El Paso Electric (NYSE: EE) said Nov. 2 that it made progress in the third quarter on getting out of coal and wrapping up work, though not finances, on its gas-fired Montana Power Station in Texas.
“The third quarter of 2016 was a pivotal quarter for the Company. We completed our more than $1.4 billion construction program, as we put the last unit of the Montana Power Station into commercial operation. We also received rate relief in Texas and New Mexico for Montana Units 1 and 2 and other plant added in the first phase of that program,” said Mary Kipp, Chief Executive Officer. “The August 25, 2016 final order from the Public Utility Commission of Texas approving an unopposed settlement allowed us to retroactively recognize revenues back to January 12, 2016. Also during the third quarter of 2016, we completed the sale of Four Corners, which means the Company no longer owns any coal-fired generation.”
Kipp added: “Looking ahead, we anticipate filing new rate cases in Texas and New Mexico in the first half of 2017, primarily for the recovery of costs associated with the second phase of our construction program, including Montana Units 3 and 4, which are helping meet continued customer growth.”
The company completed the construction of Montana Power Station (MPS) Units 3 and 4 and placed them into service on May 3, 2016, and Sept. 15, 2016, respectively. The placement of these assets into service are having and will continue to have a negative impact on the company’s 2016 and 2017 financial results until new rates are effective due to the regulatory lag associated with the recovery of related costs. The company anticipates filing new rate cases in Texas and New Mexico in the first half of 2017 to reflect MPS Units 3 and 4 in rate base.
The company has completed construction of the MPS placing into service Units 3 and 4 and the related common facilities and transmission systems at a cost of approximately $152.8 million for the two units. Similar to Units 1 and 2, each unit is an 88-MW simple cycle aero-derivative combustion turbine, is powered by natural gas and has quick start capabilities which allows the unit to go from off-line to full output in less than 10 minutes, thus increasing overall power grid stability. Each of the four units will work in concert with the company’s renewable energy sources.
In February 2015, El Paso Electric and Arizona Public Service (APS) entered into an asset purchase agreement, providing for the purchase by APS of the company’s interests in Units 4 and 5 of the Four Corners Power Plant. On July 6, 2016, the closing of the transaction occurred, after which El Paso no longer owns any coal-fired generation. No significant gain or loss was recorded upon the closing of the sale.