Arizona approves APS buy of part of NM coal plant

Thu Apr 19, 2012 3:28pm EDT

* APS to pay $294 million for SCE stake in plant

* APS to retire old coal units after buying SCE stake

* Old coal units to retire due environmental rules

By Scott DiSavino

April 19 (Reuters) - Arizona utility regulators approved Arizona Public Service's (APS) $294 million plan to buy part of the Four Corners coal-fired power plant in New Mexico from Southern California Edison.

A spokesman at APS told Reuters Thursday this is a big step closer to APS's acquiring the bigger Four Corners stake but a couple of items still needed to be completed before the deal can close.

The spokesman said APS still needed approval from the U.S. Federal Energy Regulatory Commission (FERC) and a coal contract extension with the mine that provides fuel to the plant.

APS hoped to complete the purchase by the end of the year.

In March, California utility regulators approved Southern California Edison's (SCE) previously announced sale of its interest in Four Corners to APS, which would end the California utility's ownership in coal-fired generation.

The California Public Utilities Commission (CPUC) required SCE, a unit of California energy company Edison International , to sell its interest in coal-fired power plants by 2016.

SCE owns a 48 percent share in the 770-megawatt Units 4 and 5 at Four Corners, which is operated by APS. APS is a unit of Arizona energy company Pinnacle West Capital Corp.

SCE agreed to sell its share in Four Corners to APS in November 2010.

There are five units at Four Corners. Units 1, 2 and 3 are wholly owned by APS.

Units 4 and 5 are 48 percent owned by SCE, 15 percent by APS, 13 percent by PNM Resources' Public Service Co of New Mexico, 10 percent by Salt River Project, 7 percent by El Paso Electric and 7 percent by UniSource Energy's Tucson Electric.

APS has said it plans to shut Units 1, 2 and 3 if it acquires SCE's stake in Units 4 and 5.

APS said it would shut Units 1, 2 and 3 because they are older and smaller than Units 4 and 5 and are therefore not economically practical to upgrade to meet the new, more stringent federal emissions requirements proposed by the Environmental Protection Agency (EPA) over the past few years.

Energy companies have announced plans to shut more than 30,000 MW of coal-fired generation in the United States, primarily because of the new EPA regulations, weak power market conditions and natural gas prices near 10-year lows making efficient gas plants cheaper than older coal units.

See FACTBOX on coal fired retirements.

Units 1 and 2 at Four Corners are each 170 MW and entered service in 1963. Unit 3 is 220 MW and entered service in 1964. Units 4 and 5 are 770 MW each and entered service in 1969 and 1970.