APS: Jobs saved but revenue would drop
By Erny Zah
WINDOW ROCK, Nov. 20, 2010
Pressed by the U.S. Environmental Protection Agency to reduce emissions, APS proposes to close the three oldest generating units and buy out Southern California Edison's ownership in two other units of the plant. Edison wants to sell because California is forcing its utilities to reduce their stake in coal-fired electric generation.
Representatives from both companies addressed the Navajo Nation Council's Budget and Finance committee on Tuesday.
The deal could save more than 1,000 jobs, most of which belong to Navajo workers, and keep a steady stream of revenue coming to the Navajo Nation, the proponents said.
But it still must be approved by federal agencies, state commissions and the tribe, which is reviewing new leases for the plant and the coal mine. Both leases expire in 2016.
"I think we have a challenge today in the generating station that we all have an interest in," said David Hansen, APS vice president of fossil generation.
Pressure to clean up
The future of the 2,100-megawatt Four Corners Power Plant became uncertain when the USEPA announced plans to require an 80 percent reduction in emissions of nitrogen oxide.
The plant is located a few miles south of Farmington, but its emissions dirty the air as far away as the Petrified Forest National Monument and Mesa Verde National Park, according to the agency.
The pollution also increases the risk of respiratory ailments among nearby residents, according to other critics of the agency.
The USEPA wants the best available control technology used, which APS, the plant manager, said would cost about $875 million.
Power is generated at five units. Units 1, 2 and 3 are the oldest and are owned by APS. APS also has part ownership in units 4 and 5, which were built in the late 1960s.
SCE owns 48 percent of units 4 and 5. With the pending sale, APS stands to control 63 percent of those units.
BHP's nearby Navajo Mine is the sole supplier of coal to the plant, and provides eight to nine million tons of coal a year, said Norman Benally, BHP manager of human resources, government and community relations.
Coal-fired power plants like Four Corners are the largest industrial sources of carbon, the main substance linked to global warming. Efforts to reduce carbon emissions are wobbly, at best, in the Southwest, but in 2006, California passed a tough law forcing its utilities to shift into cleaner energy sources.
Getting out of coal
APS, in conjunction with Southern California Edison, have reached an agreement in principal to solve both their problems. APS would buy Edison's share of Four Corners for $294 million.
According to APS's Hansen, the actual cost is likely to be closer to $400 million because of restrictions on Edison against making further capital investments in the plant. He said APS would pay for the needed improvements.
"That is a risk we are taking," he said.
However, the deal is based on signing new leases with the Navajo Nation and BHP. The deal also would need approval from the California Public Utilities Commission, the Arizona Public Regulation Commission, the USEPA and federal anti-trust agencies.
On the upside, APS, which employs 574 people at the plant - 70 percent of them Navajo - said the proposed buy-out wouldn't result in layoffs, though the plant would reduce its power output from 2,100 to 1,540 megawatts.
Job losses would be handled through retirement and attrition, APS said.
APS customers, most of whom are concentrated in the Phoenix area, wouldn't notice any change in their power, Hansen said.
In a press release, APS said the closure of units 1, 2 and 3, along with upgrades to units 4 and 5 would cut nitrogen oxide emissions by 36 percent, carbon dioxide by 30 percent, and sulfur dioxide by 24 percent.
"Closing the three smaller, less efficient units and keeping the cleaner, more efficient units 4 and 5 in operation would dramatically reduce the carbon footprint in the region and enable the plant to remain compliant with state and federal environmental standards," said Mark Schiavoni, APS senior vice president of fossil generation, in a press release.
APS pays the Navajo Nation about $65 million a year in lease fees and with a new lease, Hansen said the Navajo Nation would get about $60 million a year from lease fees.
Council Delegate Nelson Begaye (Lukachukai/Tsaile/Wheatfields) asked who was on the lease negotiation team from the Navajo Nation, but his question went unanswered during the report.
Although APS projects that its energy output would remain relatively unchanged, BHP said the APS plan would cause a 30-percent reduction in coal production at the mine.
The Navajo Nation stands to lose as much as $13 million per year in lost coal royalties and taxes, Benally told the committee.
However, the reduction wouldn't cause layoffs, BHP's Benally said. The 445 coal miners - 86 percent of them Navajo - would be gradually reduced through retirement and attrition, he said.
Why not solar?
Environmentalists, the plant's harshest critics, like the idea of burning less coal in the San Juan River Valley but want a more ambitious plan.
"Burning less coal at Four Corners is a great start towards protecting both people's and Mother Earth's health, but this won't make the current sickness go away," said Elouise Brown, president of Dooda Desert Rock, in a prepared statement. "I would feel better if we made more jobs in transitioning the other units off of coal and towards a cleaner energy from renewable like wind and solar."
Hansen told the committee that he would like to have new leases with the Navajo Nation by 2012 because APS would need the time to upgrade units 4 and 5.
"We think we have a strong position with the EPA," Hansen said about a recent meeting with the agency about the proposed buyout of Edison.
He added that APS has been in negotiations with the Navajo Nation for a new lease since last year and stressed to the Budget and Finance Committee that the deal is contingent upon getting new leases with the tribe and with the coal supplier.
"Closing this power plant is not the right decision," Hansen said.