Arizona deregulation inquiry casts cloud on plant, mine deals

August 26, 2013
The Daily Times
Chuck Slothower

FARMINGTON — A move by the Arizona Corporation Commission to consider deregulating the electric market in that state is sending a jolt through San Juan County, causing local public officials and the operator of Four Corners Power Plant to increasingly question the plant's future.

Arizona Public Service Co., the operator and part owner of Four Corners, is urgently pushing the ACC to end its inquiry into deregulation. APS spokesman Damon Gross said the utility cannot move ahead with pending deals to supply the plant with coal and complete a $294 million purchase as long as the deregulation debate looms.

"We need that issue resolved," he said.

San Juan County commissioners last week sent a letter stating that closure of Four Corners Power Plant could cause a chain reaction that would "decimate" the economies of the Navajo Nation and the county and cost "literally billions" to area and state economies.

The 2,040 megawatt coal-fired power plant and neighboring Navajo Mine west of Farmington employ more than 800 workers and support a network of local contractors and ancillary businesses.

Gross said APS has no specific timeline for making decisions on the plant's future, but he said there is some urgency to executing the coal-supply agreement and a deal to purchase Southern California Edison's interest in units 4 and 5. APS would then shut down the three oldest units to satisfy environmental requirements.

"I don't know if we can give you a firm date that that has to occur by, but I would say that time is not necessarily on our side," Gross said. "It is something that needs to have some resolution, shorter term rather than longer term."

Gross said if the Arizona commission forges basic changes to Arizona's electricity market, "the longer-term viability of the plant would be unknown."

The Arizona debate has also stalled the Navajo Nation's purchase of Navajo Mine, which supplies coal to Four Corners. Officials with the tribe and mining giant BHP Billiton said the deal is all but finished, but is on hold because of the Arizona commission's move.

"We hope that the ACC considers the amount of economic importance that Four Corners Power Plant and BHP Navajo Mine has in the Four Corners region, and any disruption to the current situation is going to put the entire county and 800-plus jobs in a situation that's not needed," said Erny Zah, spokesman for Navajo Nation President Ben Shelly.

Navajo Transitional Energy Co., a business entity created by the tribe to purchase the mine, also weighed in with a letter to the Arizona commission. Attorney William Gregory Kelly urged the ACC to "immediately end its inquiry into restructuring the Arizona retail electric market."

The regulatory morass has caught the attention of local leaders. Officials said the economic fallout from closing the power plant and mine would be devastating to the county, which also faces weakness in its other major industry, natural-gas production.

San Juan County commissioners, in a sharply worded Aug. 20 letter, said "Continuing with this inquiry at this time will terminate pending agreements between the Four Corners Power Plant, of which the majority interest owner is Arizona Public Service, and the Navajo Transitional Energy Co., which is owned by the Navajo Nation."

Commissioners said APS could move to shut down Four Corners Power Plant if it doesn't have regulatory certainty, which would also cause the closure of Navajo Mine. The power plant is the only major customer of the mine's coal.

"If this occurs, in addition to the economic harm for New Mexico and Arizona, the economies of the Navajo Nation and San Juan County will be decimated," commissioners said. "The people and economies of San Juan County, New Mexico, and the Navajo Nation will lose billions of dollars -- literally billions -- if the (coal supply agreement), which is on hold for this inquiry, is not closed and (Four Corners Power Plant) and Navajo Mine operations shut down."

Mayor Tommy Roberts submitted a letter with similar wording, as did San Juan County's state legislative delegation.

The Arizona commission has not set a date to discuss the issue, but it is likely to hold a public meeting on the topic in late September or early October, said Jodi Jerich, executive director of the Arizona Corporation Commission.

"Basically the commission has agreed to look into this idea of whether it's in the public interest for Arizona to move into a competitive retail marketplace," she said.

Jerich said the commission is aware of the mounting worries and will not drag its feet.

"The commission is cognizant of those concerns and thinks those concerns are valid," Jerich said. "They want to make an informed vote, and they don't want to delay the vote."

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