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Ariz. regulators to discuss APS study on converting coal unit to burn biomass

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Ariz. regulators to discuss APS study on converting coal unit to burn biomass

Arizona utility regulators are scheduled to consider an Arizona Public Service Co. study assessing the feasibility and potential cost of modifying an existing coal-fired unit to burn forest cuttings in order to help reduce the risk of wildfires. They apparently will not, however, take up at the meeting a separate proposal by Arizona Corporation Commission staff related to utility electric vehicle pilot programs.

Burning biomass at the Pinnacle West Capital Corp. subsidiary's Cholla unit 1 would help the U.S. Forest Service meet the goal of its Four Forest Restoration Initiative to remove unwanted trees and other overgrowth from a million acres in northern Arizona over 20 years, according to a study Arizona Public Service, or APS, submitted to the commission on May 9.

The commission is scheduled to discuss the study at its May 21-22 meeting, but the commissioners are not expected to vote on whether to move forward at that time. In December 2018, the commission adopted a policy stating that forest bio-energy is an increasingly important carbon-neutral, renewable energy resource that encourages responsible forest management and reduces wildfire risk. The commission is requiring APS and other parties to help provide solutions for forestry management to deal with densely packed trees and undergrowth.

APS retained Black & Veatch to perform a technical analysis and prepare capital and operational cost estimates for modifying Cholla unit 1 to burn biomass. The study concluded that the Cholla unit could be converted to burn wood waste and provide 83 MW of generation capacity by sometime in 2022 at a cost of $205 million.

With a 116-MW net output, Cholla unit 1 is the smallest generating facility at the four-unit plant in Joseph City, Ariz., and it no longer will be able to burn coal beyond 2025 based on Arizona's Regional Haze State Implementation Plan. The other units at the plant include unit 2, which was retired in 2015, and units 3 and 4, which also are required to cease burning coal beyond 2025. Of the Cholla units — units 1-3 are owned by APS and unit 4 is owned by PacifiCorp — the relatively small size of unit 1 makes it the best choice for biomass conversion, the study said.

Even so, fuel availability is a limiting factor on how many hours the plant is run. APS assumed that if enough fuel could be provided to run the plant unit 75% of the time, the cost of producing electricity would be $115/MWh.

APS said guaranteeing long-term fuel supplies, such as by entering into 20-year contracts with forest industries, will be necessary to make the project successful. To that end, APS said the concurrent release of the Forest Service's request for proposals and the utility's own assumed June RFP release will increase opportunities for suppliers. However, the Forest Service ultimately will select the most effective solutions, which may or may not involve the Cholla conversion project. APS said it does not intend to go into the business of collecting and transporting the biomass fuel.

Further, APS said the commission must allow it to recover its costs through the Arizona Renewable Energy Standard and Tariff, which is the state's renewable portfolio standard. The commission has considered a renewable energy standard carve-out of at least 60 MW for affected utilities.

Proposed EV plan submitted but not scheduled for vote

Meanwhile, commission staff recently filed a proposed order for an electric vehicle implementation plan in preparation for the May 21-22 meeting, but the order was not scheduled to be taken up at that time. The plan is intended to provide guidelines for utilities to propose electric vehicle pilot programs by July 1. Utility programs would include charging infrastructure, rate design, customer incentives, outreach and cost recovery. Utilities would propose rate designs that provide incentives for customers to charge their vehicles during off-peak hours when electricity prices are low.

Under the guidelines, utilities also would propose configurations and locations of charging stations and work with developers and other nonutility parties to build, operate and maintain the stations.

The commission in December 2018 voted 4-1 to adopt a policy encouraging utilities to invest in infrastructure and develop programs that support widespread transportation electrification. The commission majority highlighted the potential economic benefits of having utilities prepare for increased customer use of EVs and directed regulatory staff to come up with guidelines for utilities to carry out the policy.

However, Commissioner Justin Olson, who cast the dissenting vote, wrote in a guest editorial opinion that appeared May 12 on azcentral.com that his fellow commissioners are making decisions on bioenergy and electric vehicles that are needlessly costly to ratepayers.

"The Arizona Corporation Commission does not have the constitutional authority to increase rates to pay for projects like deforestation and electric vehicle subsidies," Olson said.