Navajo Generating System may lose its biggest customer

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Central Arizona Project is considering making a break from coal, a move that could have a negative impact on the Navajo Generating System.

The Navajo Generating System was built as a part of the CAP as a way for the power from the plant to be used to pump water into Phoenix and Tuscon while the surplus power would be sold to repay the debt.

CAP is now considering splitting from the system as they look at natural gas power and green power options. If CAP breaks away from the system, it will destroy the economics of the plant, says former Congressman John Shadegg.

“They don’t like the politics of coal,” Shadegg says. “Quite frankly, I don’t think they like dealing with the Navajo tribe… For 40 years, since 1974, we have asked the people of the Navajo reservation to produce coal and run that plant and we’ve gotten cheap water.”

One of the advantages of taking coal from the plant is a stable market. Shadegg says the Valley has saved a billion dollars by using stably priced coal rather than buying power on the market.

If CAP should leave and no one replaces them, then owners of the plant with permission can bulldoze it and coal can never again compete with other fuels in Arizona. If someone does replace CAP as a primary customer, then there will be a price competition between natural gas and coal.

There are many people who are in favor of bulldozing the plant due to its perceived uncleanliness, but Shadegg disagrees, stating that the Navajo have one of the cleanest coal plants in the country. He says a billion dollars was spent recently to clean it up. If it stays open, Shadegg says they will spend more money on additional cleanup.

At the moment, there are buyers looking at the plant to take it off of the Navajo’s hands. However, if CAP, being their biggest customer, decides to leave then it will discourage possible investors from buying.

TED SIMONS: COMING UP, NEXT ON ARIZONA HORIZON WHY MARCHERS GATHERED TODAY IN SUPPORT OF THE NAVAJO GENERATING STATION AND OTHER STORIES WE WILL FIND OUT HOW A TARIFF ON SOLAR EQUIPMENT WILL AFFECT RENEWABLE ENERGY IN ARIZONA AND LATEST ADVANCES IN HEART AND VASCULAR MEDICINE THOSE STORIES AND MORE NEXT ON ARIZONA HORIZON.

VIDEO: ARIZONA HORIZON IS MADE POSSIBLE BY CONTRIBUTIONS FROM THE FRIENDS OF ARIZONA PBS MEMBERS OF YOUR PBS STATION. THANK YOU.

TED SIMONS: GOOD EVENING AND WELCOME TO ARIZONA HORIZON I'M TED SIMONS. ARIZONA SENATOR JEFF FLAKE PUSHED BACK ON TRUMP'S COMMENTS THAT DEMOCRATS WHO DID NOT CLAP DURING THE STATE OF THE UNION SPEECH WERE TREASONOUS.

JEFF FLAKE: ONE WHO LEVELS SUCH A CHARGE KNOWS NEITHER THE MEANING OF TREASON OR THE POWER OF THE WORDS THAT A PRESIDENT CARRY, I HAVE SEEN THE MOST ARDENT DEFENDERS USE THE NOW WEARY ARGUMENT THAT THE PRESIDENT’S COMMENTS WERE MEANT AS A JOKE, JUST SARCASM, ONLY TONGUE AND CHEEK, BUT TREASON IS NOT A PUNCH LINE. MR. PRESIDENT, RESPECT IS EARNED, NOT COMMANDED. APPLAUSE SIGNALS APPROVAL OF AN IDEA, NOT LOYALTY TO ONE'S COUNTRY. OUR DEMOCRATIC COLLEAGUES LOVE THIS COUNTRY AS MUCH AS WE DO, TO SUGGEST OTHERWISE IS SIMPLY UNCONSCIONABLE.

TED SIMONS: THE PRESIDENT WAS UPSET AT DEMOCRATIC LAWMAKERS DID NOT REACT WHEN HE TALKED ABOUT LOW UNEMPLOYMENT NUMBERS AMONG MINORITIES. AND A COALITION OF GROUPS TODAY PUSHED STATE LAWMAKERS TO SUPPORT EXTENDING THE LIFE OF A NAVAJO GENERATING STATION A COAL FIRED PLANT NEAR THE ARIZONA UTAH BORDER. THE PLANT IS SET TO CLOSE AT THE END OF NEXT YEAR UNLESS A NEW OWNER CAN BE FOUND. UTILITIES THAT USE THE PLANT SAY THEY CAN GET POWERS ELSEWHERE AT A LOWER PRICE, AMONG THOSE AT THE CAPITOL ADVOCATING FOR KEEPING THE PLANT OPEN FORMER ARIZONA CONGRESSMAN JOHN SHADEGG WHO REPRESENTS PEBODY ENERGY AND PROVIDES COAL TO THE PLANT THANKS FOR BEING HERE. THE STATUS OF THE NAVAJO GENERATING STATION, WHERE ARE WE NOW?

