In a continuing trend throughout the industry, three coal-fired generators that opened in the 1960s near Farmington, NM, closed Monday as part of a $182 million plan for Arizona Public Service Co. (APS) to meet environmental regulations.
APS also purchased a larger stake in two units that will remain open at the plant, a move that could cost APS customers almost $3 a month.
The move is part of APS’ proposal to meet Environmental Protection Agency requirements for pollution from the plant’s five generators. Rather than pay to upgrade the three oldest units, APS closed them and paid $182 million for a larger stake in Units 4 and 5, which don’t need as much investment to meet EPA standards.
APS has not been replacing workers at the plant as they quit or retired since 2010 when the plan was first proposed, avoiding layoffs from the closure, said APS Vice President of Fossil Generation David Hansen.
There should be no layoffs because the 120 workers from the first three units will need to work over the next three years to decommission the plant, Hansen said. After that, they should all end up absorbed into the larger workforce of the bigger two units that remain open.
Keeping part of the plant open was important in reaching a resolution to the environmental concerns. The plant and a nearby coal mine generate about $225 million a year in economic benefits to the Navajo Nation and New Mexico economies, according to APS.
Unemployment on the reservation is about 50 percent, so the more than 800 jobs at the plant and mine are critical. Native Americans hold more than 80 percent of the positions. The operations are responsible for about 30 percent of the Navajo Nation’s general fund.
APS owned 15 percent of Units 4 and 5 and bought an additional 48 percent stake in them from Southern California Edison.
PNM Resources Inc. of New Mexico, Salt River Project, El Paso Electric and Tucson Electric Power also own minority stakes in Units 4 and 5.
Units 1, 2 and 3 opened in 1963-64 and Units 4 and 5 opened in 1969-70. The newer units are larger and cleaner-burning.
APS will now seek to raise rates on its more than 1 million customers in Arizona to recover the cost of buying the new units from Edison. When originally proposed in 2010, the purchase was going to cost APS close to $300 million, but delays in the sale reduced the price because APS was not getting the electricity from the plant as early as planned, spokesman Damon Gross said.
It could mean a 2 percent rate increase for APS customers, or about $2.77 a month for the average residential customer, if regulators approve the increase, APS reported. That does not include the $350 million APS expects to spend by August 2018 upgrading Units 4 and 5 to meet EPA pollution standards by adding pollution controls in a process known as selective catalytic reduction.
APS also will see additional costs as it pays for the 7 percent share of the contract to supply coal to Units 4 and 5 that was previously paid by El Paso Electric, which did not sign the supply agreement for 2016 and beyond, according to the regulatory filing. APS will make the 7 percent share of those units available for sale to the Navajo Nation, the filing said.