Coal

Arizona Public Service withdraws apps at FERC on Four Corners buy

By Barry Cassell, Chief News Analyst, GenerationHub

Due to a decision by the Arizona Corporation Commission to re-look at the issue of deregulation in the state, Arizona Public Service (APS) on June 26 withdrew at the Federal Energy Regulatory Commission applications related to its now-shelved plan to buy 48% of the coal-fired Four Corners Units 4 and 5.

“On May 17, 2013, APS made a number of filings intended to reflect changes resulting from APS’s planned acquisition of Southern California Edison Company’s (‘SCE’) ownership interests in the Four Corners Power Plant (‘Four Corners’),” the utility told FERC. “Specifically, APS filed: (i) the Edison-Navajo Transmission Agreement in Docket No. ER13-1519-000; (ii) an amendment to the Shiprock-Four Corners Project 345-kV Switchyard Interconnection Agreement in Docket No. ER13-1520-000; and (iii) amendments to the Four Corners Project Co-Tenancy Agreement, the Four Corners Project Operating Agreement, the Four Corners Project Emission Abatement System Operating Power Agreement and the Principles of Interconnected Operation for Four Corners Interconnection Agreement in Docket No. ER13-1521-000.”

Because at the time of that filing APS anticipated that the closing on the sale and transfer of SCE’s interests in the Four Corners plant to APS would take place on July 1, 2013, APS asked that the authorizations requested in each of these filings be effective July 1.

But, the Arizona Corporation Commission (ACC) recently voted to re-examine the facilitation of a deregulated retail electric market in Arizona, the utility told FERC. The ACC opened a docket for this matter and set a procedural schedule where comments from interested parties on the pros and cons of deregulation will be filed in July and August. The ACC stated that after it has had an opportunity to review the written comments, it plans to convene an open meeting to discuss the issues and information filed in the docket.

“In light of this development, APS currently expects that it will not be in a position to close the Four Corners purchase transaction with SCE until the ACC’s intentions with regard to pursuing deregulation in Arizona become clearer,” the utility told FERC. “As such, APS now moves to withdraw the referenced filings without prejudice. APS intends to re-submit the relevant agreements with a new proposed effective date as appropriate.”

Pinnacle West warned about this problem on June 17

APS parent Pinnacle West Capital (NYSE: PNW) said in a June 17 SEC filing that the ACC decision had put the Four Corners deal on hold. APS and Southern California Edison (SCE) have an agreement where APS would purchase SCE’s 48% interest in each of Units 4 and 5. SCE needs to get rid of this coal stake to satisfy California greenhouse gas standards.

The U.S. Environmental Protection Agency in its final regional haze rule for Four Corners set a date of July 1, 2013, for the Four Corners’ owners to elect one of two emissions-control alternatives. Either alternative would involve substantial investment by the owners in additional post-combustion pollution controls, and accordingly contemplates the continued operation of Four Corners for a substantial period of time. In light of the docket opened by the ACC concerning deregulation, APS is in discussions with the EPA for a potential extension of the July 1 deadline.

SCE is a unit of Edison International (NYSE: EIX). Four Corners is located on the Navajo Nation in Fruitland, N.M., about 25 miles west of Farmington. It is owned, in varying shares by SCE, APS, Public Service Co. of New Mexico (PNM), Salt River Project Agriculture Improvement and Power District (SRP), El Paso Electric (EPE) and Tucson Electric (TEP).

The plant consists of five generating units. The first three units, each of which is wholly-owned by APS, went online in 1963-1964 and have a combined capacity of 560 MW. Units 4 and 5, each of which is co-owned by APS, SCE, PNM, SRP, EPE and TEP, commenced commercial operation in 1969-1970 and have a combined capacity of 1,540 MW. APS operates Four Corners on behalf of all the participants.

APS has announced that, if its purchase of SCE’s interests in Units 4 and 5 is consummated, it will close Units 1, 2 and 3 at the plant. APS owns 100% of Units 1-3. These events will change the plant’s overall generating capacity from 2,100 MW to 1,540 MW and APS’s entitlement from the plant from 791 MW to 970 MW.

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