JOHN SHADEGG: IT'S WIDE OUT AND THE SECRETARY SENT A TWEET TO THE RALLY SAYING THAT HE WOULD WORK WITH ALL STAKEHOLDERS TO DO HIS BEST TO KEEP THE PLANT OPEN AND OPERATING, I THINK HE IS COMMITTED TO IT BECAUSE OF THE VALUE IT ADDS TO ARIZONA AND BECAUSE OF THE HISTORY. PEOPLE HAVE FORGOTTEN THAT THE FEDERAL GOVERNMENT BUILT THAT PLANT NOT ANY UTILITY NOT SRP OR APS THE FEDERAL GOVERNMENT BUILT THE PLANT AT THE REQUEST OF THE PEOPLE OF ARIZONA OF THE ARIZONA DELEGATION AND THE DEAL WAS WE WILL BUILD A POWER PLANT AS PART OF THE CENTRAL ARIZONA PROJECT YOU USE POWER FROM THAT PLANT TO PUMP THE WATER INTO PHOENIX AND TUCSON AND OH, BY THE WAY WE WILL GIVE YOU A LITTLE EXTRA POWER TO SELL AND YOU SELL THE SURPLUS AND REPAY THE DEBT AND NOW IT LOOKS LIKE ARIZONA WANTS TO RENIG ON THE DEAL.

TED SIMONS: CERTIANLY SRP, APS, ALL OF THEM ARE SAYING THEY CAN FIND POWER CHEAPER ELSEWHERE, THE PRICE OF COAL IS NOT SUSTAINABLE FOR THEM, YOUR RESPONSE.

JOHN SHADEGG: GOOD THAT WE ARE TRUE. I MEAN IN POINT OF FACT THE COST OF NATURAL GAS DIPPED BELOW THE COST OF COAL FOR ONE YEAR 2016 ONE OF THE GRAPHS I SENT YOU WHICH WE CAN'T SHOW YOU SHOWS A COUPLE DIFFERENT THINGS NUMBER ONE THE COST GOES UP AND DOWN DRASTICALLY IN 2016 AND GOT DOWN TO 1.82 SINCE THEN IT IS ALREADY UP 60%. SO WHAT THOSE UTILITIES ARE SAYING AND BY THE WAY THEY CAN GO AWAY IF THEY WANT, THEY DO NOT NEED TO OWN THE PLANT BUT BULLDOZING IT WOULD BE THE CONCERN BUT IT'S GONE IT'S ALREADY GONE UP BY 60% WHAT THEY ARE SAYING IS BULL DOZE THE PLANT IF YOU BULL DOZE THE PLANT AND THE COST OF NATURAL GAS GOES UP WHICH IT HAS BEEN 60% THEY WILL PASS ON THE RIGHTS TO YOU AND ASK YOURSELF WHY DO THEY WANT COAL TO BE BULLDOZED AND THE ANSWER IS THEY DON'T EAT THE PRICE OF ENERGY THEY PASS THAT ON TO YOU AND ME.

TED SIMONS: WELL IF THEY DO THAT AND LET'S SAY THE PLANT IS NOT BULLDOZED AND MOVE ON TO NATURAL GAS WHERE THEY WANT TO GO WHERE THEY THINK THEY CAN GET THE BETTER PRICE VOLATILITY NOTWITHSTANDING WHY ARE THERE NOT OTHER OWNERS CHOMPING AT THE BIT TO GET IN THERE.

