

Tucson Electric is a vertically-integrated utility that provides regulated electric service to approximately 417,000 retail customers. Tucson Electric owns approximately 2,763 MW of generating capacity including, as is relevant here, 49.505% of the fee interests in Springerville 1, a coal-fired 424.8 MW (nameplate) unit located near Springerville, Arizona, which forms part of the approximately 1,755 MW (nameplate) Springerville Generating Station.

The to-be-purchased nterests are held in trust by Wilmington Trust Co. and William J. Wade (collectively called the “Owner Trustees”) for the benefit of Alterna Springerville LLC and LDVF1 TEP LLC. Alterna holds, through a passive grantor trust, a 43.0693% undivided interest in Springerville 1 and a 21.53465% undivided interest in certain non-jurisdictional common facilities at the Springerville Station. LDVF1 holds, through a passive grantor trust, a 7.4257% undivided interest in Springerville 1 and a 3.72635% undivided interest in non-jurisdictional common facilities at the Springerville Station. Alterna and LDVF1 both have market-based rate tariffs on file with the commission, and both are Exempt Wholesale Generators.

Tucson Electric has agreed to purchase these interests. Concurrent with or shortly after such transfers, Tucson Electric will dissolve the trusts and thus directly hold these assets.

Tucson Electric will after the dust settles hold all fee interests in Springerville 1 and an undivided 50% interest in Springerville Common Plant. The settlement also provides that, upon consummation of the transaction, the parties will seek dismissal of their various adversarial proceedings, including the Ninth Circuit appeal.

Tucson Electric had been leasing this capacity it now wants to buy under a deal that expired in early 2015. That expiration left the financial entities that own this portion of the plant needing to sell that power on the open market, with those parties complaining that the utility was giving them poor transmission options to get that power to any off-takers.

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.