TEP Prepares To Diversify Generation Portfolio With Planned Purchases

Tucson Electric Power (TEP) is taking several significant steps to diversify its generation portfolio, which includes receiving a smaller percentage of the output from Unit 1 at the coal-fired Springerville Generating Station (SGS), the potential purchase of additional natural gas-fired resources in Arizona and the continued expansion of renewable resources.

“We’re reshaping our generation portfolio by pursuing the opportunity to purchase a cleaner, favorably priced resource that will allow us to take greater advantage of low natural gas prices,” said Paul Bonavia, Chairman and Chief Executive Officer of TEP and its parent company, UNS Energy Corporation (NYSE: UNS).

As part of the company’s resource diversification strategy, TEP issued a request for proposals for non-coal-fired generating capacity. After evaluating several bids, TEP entered into exclusive negotiations with Entegra Power Group LLC to purchase a 550 MW gas-fired combined-cycle generating unit at the Gila River Generating Station in Gila Bend, Ariz.

This gas-fired resource and continued expansion of renewable resources will help the company continue to improve its emissions profile. In 2012, more than 5 percent of TEP’s total retail sales were generated by renewable resources. TEP was selected as the 2012 Investor Owned Utility of the Year by the Solar Electric Power Association and is again this year a finalist for the award. TEP is also a finalist for Arizona Forward’s 33rd Annual Environmental Excellence Awards. The company was nominated for its investment in solar energy at the University of Arizona Science and Technology Park.

TEP currently receives all of the output from SGS Unit 1, a coal-fired generating facility with a continuous capacity rating of 387 megawatts (MW), through a 14 percent ownership and leases for the remainder. Under the terms of the leases, TEP can purchase additional interests at a pre-determined appraisal price but was required to notify other owners of its election to purchase before Sept. 1, 2013. TEP has agreed to purchase an additional 25 percent share of the unit and associated facilities when the leases expire on Jan. 1, 2015.

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