Arizona reviewing possible deregulation of local Four Corners Power Plant

The Navajo Nation’s potential ownership of Navajo Mine has been put on hold, while the Arizona state government reviews the possible deregulation of Four Corners Power Plant in Fruitland.

The Arizona Corporation Commission is responsible for regulating public utilities in the state of Arizona. It functions as an executive body that adopts rules and regulations regarding utilities, railroads and pipeline safety, according to the commission’s website.

The commission is looking into whether the electric utility in Arizona should be deregulated or whether to open the state’s electric supply to free market competition.

Deregulation could affect the future of the Four Corners Power Plant, which in turn would affect Navajo Mine, which supplies coal to the facility, according to Pat Risner, asset president of BHP Billiton, owner of Navajo Mine. He spoke to the San Juan County Commission during its regular July 2 meeting in Aztec.

“We understand from APS that they will need to gain more clarity as to how the market will function, and if deregulation will proceed before they enter into the long-term agreements necessary for us to conclude our transactions to sign the agreements and ensure the power plant runs beyond 2016,” Risner said.

Navajo Mine is supposed to supply coal to the plant through 2031, according to a coal sales agreement, but if the plant undergoes deregulation, the need for coal could be cut short.

Despite a possible setback in the ownership transfer, Risner said BHP Billiton will continue to work out an agreement with the Navajo Nation. “Our intention is to move forward and get the agreements in place, and wait for the (Arizona Corporation Commission’s)” decision on deregulation.

County CEO Kim Carpenter said he heard a “rumor” that if deregulation occurred the APS Four Corners Power Plant would shut down.

“But it doesn’t sound like that is fully the case. Are you saying until they get their hands around what the deregulation would comprise of they will evaluate their situation and then make a determination,” Carpenter asked.

“It is our understanding the decision to proceed with retail competition or not is a significant factor in the (Arizona Corporation Commission’s) decision in entering into these long-term agreements,” Risner said, adding that APS also is considering whether it will buy out the ownership of Southern California Edison in Units 4 and 5.

Four Corners Power Plant has five units that provide coal-fired electricity to Arizona, California and Nevada. Southern California Edison owns 48 percent of the shares in Units 4 and 5, and if APS purchased those shares the company planned to shut down Units 1, 2, and 3, according to Risner.

While the plant’s future remains uncertain, Risner said APS intends to run all five units at APS until BHP and the Navajo Nation complete the proposed sale of Navajo Mine.

Risner added it is important to complete the mine’s ownership transfer, because Four Corners Power Plant and Navajo Mine will generate $5.6 billion for San Juan County’s economy between 2016 and 2031, according to a recent study conducted by the business school at Arizona State University.

Navajo Mine employs 400 workers, of which 85 percent are American Indian. The mine has been operated by BHP Billiton for 50 years.