APS 2015 Annual Report Download - page 10

Table of Contents
In 2012, several environmental groups filed a lawsuit in federal district court against OSM challenging OSM’s 2012 approval of
a permit revision which allowed for the expansion of mining operations into a new area of the mine that serves Four Corners ("Area IV
North"). In April 2015, the court issued an order invalidating the permit revision, thereby prohibiting mining in Area IV North until
OSM takes action to cure the defect in its permitting process identified by the court. On December 29, 2015, OSM took action to cure
the defect in its permitting process by issuing a revised environmental assessment and finding of no new significant impact, and
reissued the permit. This action is subject to possible judicial review.
Cholla — Cholla was originally a 4-unit coal-fired power plant, which is located in northeastern Arizona. APS operates the
plant and owns 100% of Cholla Units 1, 2 and 3. PacifiCorp owns Cholla Unit 4, and APS operates that unit for PacifiCorp. On
September 11, 2014, APS announced that it would close its 260 MW Unit 2 at Cholla and cease burning coal at Units 1 and 3 by the
mid-2020s if EPA approves a compromise proposal offered by APS to meet required environmental and emissions standards and rules.
On April 14, 2015, the ACC approved APS's plan to retire Unit 2, without expressing any view on the future recoverability of APS's
remaining investment in the Unit. (See Note 3 for details related to the resulting regulatory asset and Note 10 for details of the
proposal.) APS believes that the environmental benefits of this proposal are greater in the long term than the benefits that would have
resulted from adding the emissions control equipment. APS closed Unit 2 on October 1, 2015. Following the closure of Unit 2, APS has
a total entitlement from Cholla of 387 MW.
APS purchases all of Cholla’s coal requirements from a coal supplier that mines all of the coal under long-term leases of coal
reserves with the federal and state governments and private landholders. The Cholla coal contract runs through 2024. In addition, APS
has a long-term coal transportation contract that runs through 2017. See "Current and Future Resources - Future Resources and
Resource Plan" below for a discussion of future plans for Cholla.
Navajo Generating Station — The Navajo Plant is a 3-unit coal-fired power plant located in northern Arizona. Salt River
Project operates the plant and APS owns a 14% interest in Navajo Units 1, 2 and 3. APS has a total entitlement from the Navajo Plant
of 315 MW. The Navajo Plant’s coal requirements are purchased from a supplier with long-term leases from the Navajo Nation and the
Hopi Tribe. The Navajo Plant is under contract with its coal supplier through 2019, with extension rights through 2026. The Navajo
Plant site is leased from the Navajo Nation and is also subject to an easement from the federal government. The current lease expires in
2019. See "Environmental Matters - EPA Environmental Regulation - Regional Haze Rules - Navajo Plant" below for a discussion of
potential future plans for the Navajo Plant.
These coal-fueled plants face uncertainties, including those related to existing and potential legislation and regulation, that could
significantly impact their economics and operations. See “Environmental Matters” below and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations — Overview and Capital Expenditures” in Item 7 for developments impacting these
coal-fueled facilities. See Note 10 for information regarding APS’s coal mine reclamation obligations.
Nuclear
Palo Verde Nuclear Generating Station — Palo Verde is a 3-unit nuclear power plant located approximately 50 miles west of
Phoenix, Arizona. APS operates the plant and owns 29.1% of Palo Verde Units 1 and 3 and approximately 17% of Unit 2. In addition,
APS leases approximately 12.1% of Unit 2, resulting in a 29.1% combined ownership and leasehold interest in that unit. APS has a
total entitlement from Palo Verde of 1,146 MW.
7