Coal Age

MAR 2017

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Page 12 of 51

March 2017 11 news continued Power Co. (AEP), one of the largest electric utility companies in the United States. Starting in February, the twin-unit, 2,665-megawatt (MW ) baseload generating station was under new ownership after Blackstone Group LP and ArcLight Capital Partners LLC acquired Gavin and three natural gas-burning plants in Ohio and Indiana from Columbus, Ohio-based AEP for approximately $2.17 billion. The new owners said they intend to continue operating Gavin, the largest power plant in Ohio and one of the biggest coal burners in the U.S. The plant, which has nearly 300 employees, consumes more than 7 million tons of steam coal annually from several sup- pliers, including Ohio-based Murray Energy Corp., the largest pri- vately owned coal company and underground miner in the nation. AEP built Gavin's two roughly 1,300-MW generating units in 1974 and 1975. The plant was named in honor of a World War II hero, com- manding general of the 82 nd Airborne Division and U.S. ambassador to France, who also served as an AEP director from 1961 to 1980. The plant established several AEP records for availability and total gener- ation in its first few years of commercial operation. In recent years, though, AEP has retired more than 6,000 MW of coal-fired generation in the region. So-called "competitive" coal plants like Gavin, whose output is sold into PJM Intercon- nection, a regional grid operator headquartered in Pennsylvania, have found it increasingly difficult to compete in an era of flat electricity load growth, lower natural gas prices and rising renew- able energy resources such as wind and solar. Along with Gavin, Blackstone and ArcLight purchased the 840-MW Waterford Energy Center in Waterford, Ohio; 507-MW Darby Genrating Station in Mount Sterling, Ohio; and 1,186-MW Lawrenceburg Generating Station in Lawrenceburg, Indiana. AEP announced the sale on September 14 and the deal closed at the end of January. AEP said it expected to net about $1.2 billion in cash after tax- es from the transaction. The company is investing proceeds from the sale in its regulated businesses, including transmission and contracted renewable projects. "AEP's long-term strategy has been to become a fully regu- lated, premium energy company focused on investment in in- frastructure and the energy innovations that our customers want and need," Nicholas Akins, AEP chairman, president and CEO, said in a statement. "This transaction advances that strategy and reduces some of the business risks associated with operating competitive generating assets." AEP and Gavin made national news 15 years ago when the company spent about $20 million to essentially buy the village of Cheshire, located in the shadow of the plant, over air pollution con- cerns. Most of the approximately 200 local residents relocated. Before the end of 2017, AEP plans to complete a lengthy stra- tegic review process that could result in the sale or closing of four other coal plants representing 2,671 MW of generating capaci- ty. They are Cardinal, Conesville, Stuart and Zimmer, all located in Ohio. Some of the plants are co-owned with Dynegy Inc. and Dayton Power & Light Co., a subsidiary of AES Corp. of Arlington, Virginia. Owners of Navajo Plant Vote for 2019 Lease Extension Rather than close the plant later this year, the utility owners of Navajo Generating Station (NGS) voted on February 13 to extend operations of the three-unit 2,250-megawatt (MW ) facility near Page, Arizona, to December 2019 if an agreement can be reached with the Navajo Nation. This measure would preserve continued employment at the plant and add additional revenue 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. The owners of NSG include the Salt River Project (SRP) at 42.9%, which is also the operator; U.S. Bureau of Reclamation at 24.3%; Arizona Public Service Co. at 14%; NV Energy at 11.3%; and Tucson Electric Power (TEP) at 7.5%. "The utility owners do not make this decision lightly," said Mike Hummel, deputy general manager of SRP, the plant's oper- ator. "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 En- ergy Laboratory, "Electricity produced at NGS is currently more expensive than electricity purchased on the wholesale spot mar- ket," and "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 agree- ment with the Navajo Nation that would allow the plant to con- tinue to run through the end of its lease on December 22, and allow removal and restoration activities, which could take up to two years. Hummel said without an agreement between the own- ers and the Navajo Nation, the plant would be required to cease operations in 2017. David Palumbo, deputy commissioner of operations for the Bureau of Reclamation, said the Department of the Interior is looking into ways the plant could operate after 2019 in a more cost-effective manner. "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." NGS currently employs 400 full-time workers, 90% of whom are Navajo. Hummel said NGS employees will be considered for possible positions within SRP, while career and financial planning services will also be available. SRP President David Rousseau said, "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." TEP President and CEO David G. Hutchens agreed. He said, "We look forward to working toward a long-term solution for NGS that balances the needs of the plant's many stakeholders and serves the best interests of our customers and the community we serve." American Coal Council and Coal Trading Association Combine Members of the American Coal Council (ACC) and the Coal Trad- ing Association (CTA) have approved the combination of the two organizations. The combined organization will operate under the

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