JOHN SHADEGG: THERE ARE OTHERS INTERESTED IN GETTING IN AND A LOT OF HISTORY HERE IN PART BECAUSE THE FEDERAL GOVERNMENT OWNS 25 OR 24% OF THE PLANT AND ALSO THERE IS A THREAT BEING MADE TO THE PLANT ITSELF IN WHICH AFTER SRP SAID SUDDENLY LAST DECEMBER THEY WANT TO CLOSE IT, THE CENTRAL ARIZONA PROJECT ITSELF IS NOW SAYING, WELL, WE'RE NOT SURE WE ARE GOING TO TAKE NAVAJO GENERATING STATION POWER ANY MORE AND USE IT TO RUN THE PUMP THEY ARE SAYING THEY MIGHT USE NATURAL GAS POWER OR THEY MIGHT USE GREEN POWER FROM CALIFORNIA. IF YOU TAKE AWAY CAP AS THE CUSTOMER OF NAVAJO GENERATING STATION YOU DESTROY THE ECONOMICS OF THE PLANT. INTERESTINGLY THE FEDERAL GOVERNMENT WROTE THE LAW SO AS TO SAY YOU'RE NOT GOING TO DO THAT TO US. THE LAW SPECIFICALLY GIVES THE SECRETARY OF INTERIOR THE POWER TO SAY HOW MUCH ELECTRICITY CAWCD HAS TO BUY.

TED SIMONS: CAWCD IS?

JOHN SHADEGG: CAP, CENTRAL ARIZONA PROJECT.

JOHN SHADEGG: THEY WANT TO RENIG ON THE DEAL AND THE LAW DOES NOT LET THEM RENIG ON THE DEAL AND POINT OF FACT IN TERMS OF THE LONG-TERM WE HAVE STUDIES THAT SHOW THAT AS EARLY AS 2020, MAYBE 2022 THE -- WE WILL KNOW WHETHER COAL STAYS CHEAPER AND, IN FACT, WE WILL SAVE MONEY, WE HAVE A STUDY THAT SHOWS IT SAVES HUNDREDS OF MILLIONS OF DOLLARS JUST BETWEEN NOW AND 2030 oR NATURAL GAS STAYS SUPER CHEAP IF NATURAL GAS STAYS SUPER CHEAP FOUR YEARS FROM NOW FINE.

TED SIMONS: THE OWNERS AND OPERATORS, THESE ARE NOT FOOLISH PEOPLE AND LOOK AT GRAPHS AND SEE THE VOLATILITY AND THE STRAIGHT LINE AS FAR AS NGS POWER IS CONCERNED WHY I MEAN THEY HAVE A TWO-YEAR EXTENSION ON THIS AND IT WAS SUPPOSED TO BE ADI, OS A YEAR AGO WHY ARE THEY IN SUCH A HURRY?

JOHN SHADEGG: WHY ARE THEY IN SUCH A HURRY MY ANSWER IS THEY WANT TO ELIMINATE COMMENDATION AND IF SOMEONE BUYS IT THERE WILL BE A PRICE COMPETITION BETWEEN NATURAL GAS AND COAL IF NO ONE COMES ALONG AND THE SRP OR OTHER OWNERS GET THE SECRETARY'S PERMISSION THEY WILL HAVE TO HAVE AND THEY BULL DOZE THE PLANT WELL THEN COAL CAN NEVER AGAIN IN ARIZONA COMPETE WITH ANY OTHER FUEL AND THEY ALSO DON'T LIKE THE POLITICS OF COAL, QUITE FRANKLY THEY DON'T LIKE DEALING WITH THE NAVAJO TRIBE BUT THAT IS SOMETHING ARIZONIANS OUGHT TO THINK ABOUT NUMBER ONE NAVAJO PRODUCES LESS EXPENSIVE WATER AND WILL THROUGH 2030 aND PROBABLY THROUGH 2044. IF WE, IN FACT, RAISE THE COST OF WATER THAT'S GOING TO DAMAGE THE ENTIRE ECONOMY BUT LOOK AT IT FROM THE STANDPOINT OF THE NAVAJO THERE. FOR 40 YEARS WE HAVE RELIED SINCE 1974 WE HAVE ASKED THE PEOPLE OF THE NAVAJO RESERVATION TO PRODUCE COAL AND RUN THAT PLANT AND WE HAVE GOTTEN CHEAP WATER, JUST SINCE 2001 WE HERE IN THE VALLEY HAVE SAVED A BILLION DOLLARS BY USING STABLE PRICED COAL INSTEAD OF BUYING THE POWER ON THE MARKET AND YOU MENTIONED THIS EARLIER THE OTHER GRAPH SHOWS THE LINE OF THE COST OF COAL OVER TIME IS ALMOST A FLAT LINE AND GOES UP SLOWLY AND SAME LINE FOR NATURAL GAS AND IT BOUNCES UP AND DOWN. IF YOU ARE GOING TO INVEST IN ARIZONA AND NEED TO KNOW WATER IS GOING TO BE THERE SO YOU ARE IN THIS TOWN YOU CAN'T GAMBLE ON THE PRICE OF WATER IF IT'S ONLY STABLE FOR ONE DAY IF IT'S GOING TO BOUNCE UP AND DOWN YOU BETTER PUT YOUR PLANT SOMEWHERE ELSE.

