Our 2020 Integrated Resource Plan

TEP plans to significantly increase its use of solar and wind power and battery storage as part of a reliable, affordable and increasingly sustainable energy portfolio. TEP’s 2020 IRP calls for 2,457 megawatts (MW) of new wind and solar power systems and 1,400 MW of battery storage, allowing us to provide more than 70 percent of our power from renewable resources by 2035. These additions, combined with the gradual elimination of coal-fired power from its portfolio, will help TEP achieve an 80 percent reduction in CO₂ emissions by 2035.

The preferred portfolio offers the best balance of affordability, reliability and sustainability of any we considered. It will achieve greater CO₂ emission reductions than 23 out of 24 portfolios evaluated in the IRP process at a cost that falls near the median of those considered. The only portfolio we evaluated that could achieve greater CO₂ reductions was the second most expensive; it would cost approximately $300M more than TEP’s preferred portfolio.

Concern about environmental impacts, low natural gas prices, and the increasing availability of low-cost renewable energy and storage resources are driving interest in alternatives to coal-fired generation nationwide. The planned closure of other coal-fired power plants also could lead to coal mine closures that limit long-term fuel availability.

TEP also is committed to seeking cost-effective reductions in CO₂ emissions to help combat climate change. Reducing and ultimately eliminating the use of coal-fired resources will help to bring TEP into alignment with efforts to limit the increase of global temperatures to well below 2 degrees Celsius, a goal established by the 2015 Paris Agreement on climate change.

For these reasons, TEP revised its long-term operating plans for SGS Units 1 and 2. The reliable, well-run units remain critical to the company’s current energy portfolio, but TEP will work to supplant them over the coming decade by expanding its use of wind farms, solar arrays and energy storage systems.

Under TEP’s plan, SGS would continue to provide necessary capacity and reliability for more than a decade until such time that wind and solar energy resources – supported by energy storage systems – become a cost-effective replacement alternative. In this way, TEP can maintain safe, reliable and affordable service for customers from increasingly sustainable resources.

TEP plans to operate both units from April through September but keep only one unit running from October through March. One unit could be idled throughout those cooler months, or the outage could be split between the units, with one shut down from October through December and the other shut down from January through March. After Unit 1 is shut down in 2027, Unit 2 would be operated seasonally until its 2032 retirement.

Our proposed timeline would allow TEP to reduce the plant’s 390-person workforce through attrition rather than layoffs. It also provides time for us to help the Round Valley community mitigate the impact of the units’ closure. We plan to work closely with employees and local leaders to prepare for the retirements and promote sustainable economic growth in the region. This includes evaluating the potential for developing renewable energy resources in the region.

SGS Units 3 and 4 are owned by Tri State Generation and Transmission Association and Salt River Project, respectively. TEP operates those units in addition to our own units at the eastern Arizona site. We cannot predict how long Tri-State and SRP will operate SGS Units 3 and 4, or how their plans might be affected by the shutdown of Units 1 and 2. That said, the units remain well utilized, are equipped with state-of-the-art emission controls and are among the newest coal fired generators in the United States.

TEP’s rates were designed to recover the cost of those units over a longer period of time. Our plan to retire them sooner changes that calculation, leaving less time to recoup their remaining unrecovered costs. The impact of this change on our rates will be mitigated by reduced operating and capital investment costs at the units as they enter seasonal operation and retirement.

TEP has not yet determined how it will seek to recover the remaining value of SGS Units 1 and 2 or the timing of any such request. The Arizona Corporation Commission’s approval of an appropriate plan for timely recovery of TEP’s unrecovered investment value at SGS will be critical to our ability to pursue the portfolio plan outlined in our 2020 IRP.