May 2, 2018 Read More →

Can Courts Save One of the West’s Largest Coal Plants?

E&E ($):

In a filing in the U.S. District Court for the District of Arizona, the Hopi Tribe, Peabody Energy Corp. and the United Mine Workers of America argued that the Central Arizona Project is obligated under federal law to buy electricity generated by the Navajo Generating Station (NGS).

The outcome of the court clash will have big impacts for a host of players.

Attempts by the Central Arizona Project, or CAP as the aqueduct system is known, to consider other power options threaten efforts to find a new owner for NGS and undermine the tribal economies that are built around the plant, plaintiffs contend. The lawsuit was filed two days before CAP’s board is scheduled to evaluate a series of new electricity contracts to replace NGS power.

“Our belief is that the CAP is obligated to take NGS power based on the statutes and agreements enacted when the plant was developed,” Kemal Williamson, Peabody’s president for the Americas, said in a statement announcing the lawsuit. “We are concerned that the board’s actions may interfere with a successful ownership transition and have asked the court to decide the issue.”

The lawsuit comes at a crucial time in the debate over NGS’s future. Four utilities with an ownership stake in the plant voted last year to close NGS in 2019, 25 years before its initial retirement date, saying cheap natural gas prices made it uneconomical to operate (Climatewire, Feb. 14, 2017).

Peabody Energy, America’s largest publicly traded coal company and the operator of the mine that serves NGS, has led a charge to find a new owner to operate the plant beyond 2019. Bloomberg Environment reported last week that Middle River Power, a subsidiary of the hedge fund Avenue Capital Group, is pondering the purchase of the 2,250-megawatt coal plant. Middle River’s level of interest in NGS is unclear. The company did not reply to a request for comment yesterday. Bloomberg reported that the company was interested in buying NGS and had met with CAP to discuss a power purchase agreement.

The Deerfield, Ill.-based firm owns five power plants, including one coal plant in Maryland. Middle River bought the C.P. Crane plant outside Baltimore in 2015. It has filed plans with PJM Interconnection, the Mid-Atlantic grid operator, to close the 385-MW coal plant on June 1.

Environmentalists, for their part, called the lawsuit a thinly disguised bailout for Peabody. The price of NGS electricity, $50.01 per MWh in 2017, now far outstrips average regional electricity prices at the Palo Verde nuclear plant in western Arizona ($28.03 per MWh), said David Schlissel, director of resource planning analysis at the Institute for Energy Economics and Financial Analysis.“They’ve got a plant where they want people to pay above-market rates so they can make a profit at their mine,” Schlissel said. “It’s a bailout, pure and simple.”

($) Can courts save one of the West’s largest coal plants?

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