SC Edison, Tribes Fight Over Revenues from Shuttered Coal Power Plant

SC Edison, Tribes Fight Over Revenues from Shuttered Coal Power Plant

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SAN FRANCISCO -- The Mohave coal-fired power plant in Laughlin, Nevada shut down in 2005, but it’s still generating millions of dollars in revenue for its majority owner Southern California Edison. A fight is currently underway in California over who should benefit from those revenues – anyone other than Southern California ratepayers -- and how those proceeds should be distributed.

Locked in the fight -- which has been winding through the state’s Public Utilities Commission (PUC) for the last five years -- are the utility, the Navajo Nation, the Hopi Tribe, the Sierra Club and other environmental organizations.

“This is a first of its kind [case] in the country and whenever there is a precedent set, it’s worth a lot more than the money,” said Andy Bessler, southwest field organizer with the Sierra Club based in Flagstaff, Arizona.

The shuttered coal-fired power plant continues to generate revenue through the sale of sulfur dioxide (SO2) allowances on an emissions market, where facilities can trade pollution credits in order to comply with federal clean air rules, similar to a “cap and trade” mechanism proposed to deal with greenhouse gases.

The total value of the proceeds from the sale of SO2 credits from Mohave total $3.5 million.

Earlier this year, the PUC ruled that it did have the jurisdiction to dictate where the proceeds from the sale of the credits should go. It is currently considering a range of proposals from Edison, tribal leaders and Native and non-Native environmental groups.

Southern California Edison spokesperson Gil Alexander said the company’s position is that the proceeds from the sale of SO2 allowances are a “customer asset.”

“The allowances should be subject to sale by SCE and all of the net sale proceeds should be credited to SCE customers through rates…,” the utility said in a filing to state regulators.

In separate proposals, the Navajo Nation, the Hopi Tribe, and members of the Just Transition Coalition say they want the agency to take into account the devastating environmental impact to tribal lands and people from operating the Mohave station, and the economic losses from its shut down.

Native environmental groups say the coal industry has devastated tribal communities by contaminating and depleting waterways and springs, littering the land with waste sites, pushing people off their land, and jeopardizing the health of tribal members.

The coal to power the Mohave plant came from the Black Mesa mine in Arizona located on Navajo and Hopi lands. The coal was transported via a 275-mile pipeline carrying a coal slurry – a mixture of water and pulverized coal –across state lines. Water for the coal slurry came from Navajo and Hopi aquifers.

“No one wants to be told what to do with their money, that you have to give your money back to the tribe, [as a way to provide] some kind of restitution and restoring justice for Mohave’s legacy,” said Bessler of the Sierra Club, a member of the coalition. “The PUC and everyone understand that… they understand the justice part of it. The challenge is the mechanism of how to handle these sulfur dioxide allowances. There hasn’t been a question of who do these allowances belong to.”

Bessler says the coalition’s proposal focuses on two options for distribution of the proceeds in a way that benefits tribal communities: Fund a California-based renewable energy project with shared tribal ownership or site a SC Edison project on tribal lands that benefits tribal interests.

The Navajo Nation said the suspension of Mohave caused “severe job losses, income losses, and widespread poverty,” in a filing to regulators.

Wahleah Johns, who co-directs the Black Mesa Water Coalition, a grassroots organization of Native American and non-Native activists in Flagstaff, said the idea behind the petition by tribal and environmental groups was to come up with a transition plan to help offset the economic pain of a power plant closure. Her organization is part of the coalition.

“The process has been lengthy but to give that perspective is important for us,” she said. “For [the PUC] to recognize, there has been an injustice to our communities.” And, she said, it underscored that there was no transition plan in place to help workers or the local economy when Mohave shut down.

“I don’t know if workers were compensated,” she said.

Navajo leaders would like to use the revenues to help break ground on new transmission lines and large scale solar and wind projects in Arizona and New Mexico, according to PUC documents.

The Navajo Nation became the first tribe in the nation to pass green jobs legislation. Passed in July of 2009, the Navajo Green Economy Act establishes a commission and fund to spur green jobs, but it still has no funding.

Johns says her organization is pressing forward by developing its own small-scale solar project.

“It’s important to diversify our local economy with local green entrepreneurial projects, and build capacity in our communities, because we don’t see any type of support for our people today,” she said.

Navajo leaders say potential partnerships with Edison to develop the projects could benefit the utility’s customers by supplying renewable energy to California.

“SCE is opposed to the JTC [Just Transition Coalition] proposal and the Tribes' proposals because they would have no benefit to SCE customers,” the utility said in an emailed response. “SCE already has a very aggressive program of purchasing renewable energy, which the Tribes can participate in if they can develop an eligible project, like any project developer.”

According to PUC filings, the total number of allowances per year from Mohave is around 52,000 per year. As majority owner of Mohave (56%), SCE’s share is approximately 30,000 allowances per year, Alexander said. SCE has purchased SO2 allowances through 2041.

The Sierra Club’s Bessler said that when the coalition petitioned the PUC over the distribution of the proceeds, the pot of money, based on the value of the SO2 credits at the time, was estimated at $20 million, but now they are worth much less, because the value of the allowances have plummeted.

The value of sulfur dioxide allowances under the EPA’s Acid Rain program has declined, because there’s a glut of credits on the market, according to an industry source. The reason for the surplus is that facilities are now meeting even more stringent SO2 benchmarks set under a different EPA program that addresses the transport of air pollution across state lines.

The facilities are emitting less of the pollutant, requiring the purchase of fewer allowances to meet the federal rules. In January of 2005, the value of allowances was about $700/ton. Allowances are currently worth about .75 cents/ton, according to Evolution Markets, a brokerage firm that specializes in the emissions and carbon trading markets headquartered in New York.

The declining value of SO2 allowances on the market calls into question the viability of tapping pollution credits as a source of revenue to provide a “just transition” when plant closures affect local economies.

“We’re not totally pleased with how this has turned out, but at least we have a shot at something,” Bessler said. “It’s the law of diminishing returns.”