APS plans to close one of the four generators at Cholla Power Plant

Arizona Public Service Co. plans to close one of the four generators at northern Arizona's Cholla Power Plant, adding to a string of coal-plant closures in the West.

Under a proposal APS is discussing with the Environmental Protection Agency, the No. 2 unit at the plant would close in 2016, and the No. 1 and 3 units could convert to natural gas or close in 2025 when the plant's coal contract expires.

While more coal closures are expected because of the recent EPA decision to reduce carbon emissions from them, Cholla's closure is being spurred by rules regarding mercury and haze pollution.

In 2010 the EPA notified the utility that Cholla's No. 2 unit would need new pollution controls to limit mercury, then in 2012 proposed additional pollution controls on the No. 2, 3 and 4 units to limit nitrogen-oxide emissions that contribute to haze.

"We believe we can comply with the EPA rules by closing Unit 2," said Ann Becker, APS vice president of environmental and chief sustainability officer. "There will be no more emissions from that unit, and we can negotiate something with the EPA better than the environmental benefits by either closing or converting the others."

It's going to be cheaper to shut No. 2 and convert Nos. 1 and 3 to natural gas than spend an estimated $350 million on pollution controls, she said.

The EPA and Arizona Corporation Commission must approve the plan.

The No. 4 unit at the plant is owned by PacifiCorp/Rocky Mountain Power, which provides power in Oregon, Washington, California, Utah, Wyoming and Idaho.

That company isn't settled on what it might do with its portion of the plant.

"We are reviewing similar options for Unit 4 with our regulators and stakeholders," PacifiCorp spokesman Tom Gauntt said from Portland.

APS and PacifiCorp have a power exchange where the northern utility supplies APS in the summertime with electricity, and APS supplies power to PacifiCorp in the winter. The No. 4 unit is commonly used for that exchange, but Hansen said the utilities have other options to meet that seasonal agreement.

The closure in 2016 could probably be accomplished without layoffs because the plant has been replacing permanent employees who retire with contract workers for the past few years in anticipation of such a move, APS Vice President of Fossil Generation David Hansen said.

"Fortunately we were being proactive," Hansen said.

The plant gets its coal from the El Segundo mine in New Mexico, owned by Peabody Energy.

If APS buys less coal from Peabody by closing Unit 2, it could face penalties from the coal contract, Hansen said. However, APS might avoid those penalties by continuing to purchase the minimum amount of coal allowed in the contract and burning more at the other two units until the contract expires in 2025, he said.

"If dispatch economics support that, it is certainly a possibility," he said.

The other two units APS owns have bag houses, a type of environmental control that can better capture mercury emissions, so increasing their output while shutting No. 2 would still offer a reduction of that pollutant, Hansen said.

Switching the other units to natural gas would significantly reduce most forms of pollution associated with coal, should APS take that route. But it also would require a new gas pipeline to serve the plant, Hansen said.

Cholla could join a rapidly growing list of coal plants closing or converting to natural gas in the West.

APS at the start of the year closed three of the coal-fired generators at the Four Corners Power Plant near Farmington, N.M. It bought a larger stake in two remaining units at the plant that Southern California Edison needed to divest because of rules in that company's home state of California.

Salt River Project and other plant owners recently got an OK from the EPA to close one of the three units or curtail production at the Navajo Generating Station near Page to comply with haze rules.

Peabody also runs the Kayenta Mine, which supplies that plant.

Tucson Electric Power, which gets a higher percentage of its power from coal than APS or SRP, plans to reduce the amount of power it gets from the Springerville Generating Station in Arizona.

It also is agreeing to a plan with the EPA to close two of the four units at the San Juan Generating Station near Farmington, N.M., one of which supplies the company. It also plans to switch one coal-burning unit at the Sundt Generating Station in Tucson to natural gas.

NV Energy earlier this year proposed closing all four units at the Reid Gardner coal plant in Nevada by 2017, some this year. NV Energy also is one of the utilities, along with the Los Angeles Department of Water and Power, that is divesting of the unit closing at the Navajo Generating Station.

Sierra Club officials said they were pleased to see the proposal to close the Cholla unit so soon.

"We need to see more coal retirements to meet the requirements of the Clean Air Act and to benefit public health and national parks and wilderness areas," said Sandy Bahr, director of the Grand Canyon Chapter of the Sierra Club.

"The devil is in the details," she said. "It is unclear exactly what is going to happen with the remaining units. ... We look forward to hearing more and seeing a plan that gives us clean air sooner rather than later."