LADWP Confirms Early Navajo Coal Plant Retreat

By Published On: October 12, 2012

The nation’s largest municipal utility plans to end its interest in the West’s largest coal-fired plant in 2015. That’s four years earlier than its present partnership agreement expires, according to its latest draft integrated resource plan discussed publicly for the first time Oct. 11. The plant faces huge investments in pollution controls. Under the plan, the Los Angeles Department of Water & Power seeks to sell its 477 MW interest in the 2,250 MW Navajo Generating Station on Navajo Nation land near Page, Arizona. Replacement power would come from new renewable energy plants, some of which could be located along the existing transmission system between the coal plant and Los Angeles. Energy efficiency, demand response programs, and some purchased natural gas-fired power also would help replace the coal-fired power. “It’s a major transformation,” said William Glauz, LADWP manager of resource planning and development. “We’ve built the system over the past 100 years and in the next 10 to 15 years we’re going to replace 70 percent of that system.” An early exit from the plant would raise the cost of power for muni customers by an estimated 0.36 cents/kWh, which would mark a one-time increase of 2 percent. Should natural gas prices for substitute power run on the high side, rates could rise by as much as 1 cent/kWh, a 5.7 percent increase. The move would help the muni meet its greenhouse gas reduction requirement under the state’s carbon cap-and-trade program, eliminating 7.2 million tons of greenhouse gas emissions from 2016 through 2019. LADWP also noted that wrapping up its interest in Navajo would clear the way for it to focus on getting out of the 1,800 MW Intermountain Power Project in Utah--a coal-fired plant that provides it with up to 1,202 MW of power. Its power purchase agreement with the plant’s operator, the Intermountain Power Agency, ends in 2027. LADWP, though, is eyeing ending that contract by 2023 and possibly entering a new agreement if the plant is converted to natural gas fuel by then. Discussions on converting it to natural gas are underway between the muni, Intermountain Power Agency, and the plant’s 59 other participants and owners. The Utah Legislature earlier this year passed a bill allowing the plant to be converted to natural gas, said Intermountain Power Agency spokesperson John Ward. “This project has been a major economic contributor to the state,” he said. Converting it to natural gas and continuing to sell power to California would “keep it as a major contributor,” he added. The muni’s plan to pull out of the Navajo Generating Station by 2015 comes as the plant faces potentially massive investments to meet new air pollution control requirements the federal Environmental Protection Agency is pursuing. Some of the new rules--put in place in August-- require cuts in sulfur dioxide and particulate emissions. EPA further promises to require cuts in nitrogen oxide emissions at the three unit plant, which opened in the mid-1970s, in a separate forthcoming regulation. The rules aim to prevent regional haze that obscures views, particularly at national parks like the Grand Canyon. Complying with the rules could cost $1.1 billion, according to an Arizona State University study released earlier this year. LADWP could sidestep its 21.2 percent share of the expense by selling its interest in the plant before the likely regulatory compliance deadline of 2017. The resulting uncertainty--along with the muni’s plan to divest its share in the plant--are raising questions among the current partners in the plant about whether or not it will be worth it to keep the facility going after 2019, said Scott Harrelson, Salt River Project spokesperson. The plant has six owners, including LADWP and Salt River Project. Harrelson said the biggest proponent for keeping the plant going may well be the federal Bureau of Reclamation, which is the largest owner of the coal plant, with a 24.3 percent share. It uses its allotment of power to pump water from Lake Mead through the Central Arizona Project, which runs all the way to Tucson. Without the low-cost coal power, the price of water would likely go up dramatically, he said, so the Bureau has been a strong proponent of keeping the plant going. Navajo Nation president Ben Shelly stated that the air pollution control requirement could result in the plant closing down, which would eliminate 1,000 jobs, including coal mining positions at Peabody Western Coal’s Kayenta Mine, which feeds the plant. The jobs pay $100,000 or more a year in an area with little employment base and high unemployment. A National Renewable Energy Laboratory study released earlier this year showed the plant has contributed $1.3 billion in royalties, water fees, and bonuses to the Navajo Nation and Hopi Tribe over the last 25 years. Another study earlier this year by Arizona State University shows that closing the plant and mine would result in a $640 million/year loss to Arizona’s economy. The prospect of Navajo closing has become a rallying cry in the House, where Rep. Jeff Flake (R-AZ) succeeded Sept. 21 in getting an amendment inserted into H.R. 3409, the Stop the War on Coal Act of 2012. His amendment would usurp federal authority over regional haze and reserve it instead for states. “States like Arizona ought to have primary regulatory authority,” stated Flake. “We’ve got to keep the EPA in check on this.” The proposed legislation is seen as having little prospect of getting through the Senate this year. Meanwhile, Navajo’s owners face other hurdles to keeping the plant open, including the need to negotiate a new land lease with the Navajo Nation and a new coal supply contract, both of which expire at the end of 2019. Salt River’s Harrelson also notes that many of the utilities that currently get power from the plant are increasingly using renewable energy just like LADWP, but that the coal plant remains a low-cost and reliable source of baseload power.

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