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Arizona Coal Plant May Operate Through 2019; Future in Navajo's Hands

The four non-government utilities that own most of Navajo Generating Station (NGS) in Arizona, as expected, decided Monday to push for the plant's continuing operations through the next three years. However, they could walk away from the 2,250 MW coal-fired plant by the end of this year rather than the end of 2019, when an existing lease with the Navajo Nation expires.

As previewed in an earlier report in NGI, the four owners, headed by Phoenix-based Salt River Project (SRP), agreed to keep operating the facility on the Navajo reservation at Page, AZ, until December 2019, but only if they can reach an agreement with the Navajo Nation.

If that agreement fails to materialize, the plant -- one of the largest coal-fired generation facilities in the West -- will be shuttered at the end of this year, an SRP spokesperson told NGI Monday.

"Our focus in now on keeping the plant open until 2019," the spokesperson said. "If we can reach an agreement with the Navajo Nation to conduct removal and restoration activities on [tribal] land, the plant can continue to operate through 2019 to the benefit of our employees and the Navajo Nation."

Along with preserving the plant's economic advantages for both Navajo and Hopi peoples, it also provides the Navajo or others with the potential to operate the plant beyond 2019 should they choose to do so, said the spokesperson for the majority owner/operator SRP.

Other NGS utility owners include Arizona Public Service Co., NV Energy and Tucson Electric Power. The four utility owners "did not make the decision lightly," according to Mike Hummel, SRP's deputy general manager.

Lauding the plant and its employees for facilitating the growth of the greater Phoenix metropolitan area in recent decades, Hummel said "SRP [also] has an obligation to provide low-cost service to our more than 1 million customers, and the higher cost of operating NGS would be borne by our customers."

Ultimately, the NGS plant is another casualty of the impact today's cheap, abundant U.S. natural gas supplies have had on the once-dominant coal-fired electricity sector.

SRP officials cited a recent National Renewable Energy Laboratory (NREL) study that indicated that the NGS plant is at a competitive disadvantage and a turnaround is not likely anytime soon. "Electricity produced at NGS is currently more expensive than electricity purchased on the wholesale spot market," according to NREL's study.

Monday's decision was based on what the SRP spokesperson called "rapidly changing economics in the energy industry, which has seen natural gas prices sink to record lows and become a viable long-term and economical alternative to coal power."

A non-utility participant in NGS is the U.S. Bureau of Reclamation, and its officials have said they would prefer to explore ways to operate the coal-fired plant economically after 2019.

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