The President of the Navajo Nation wants Tucson Electric Power (TEP) to pay $100,000 per megawatt of coal capacity it owns in three plants on or near the reservation, to help communities cope with the loss of jobs and tax revenues as the facilities are shuttered.
The total ask, made in TEP's ongoing rate case before the Arizona Corporation Commission, comes to almost $62 million and reflects shares the utility owns in the Navajo Generating Station in Arizona and the Four Corners Power Plant and San Juan Generating Station in New Mexico.
There is growing acceptance that utilities have monetary and environmental responsibilities toward communities that hosted coal plants, and experts say as more large and rural plants retire earlier than expected in the next few years the economic impacts will only accelerate.
Navajo Nation's case for a just transition
The Navajo Nation is not a party to TEP's ongoing rate case, but in a letter to Arizona regulators President Jonathan Nez made the case that the tribe is owed economic assistance from the utility.
"As the state's utilities begin to pivot their energy portfolios away from coal, the Navajo Nation is faced with significant economic repercussions," Nez wrote. The issue "underscores the need to begin inclusive, proactive conversations about life after coal for communities that have relied on mining and coal-fired generation for their economic livelihoods."
Salaries at the Navajo Generating Station and Four Corners plants were "typically in excess of $100,000/year, [and] including retirement and health benefits brings the average closer to $150,000/year," according to the Nez. "These jobs are irreplaceable on the Navajo Nation and this loss will have a significant impact on community members."
A spokesperson for TEP told Utility Dive that it "supports transition efforts for impacted communities, but as a normal course of operations, the company will not adopt an individual position on a joint matter without agreement from all station owners."
At peak ownership, TEP's stake in NGS, Four Corners and the San Juan plant amounted to more than 600 MW of capacity, representing almost half its total coal capacity. According to Nez, TEP maintained a 10% stake across the three coal plants through the end of 2019.
"Given our minority ownership interests and the complexity of potential legal issues, we defer to plant operators to coordinate specific negotiations," TEP spokesman Joseph Barrios said in email. "We support a coordinated approach to ensure consistent and fair negotiations that balance the interests of all stakeholders."
NGS ended operations in November and was majority-owned by Salt River Project (SRP). According to utility spokesperson Scott Harelson, the utility "did believe there were responsibilities we should meet when closing NGS."
SRP redeployed almost 300 employees of the 483 who worked at the power plant. Almost 100 retired, and others are working on decommissioning the facility.
Under a 35-year extension lease at the facility, NGS owners will also make lease payments totaling approximately $110 million to the Navajo Nation.
The San Juan station is majority owned and operated by Public Service Co. of New Mexico, and is currently slated to shutdown in 2022 — though there is a push to keep it operating through the use of carbon capture technology.
An outsized impact on rural communities
The extent to which utilities should pony up to transition communities past coal is tied to how much of an impact the closure will have, according to Bruce Nilles, managing director of electrification at Rocky Mountain Institute.
Plant closures near urban areas have typically had smaller impacts on property tax revenues, he told Utility Dive. But with many of those gone it is now large rural plants under pressure — and the economic distress those retirements can cause is much greater.
"More and more, the last plants left are large coal plants that are a big piece of the local economy," Nilles said. And the money utilities are being asked to contribute to help revitalize communities "is modest compared to the enormous profits they've made."
Worker retraining or redeployment to other positions is common, and utilities with unionized workforces tend to treat their employees fairly, said Nilles. But coal mining operations that supply the plants are often hit harder, as they don't tend to be unionized.
Plant ownership is also a factor. Investor-owned utilities (IOU) have closer regulation and a political impetus to be good actors in their communities, said Nilles. But merchant plants, with owners that have only recent ties to the community, can be more problematic.
"Most utilities, in my experience, have been decent in treating unionized workforces fairly," said Nilles. "On the community piece, it is more of a mixed-bag depending on whether it's an IOU, muni or merchant."
Activists say along with providing jobs, utilities should also be responsible for impacts to air and water quality caused by coal plants.
"Utilities do owe these communities and should include planning for early retirements in their rate cases and in their integrated resource plans," Sandy Bahr, Sierra Club's Arizona chapter director, told Utility Dive in an email.
Bahr said one "key issue" Sierra Club has pressed for is preferential siting of renewable project in communities previously tied to coal generation.
Industry's responsibility to communities
Utilities are reticent to discuss the issue, but in recent shutdown announcements there has been acknowledgement by the industry that it has a responsibility to coal communities.
Last month, Tri-State G&T announced the closure of coal plants in New Mexico and Colorado and committed $5 million each to impacted communities.
The majority of the workforce at its Escalante Power Plant comes from two counties in New Mexico, stretched across more than a half dozen towns.
"As a cooperative association, Tri-State has always felt a strong connection with its communities," the utility said in an emailed statement. "While there are no specific requirements for us to provide support to communities where our facilities are closing, we do so because it is the right thing to do."
The utility said it is also working with state and federal leaders to advocate programs with funding to support these communities.
Also in January, Arizona Public Service announced a plan to close down Units 4 and 5 at the Four Corners plant, and pledged to see economic development opportunities for affected communities — though officials said it was too early for specific commitments.
Nilles says issues surrounding community revitalization are ripe for federal lawmakers to tackle.
"In small communities, retirements are shockwaves to local communities," Nilles said. Of immediate concern is PacifiCorp's plan to retire 2 GW of coal capacity across the next decade, including generation at the large Jim Bridger plant in Wyoming.
PacifiCorp says that planning for coal employees and communities is a part of that shutdown process and is happening now.
"Any employee who wants continued employment ... will be afforded that opportunity," the utility said in an email. "For some, it may mean learning new skills. For others, it might mean relocating to where new opportunities are available."
The utility has expand its employee education assistance program, and is making a matching contribution to an economic diversification grant from the Wyoming Department of Commerce's Economic Development Agency. That match will result in about $300,000 for the city of Kemmerer in Southwestern Wyoming, for instance.
PacifiCorp also said it has dedicated a certified economic developer to assist the three Wyoming communities impacted by the transition.
"Changes are difficult, and PacifiCorp's commitment to each of our employees is simple," the utility said.
Data from the U.S. Energy Information Administration shows utility coal use is rapidly declining, and experts say it may be gone within a few years, making support for coal communities an immediate issue.
"Coal is crashing," said Nilles. "This isn't a problem in 10 years; it's a problem today and yesterday."