FARMINGTON — Arizona Public Service Company's $294 million purchase of two units at Four Corners Power Plant is on hold following action by the Arizona Corporation Commission to pursue electricity deregulation in that state, according to a federal regulatory filing.
The commission's move casts uncertainty on APS' purchase of units 4 and 5, first announced in 2010. The purchase is a key aspect to APS' plans to keep the two units running for years to come.
APS still intends to complete the purchase, said spokesman Damon Gross.
"Our target is still completing the transaction. We just need to get some resolution on the deregulation issue first," Gross said.
APS is regulated in Arizona by the Arizona Corporation Commission. On May 9, the commission voted to consider moving toward deregulating Arizona's electric market.
"Because of the uncertainty of what that market would look like, we have put completing that purchase on hold until we can have some level of certainty as to where that discussion is going to go," Gross said.
The news was first revealed in a June 17 filing with the U.S. Securities and Exchange Commission.
APS has requested an extension from the U.S. Environmental Protection Agency to a July 1 deadline for deciding on options for the plant's future. APS may either install expensive selective catalytic reduction pollution-control technology on all five stacks, or, as the company prefers, close the three oldest units by Jan. 1, 2014, and install pollution controls on the two remaining units.
APS is the operator and largest shareholder of Four Corners Power Plant. The coal-fired plant, located about 20 miles west of Farmington in Fruitland, produces up to 2,040 megawatts and is a major contributor to the West's electric grid.
If APS moves ahead with the purchase, the company would still need to reach agreement with mining company BHP Billiton, which operates the adjacent Navajo Mine, to continue supplying coal. It could then purchase Southern California Edison's 48 percent interest in units 4 and 5.
"We've made really good progress on the coal contract," Gross said. "If we're satisfied with the outcome on the discussion surrounding deregulation, then we expect to be able to finalize a coal supply agreement, and then complete the purchase of (Southern California Edison)'s units 4 and 5 and then begin decommissioning units 1, 2 and 3."
The plan is intended to satisfy EPA requirements that the Four Corners reduce its emissions of pollutants that contribute to regional haze.
It may not be so easy for APS to earn an extension from the EPA, said Mike Eisenfeld, New Mexico energy coordinator for San Juan Citizens Alliance, a Durango, Colo.-based environmental group.
"They're talking about extensions on timelines that they have no control over," he said.
APS' delay could also figure into discussions on Navajo Mine. The Navajo Nation is evaluating whether to purchase the mine from BHP Billiton, an Australia-based mining company. Four Corners is the sole customer for Navajo Mine's coal, so any changes to the plant's operations directly affect the mine.
Eisenfeld said there are many unanswered questions.
"It displays an extraordinary amount of uncertainty with the industry," he said.