TED SIMONS: WE ARE TALKING OF COURSE OF THE ECONOMICS OF THIS AND THERE IS ANOTHER ARGUMENT SAYING THE PLANT IS ONE OF THE WORST IN THE UNITED STATES AS FAR AS C02 AND NITROS OXIDE AND THAT IS IN PLAY HERE AND FOLKS ON THE RESERVATION UP THERE THERE ARE SOME NOT MOST BUT SOME WHO BASICALLY SAY THIS IS AN OPPORTUNITY FOR THE TRIBES TO GET OUT OF COAL FIND RENEWABLE CLEANER ENERGY.

JOHN SHADEGG: FINE IF YOU CAN FIND CLEANER RENEWABLE ENERGY THEN IT'S GOING TO TAKE A LITTLE TIME TO PLAN THAT AND ALL I SAID IS LET'S LOOK AT KEEPING IT OPEN UNTIL 2022 WHEN WE WILL KNOW WHETHER COAL IS GOING TO BE CHEAPER THAN NATURAL GAS AND WON'T HAVE TO GUESS OR BASE IT ON STUDIES THERE ARE ENVIRONMENTAL ACTIVISTS ON THE RESERVATION WHO FEEL THAT WAY BUT IN POINT OF FACT THAT IS ONE OF THE CLEANEST COAL PLANTS IN THE COUNTRY, WE HAVE JUST SPENT A BILLION DOLLARS CLEANING IT UP AND IF IT STAYS OPEN THERE WILL BE ADDITIONAL CLEANUP THAT IS DONE. IT IS, IN FACT, A VERY CLEAN SOURCE OF ELECTRICITY, IT IS NOT LIKE A LOT OF COAL PLANTS ACROSS THE COUNTRY AND IT WAS BUILT AND IT DID IMPOSE TO THE ARIZONA AND TO THE FEDERAL GOVERNMENT REPAY THE MONEY AND WE WILL REPAY THE DEBT AND TALKING NOT REPAYING THE DEBTOR PAYING FOR POWER TWICE.

TED SIMONS: WHEN YOU SAY IT'S THE CLEANEST IN THE COUNTRY FOLKS WILL DENY THAT AND SAY IT'S ONE OF THE WORST IN THE COUNTRY.

JOHN SHADEGG: THE TWIG AGREEMENT NEGOTIATED BY SRP WITH THE EPA REQUIRES KNOX CLEANUP AND WILL MAKE IT AND IT IS ALREADY AND SINCE THE BEGINNING ONE OF THE CLEANEST PLANTS OTHERS CAN SAY IT'S NOT TRUE BUT POINT OF FACT IT'S TRUE.

TED SIMONS: LAST POINT DO YOU THINK A BUYER CAN BE FOUND? YOU GOT YOUR CHARTS THERE, YOU HAVE YOUR INFORMATION, I'M STILL WONDERING WHY ISN'T SOMEONE READY TO JUMP IN?

JOHN SHADEGG: WELL, THERE ARE BUYERS LOOKING AT IT RIGHT NOW BUT THE THREAT BEING MADE BY CAP BY THE CENTRAL ARIZONA PROJECT.

TED SIMONS: RIGHT.

JOHN SHADEGG: TO BUY THEIR POWER WHEREVER THEY WANT.

TED SIMONS: BIGGEST CUSTOMER.

JOHN SHADEGG: SAYING WE ARE GOING TO WALK AWAY IF THERE IS NO CUSTOMER YOU CAN'T FIND A BUYER. BUT THE CAP IS PROPOSING TO RENIG ON A DEAL THE FEDERAL GOVERNMENT WILL NOT LET IT RENIG ON IT.

TED SIMONS: I SEE A COURTROOM FOR SOME OF THIS STUFF AND GOOD TO SEE YOU WE APPRECIATE IT AND COMING ON ARIZONA HORIZON THE IMPACT OF SOLAR EQUIPMENT TARIFFS ON THE STATE'S RENEWABLE INDUSTRY.

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