Ryan Randazzo

The Republic | azcentral.com

Utility regulator Andy Tobin proposes the federal government increase its financial investments in a Navajo coal plant

Tobin suggests SRP and other owners of the plant run it another five years to find new buyers

SRP officials said they are working on a plan and asked outsiders to limit such suggestions and other "distractions"

Arizona utility regulator Andy Tobin is urging increased support from state utilities and the federal government to help keep the Navajo Generating Station coal-fired power plant running.

Tobin suggested a compromise that would allow the current owners to keep the plant running for five more years to provide time to find new buyers who could run it for decades.

Among his suggestions is a 50-50 cost split between the federal government and the utility owners for any maintenance needed in the next five years and relief from environmental regulations.

Closure would be a hasty move, Tobin says

The four utilities that own the plant, led by Salt River Project, voted this year to stop running the plant before 2020. The U.S. Bureau of Reclamation also owns a minority share and wants to keep the plant open.

Tobin said closing the coal plant in favor of cheaper power from natural-gas burning plants is a hasty move that could backfire if gas prices rise in the years ahead and the coal generator is no longer available.

The coal plant has served as a critical piece of Arizona's infrastructure not only for the power it provides utilities, but for the portion of its output used by the Bureau of Reclamation to power pumps that bring Colorado River water to Phoenix and Tucson in the Central Arizona Project canal.

CAP officials have said they are better off buying cheap power from natural-gas plants. CAP doesn't get to decide whether the plant stays or goes, but officials there said they can save money without relying on the coal plant.

Tobin blasted both SRP and the canal operators as shortsighted because of their acquiescence to closing the plant in favor of natural gas.

"SRP and CAP know that they are subjecting their customers to the most volatile energy resource available," he said in a letter to Ryan Zinke, the new secretary of Interior, which oversees the Bureau of Reclamation.

As recently as last fall, SRP officials described the coal plant as an important component of the power system. Then early this spring, the utility voted along with Arizona Public Service Co., Tucson Electric Power Co. and NV Energy to run it no longer than 2019.

Tobin said the abrupt about-face signals "that SRP forecasters either got it significantly wrong for the last several years regarding the future of NGS, or even more startling: They're dead wrong for the next several years."

Subsidize, sell or shut down?

SRP officials have said they will work with the Navajo Nation, which leases its land to SRP for the power plant, to transition the plant to new owners if any can be found. The plant and Kayenta coal mine that supplies it are important sources of jobs and other economic benefits for the Navajo and Hopi tribes.

No plan to keep the power plant running has developed, but some Navajo political officials have suggested the federal government subsidize coal from the Kayenta Mine to make the operation more cost competitive with natural-gas power.

Tobin is one of five Arizona Corporation Commissioners who regulate utilities in Arizona including APS and TEP. But the commissioners do not have that same level of authority over SRP, which is a political subdivision of the state. SRP runs the coal plant on behalf of all the owners. Because he can't compel SRP to alter its course, Tobin put forth a proposal to keep the plant running.

The 50-50 maintenance cost split Tobin suggested would effectively double the financial responsibility of the federal government in keeping the plant running. Now, the co-owners pay expenses based on the percentage of the plant they own, and the Bureau of Reclamation only owns 24.3 percent.

A representative from Tobin's office said the proposal is not intended to be a subsidy, but is meant to ensure the plant does not fall into disrepair and discourage potential buyers. He said the cost sharing is intended to protect the investment Arizona utilities and their customers have made in the coal plant.

A 'distraction' to negotiations?

SRP officials have said they will begin a shutdown this year if they do not have a new lease signed with the Navajo Nation by July 1. The current lease expires in 2019, and SRP will need to begin tearing the plant down to meet the terms of that lease. The utility wants an extension that allows the plant to run until 2019 and allow for deconstruction to take place after that.

SRP and the Navajo Nation president's office said Monday in a news release they are making progress toward a lease agreement along those lines.

Tobin's suggested compromise also would have the Navajo Nation waive its right to oversee the plant's decommissioning.

SRP officials provided a statement that suggests Tobin's plan is a distraction to negotiations to keep the plant running.

"Negotiations between the owners of the Navajo Generating Station and the Navajo Nation are well underway for a lease extension that would extend operations of the plant through 2019 and allow for removal and restoration activities after the current lease expires on Dec. 22, 2019, or continued operations of NGS under a different ownership group if that were to come to pass," said the SRP statement provided by spokesman Scott Harelson.

"As the negotiations are in a very critical stage and time is of the essence, the NGS owners would hope that others would allow this important process to continue without distraction in order to reach a successful conclusion."

Tobin's letter also had coarse words for CAP and its management and elected board members.

He said CAP leaders have forgotten the history of the power plant, "unprofessionally" suggested direct subsidies to the tribes rather than keep the plant open, and are shortsighted.

CAP officials did not respond to a request for comment on Tobin's letter.

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