Scott Harelson, SRP, (602) 236-2500
Feb. 13, 2017

Owners Vote on Navajo Coal Plant Lease

Agree to Work with Navajo Nation to Keep Plant Running through 2019

Rather than close the plant later this year, the utility owners of Navajo Generating Station (NGS) voted today to extend operations of the facility near Page, Ariz., to the December 2019 end of its lease if an agreement can be reached with the Navajo Nation.

Media resources

Image of Navajo Generating Station in Page, Arizona

Additional information on NGS and photographs of the plant:

This measure would preserve, for almost three years, continued employment at the plant, additional revenues for the Navajo Nation and the Hopi Tribe. It also provides the Nation or others with the potential to operate the plant beyond 2019 should they so choose – although the current non-governmental group does not intend to be participants at that time.

The decision by the utility owners of NGS is based on the rapidly changing economics of the energy industry, which has seen natural gas prices sink to record lows and become a viable long-term and economical alternative to coal power.

The four utility owners of NGS include Salt River Project (SRP), Arizona Public Service Co., NV Energy and Tucson Electric Power.

“The utility owners do not make this decision lightly,” said Mike Hummel, deputy general manager of SRP, the plant’s operator. “NGS and its employees are one reason why this region, the state of Arizona and the Phoenix metropolitan area have been able to grow and thrive. However, SRP has an obligation to provide low-cost service to our more than 1 million customers and the higher cost of operating NGS would be borne by our customers.”

According to a recent study by the National Renewable Energy Laboratory, “Electricity produced at NGS is currently more expensive than electricity purchased on the wholesale spot market,” and that “price trends examined suggest a turnaround might be years away, especially if natural gas prices remain low.”

Hummel said the owners’ focus now is to secure an agreement with the Navajo Nation that would allow the plant to continue to run through the end of its lease on Dec. 22, 2019 and allow removal and restoration activities, which could take up to two years. Hummel said these discussions are critical because without an agreement between the owners and the Navajo Nation, the plant would be required to cease operations in 2017.

“NGS has been a reliable source of pumping energy for CAP for more than three decades and sales of surplus NGS energy have provided millions of dollars to assist in repaying the costs of the CAP,” said Thomas McCann, deputy general manager, Central Arizona Project. “But the electric market has fundamentally changed over the last few years to the point that NGS is now significantly more expensive than other energy alternatives. CAP understands and cannot disagree with the owners’ decision based on this economic reality. CAP has been evaluating NGS alternatives that we expect will result in lower energy costs for CAP water users.”

“While the International Brotherhood of Electrical Workers would have preferred that NGS remain open past 2019, we recognize that the focus now should be on protecting jobs at the plant for as long as possible,” said Jerry Long, business manager and financial secretary for IBEW Local 266. “We support the owners’ desire to reach an agreement with the Navajo Nation that will allow for the plant to keep running through 2019.”

“Department of the Interior’s preferred path is to explore ways in which the plant could operate economically post-2019,” said David Palumbo, Deputy Commissioner – Operations for the Bureau of Reclamation. “We recognize that NGS is an economic driver throughout the state of Arizona, both for local economic activity and Native American employment near the facility as well as for users of CAP water, including the tribes that rely on that water. Before discussing the possibility of a permanent shutdown, we would like to see if we can find a path forward that meets the needs of multiple NGS stakeholders.”

As an owner and operator of the plant, SRP will lead efforts to aid employees during the transition.

“We deeply respect and admire the efforts of the NGS employees, who for several decades have made the plant one of the safest and most reliable in the nation. SRP is committed to working closely with our employees as the plant transitions to a potential removal and restoration phase,” said Hummel.

Hummel said NGS employees will also be considered for possible positions within SRP, while career and financial planning services will also be available.

“NGS employees have provided extraordinary service to SRP and its customers over the past 40 years,” said SRP President David Rousseau. “The SRP Board fully supports operating NGS through the current lease term of 2019 while working with the Navajo Nation on transition alternatives to the mutual benefit of their members and our customers.”

“We are committed to work with the Navajo Nation on several fronts, including transmission and water rights, developing gas reserves and partnering on renewable energy projects like the Kayenta Solar Project,” Hummel said.

The participants in NGS include, SRP, the plant’s operator; the U.S. Bureau of Reclamation; Arizona Public Service Co.; Tucson Electric Power Co.; and NV Energy.