Scott Harelson, SRP, (602) 236-2500
Nov. 29, 2017

Navajo Generating Station will operate through December 2019

Navajo Generating Station will operate through December 2019.

The remaining actions necessary for final approval of a new lease for the Navajo Project, including the Navajo Generating Station (NGS), near Page, Ariz. have been completed, meaning the plant can continue operating through 2019.

The Department of the Interior was able to approve the lease and related agreements today after the Bureau of Reclamation (BOR) and Bureau of Indian Affairs issued a Finding of No Significant Impact (FONSI) and an Environmental Assessment (EA) for their approval of the Navajo Generating Station Extension Lease earlier this week.

The FONSI and EA examined the potential environmental impacts of NGS through 2019 and subsequent retirement activities.

A Navajo Nation task force and Salt River Project – on behalf of the other NGS owners – negotiated the new lease and related agreements in good faith over a period of several months.

The lease was approved by Navajo Nation Council and signed by the Navajo Nation President and the current utility owners in June. Former NGS owner Los Angeles Department of Water & Power signed the lease earlier this month.

The 35-year lease includes $110 million in lease payments, minimum fuel purchase revenue assurances for the Navajo Nation of $39 million and valuable use of transmission from the NGS transmission station to sites off the reservation. Under the lease, the NGS owners also agreed that the Navajo Nation could retain additional assets associated with NGS, including the railroad and the lake pump system. The savings for not decommissioning these assets will be shared with the Nation and is more than $18 million.

"A great deal of hard work from a number of dedicated individuals representing the Navajo Nation, the owners and the federal government made this important step possible," said Mike Hummel, deputy general manager of SRP, the plant's operator. "We are grateful for their effort as this agreement provides meaningful benefits for all involved and creates a path forward during this challenging transition.

"Importantly to us, the new lease paves the way for SRP employees at the plant to remain on the job for up to an additional two years and allows us to fulfill our commitment to redeploying all regular NGS employees to other SRP facilities by 2019."

The owners made the difficult decision in February to end their participation in NGS when the current lease term ends in 2019 after it became clear that current and forecasted low natural gas prices had made coal generation there uneconomical.

The Extension Lease sets guidelines for retirement activities at NGS that will now begin after 2019 and provides for long-term monitoring. It also extends the lease to allow ongoing operation of the transmission system on the Navajo Nation.

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.