The Federal Energy Regulatory Commission conditionally allowed Tucson Electric Power Co. to acquire the 550-MW power block 2 of the Gila River Project from the Salt River Project.

The proposed deal also covers the transfer of a 25% undivided co-ownership interest in common assets of the 2,212-MW natural gas-fired power plant in Maricopa County, Ariz., according to the June 5 application. Tucson Electric and its affiliate UNS Electric Inc., both subsidiaries of Fortis Inc., already own the Gila River plant's power block 3. Salt River operates the plant.

The companies have a tolling agreement in place which gives Tucson Electric the rights to the full output of power block 2 from May 2, 2018, to May 2, 2038. Tucson Electric also has the right to exercise an option to purchase the unit during the first three years of the tolling agreement, which it is now doing.

Tucson Electric said the acquisition will help the utility in its shift away from coal-fired resources and replacing resources slated to be retired in the next few years.

To avoid market concentration, the commission approved the deal on the condition of an acceptable mitigation agreement to sell at least 75 MW of energy during peak hours to an unaffiliated third party in all periods from Dec. 1 through June 30, 2022, with the exception of summer of 2020 in which it will sell at least 25 MW, according to FERC's Dec. 19 order. Tucson Electric will also be required to file the agreements with the commission for approval. (FERC docket EC19-100)