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Monday, June 19, 2006 5:38 PM ET
Utilities give up on returning Mohave power plant to service
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Southern California Edison Co.Rosemead, California
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Last Updated: 11/14/2019

After more than five years of effort, Southern California Edison Co. announced June 19 that it would discontinue efforts to bring the Mohave power plant back into operation.

SoCalEd, with a 56% interest in the 1,580-MW, coal-fired power plant, is the operator of the Mohave facility. The same day it made its announcement, another owner, Nevada Power Co., with a 14% interest in the plant, said it too would no longer participate in efforts to get the plant running.

A spokesman for the Salt River Project, with a 20% share of Mohave's capacity, said the Phoenix-area utility will only continue efforts if new partners are found. The Los Angeles Department of Water and Power, which has a 10% interest, said in its just-released draft 2006 integrated resources plan that it would not count on the plant's future operation. In an announcement June 19 the LADWP said it will phase out its participation in the plant and that it had already decided to sell its ownership share.

SoCalEd spokeswoman Gloria Quinn said a number of issues led to her company's decision. The water issues were first and foremost, she said. While she said SoCalEd, a subsidiary of Edison International, had made progress on finding an alternative water source for the coal slurry pipeline to the plant, that issue had not been resolved.

In order to justify spending about $1 billion on pipelines, emissions retrofits and repairs, the utility had to be certain of getting the plant back into service by 2010, Quinn said. With negotiations still unresolved, a date for resumption of service was elusive.

The deadline exists because SoCalEd has to assume that Mohave would cease operations by 2026 when a contract for drawing plant cooling water from the Colorado River ends, Quinn said. Whatever costs were to be put into getting the plant back into operation would have to be recovered over the remaining operating life of the plant.

Quinn said that the partners have agreed to work jointly on the disposition of the plant, including possibly selling SoCalEd's interest in Mohave.

"Given the value of the plant, we hope somebody with a different business model and risk profile might be interested in taking it over," Quinn said.

State policies, water issues influence utilities' decision

Quinn acknowledged that California regulators are pursuing a greenhouse gas mitigation strategy that prohibits investments in conventional coal-fired power.

"No single issue prompted our decision, but that was a factor we were aware of in making a decision," she said.

Quinn noted that, with the water-rights dispute over the N-aquifer beneath the Black Mesa coal mine site in Arizona, it would cost $160 million to build a 100-mile pipeline from a point where the replacement C-aquifer could be tapped for water to move coal through the existing 273-mile slurry pipeline from the mine to the plant, which is in Laughlin, Nev. An additional $200 million is needed for repairs and replacements of sections of the coal slurry pipeline, she said.

Also, there is the $720 million cost estimate for emissions controls and other retrofits for the plant itself.

"The challenge was that you can't make that kind of investment unless you know you have water to transport coal to the plant," she said. Due to the remote location of the mine, rail and truck transport of coal are not options.

Salt River Project spokesman Scott Harelson said the utility has not made a decision concerning Mohave.

"We will participate in a task force with the other owners of the plant to determine the future of Mohave," Harelson said. "We have not reached a decision about our future with the plant."

He said Salt River might decide to engage in future operations with new plant owners. "A new ownership would have to be put together, but whether that can happen, we don't know," he said.

Nevada Power, a subsidiary of Sierra Pacific Resources, said its own continued participation in the plant is not economically feasible.

Sierra Pacific Senior Vice President of Energy Supply Roberto Denis said in a prepared statement: "After many extensive discussions with all parties concerned, it has become clear to us that the economic conditions most certainly cannot be resolved any time in the foreseeable future. In the best interests of the customers we serve as well as our company and its shareholders, we therefore have made this decision to end our participation."

SoCalEd and Nevada Power said they will cooperate with other participants to jointly develop a plan for the plant's future.

"The co-owners have agreed to work toward a joint plan for Mohave's future," SoCalEd spokesman Gil Alexander stated by e-mail. One option is decommissioning and use of the site for other purposes, Alexander said.

He listed some of the issues that led to this decision, and said: "Each is unresolved and difficult. But combined, they made it unreasonable to think a plan would come together in time for the project to be viable for us and our customers."

Native American tribes pressured coal mining company Peabody Energy Corp. to shift aquifers, citing concerns about possible damage to the N-aquifer, the primary source of drinking water and irrigation for the area's Hopi and Navajo residents.

"We did not have an assured, new water source for Mohave's slurry system. No unresolved issue was more demanding or received more attention," Alexander wrote.

Alexander said SoCalEd became increasingly concerned about the portion of the project costs that customers would be asked to bear.

Also, business circumstances of the owners varied, so it was difficult to find an approach that would meet all needs and satisfy all regulatory and oversight bodies.

Grand Canyon Trust Air and Energy Program Director Roger Clark said that while the apparent end of the air emissions is welcome, he expressed hope that the economic impact on the Navajo and Hopi people would be mitigated through the development of renewable energy with millions of dollars in sulfur emissions credits the utilities will receive from closing the plant.

"The power plant has been operating more than 30 years at the expense of clean air and water for the Navajo and Hopi people," said Clark, whose organization secured a court consent decree in 1999 to require that emissions controls be put on Mohave by the end of 2005 or that the plant be closed. Grand Canyon Trust has since filed with the California Public Utilities Commission seeking to have renewable energy projects located on Hopi and Navajo lands to replace the $20 million in annual royalties and high-paying jobs at the plant and mine lost to the plant's closure.

"We see Mojave's closure as an opportunity to take the revenues from an old, dirty power plant and reinvest them in renewable and clean energy alternatives," he said. "This closure is not a simple celebration. We are only halfway there."

Article amended at 9:40 a.m. Eastern time on June 20 to include a statement from the Los Angeles Department of Water and Power.
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