EPA Extends Deadline for Four Corners Decision as Ariz. Re-Examines Deregulation

The Environmental Protection Agency (EPA) last week gave Arizona Public Service Co. (APS) six more months to decide on the future of its 2-GW coal-fired Four Corners Power Plant near Farmington, N.M., recognizing "uncertainties" posed by Arizona’s recent move to consider deregulation of the state’s electric sector.

The EPA on Aug. 24, 2012, promulgated a final federal implementation plan (FIP) that would require operators of the Four Corners plant, located on the Navajo Nation near where the state lines of Arizona, New Mexico, Utah, and Colorado come together, to implement best available retrofit technology (BART) requirements of a regional haze rule for the facility. The FIP essentially requires that plant owners either install costly selective catalytic reduction pollution control technology at all five units at the plant, or, as the plant’s owners have proposed, shutter Units 1, 2, and 3 by January 2014, and install selective noncatalytic reduction on the remaining two units.

But APS, the operator and the largest shareholder of the Four Corners Power Plant, in June asked the EPA to extend its July 1 deadline by which it must decide on options for the plants future, citing "new uncertainties" posed by the state’s intentions to explore electric deregulation that "complicate its decision related to BART compliance." The Arizona Corporation Commission (ACC) on May 9 voted to re-examine deregulating the state’s retail electric market. This week, a number of the state’s utilities, industry groups, and citizen organizations weighed in on whether or not the measure could benefit the state, reported the Phoenix Business Journal.

The EPA on July 11 granted that request and gave APS until December 31, 2013, to decide on its BART compliance strategy, saying the basis provided by APS was "reasonable and justified given the uncertainties in the electrical market in Arizona." The EPA said it was not proposing to amend any other requirements in the FIP for the plant, however.

APS has also reportedly put on hold a $294 million purchase of Units 4 and 5 from Southern California Edison (SCE) on concerns about Arizona’s future electric deregulation. APS, which owns 100% of the plant’s Units 1, 2, and 3, first announced in November 2010, that it intends to buy SCE’s 48% stake in the two newer units, of which it owns a 15% stake.

"APS cannot predict whether the closing of its planned purchase of SCE’s interest in Four Corners will occur, or the effect that the ACC’s re-examination of a possible deregulated retail electric market in Arizona may have on the future operation of the plant," a federal filing from the company says.

In related news, APS filings last week with the ACC proposed two options to "fairly" compensate customers who choose to generate power from rooftop solar in the future. One option would allow new residential customers to continue being reimbursed the same way, but would require they pay fees for "use of the grid, based on how much electricity they use." The second option describes a "bill credit," which would allow new system owners a small bill reduction set by state regulators and "based on the market rates APS pays other generators for power."

The recommendations have been opposed by industry group the Solar Energy Industries Association (SEIA), which said it was concerned about APS’ "method for determining the value of net metereing for all its ratepayers." SEIA said, however: "we remain committed to working with both APS and the ACC to arrive at a conclusion that preserves full retail credit net metering while achieving ratepayer fairness."

Sources: POWERnews, APS, EPA, SEIA, Phoenix Business Journal

Sonal Patel, Senior Writer (@POWERmagazine, @sonalcpatel)

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