KAYENTA – Power plant consultant Middle River Power (MRP), in negotiations to take over the Navajo Generating Station, would run the coal-fired power plant at less than half its existing capacity to ensure it is economical.

Fewer employees, a new lease and a coal supply agreement are also part of the “operating profile” – if the Chicago-based Middle River Power takes over NGS, which is set to close in December of 2019.

Citing high electricity costs, the five owners – Arizona Public Service, Bureau of Reclamation, NV Energy, Salt River Project, and Tucson Electric Power – voted last February to close the plant at the end of next year. But the federal government wanted to explore ways to keep the plant open.

In an open meeting of the Arizona Corporation Commission in Phoenix on Aug. 14, Joseph Greco, senior vice president for Middle River Power, presented a plan hat would keep NGS open beyond 2019.

Greco says MRP would operate the plant at 44 percent of its capacity, and operate differently during peak and off-peak demand, making it more economical while ensuring a steady power base.

“We view it that we have a different operating profile,” Greco said, “a different paradigm of how we would keep operating costs down and be able to provide power at a competitive price to market.”

He continued, saying, “Strategically, we think we have the opportunity of saying, ‘OK, we need to be able to have a minimum-run profile.’ The numbers we’re talking about is around 44 percent annually, to be able to be economical to make this go forward.”

Greco says one way to do that is by running two units in the off-peak and running three units in the peak period.

“Strategically, that would give us the ability to be competitive within the market,” Greco added. “Generally, that gives the ability for a sustained resiliency for the energy market in the state of Arizona.”

Navajo Nation President Russell Begaye said in July that negotiations between the Nation, MRP and its parent company, global investment firm Avenue Capital, are underway.
“A task force has been working on continuing operations at NGS,” Begaye told the Lake Powell Chronicle. “The task force is comprised of myself, Speaker (of the 23rd Navajo Nation Council) LoRenzo Bates, members of council, division directors, and staff from (the Navajo Nation Department of Justice). We’ve been interviewing companies interested in purchasing and managing the power plant.”

Begaye said after narrowing it down to two potential companies, he and Bates selected Avenue Capital, a firm that focuses on stressed and distressed companies across numerous sectors.

“We believe Avenue has the most potential, not only to become owners of the plant but also to sell the power from the plant,” Begaye said. “The selection is just the beginning. It's the preliminary step. There is still a lot of negotiation to take place, not only with the Navajo Nation but also SRP, NGS owners and Peabody (Energy). There are still quite a number of steps.”

Greco says MRP officials have been working diligently with the Nation and have worked through a request for offer process with the tribe regarding a selection process.
“We worked with them very carefully,” Greco said. “We’ve been diligently working through a negotiation process with them to potentially extend the lease.”

He added, “We’ve been working with Peabody Energy on (a) modified coal pricing arrangement that we (MRP) think will keep the facility very cost competitive. We’ve also been working with the (five owners). We’ve been working with Central Arizona Project and SRP on working through opportunities for power purchase agreement that would make sense.”     

Begaye says a lease agreement with MRP could come before the Navajo Nation Council in October during the council’s fall session in Window Rock.