November 13, 2017 Read More →

On the Blogs: Proposed Bailout of U.S. Coal Industry Puts a Spotlight on Failing Arizona Plant

Triple Pundit:

What a mess Energy Secretary Rick Perry dumped into the lap of FERC, the Federal Energy Regulatory Commission. Perry has taken a lot of heat for proposing new protections for coal and nuclear power plants, but go-ahead has to come from FERC. The decision is not expected until December 11, and meanwhile the tension is mounting.

Perry’s new proposal would essentially create new subsidies for outdated coal and nuclear power plants by requiring power plants to keep a 90 day supply of raw material on site. And no, the sun doesn’t count.

The pushback has been fierce.

Even within the fossil fuel sector, reviews have been mixed. Natural gas producers hate it, and electricity producers are generally not fans, either.

One standout example of the utility industry’s fraught relationship with coal is the powered Navajo Generating Station. It is partly owned by four Arizona utility companies, and last winter they voted to shut it down after its lease expires in 2019.

Mike Hummel, deputy general manager of the Salt River Project, told the Arizona Republic that without federal subsidies, a new owner of the plant would not be able to operate it cost-effectively. He noted that each utility owner of the Navajo Generating Station has owned and operated coal plants. “We are all very good at it, and we are all not able to make it work. That’s why the owners are choosing to exit,” Hummel told the newspaper.

The decision was based primarily on the availability of low-cost natural gas.

Somewhat ironically, the Energy Department supports the move to natural gas, with an analysis indicating that an economic turnaround was nowhere in sight for the plant.

Think Progress also cites The Institute for Energy Economics and Financial Analysis, which pins the cost of keeping NGS open just until 2019 at $414 million. The price tag for an additional 10 years of operation after 2019 comes out to the $1-2 billion range.

The four utilities could get stuck holding the bag after all. The plant is a critical economic engine for The Navajo Nation, and as it turns out, Peabody Energy — the same company with the “closed-door access” to the Energy Department — is the coal supplier to the Navajo plant.

More: Tensions Rise as Federal Decision on Coal Protections Looms

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