TEP and a sister utility paid $219 million for Gila Bend Power Station, a facility that uses waste heat to generate electricity.

Tucson Electric Power Co. has finalized the planned purchase of a gas-fired power plant in Gila Bend, in a key move to cut its reliance on coal.

In a deal announced Wednesday, TEP and sister utility UNS Electric Inc. acquired the 550-MW Gila River Power Station Power Block 3 from Gila River Power LLC for $219 million. TEP will control 413 MW of the plant’s output, while UNS Electric, which serves Santa Cruz and Mohave Counties, will own the remaining energy.

Gila River Power Block 3, completed in 2003, features combined cycle technology that improves fuel efficiency by capturing waste heat and using it to help generate additional electricity, TEP said.

“This acquisition contributes to an evolving resource portfolio that will continue to provide reliable, affordable and sustainable energy for our customers for many years to come,” David Hutchens, TEP’s president and CEO, said in a news release.

TEP and UNS are subsidiaries of UNS Energy Corp., which was acquired in August by Canadian utility operator Fortis Inc.

Eyeing long-term costs and risks driven by new and potential environmental mandates on coal-fired power plants, TEP is planning to reduce its overall coal capacity by approximately 490 MW, or about 32 percent, by 2018.

Besides the Gila River acquisition, other TEP plans for cutting its reliance on coal include:

  • Allowing a lease for a unit at the Springerville Generating Station in eastern Arizona to expire, removing approximately 200 MW of coal-fired capacity from the company’s generating portfolio.
  • By the end of 2017, TEP will begin using natural gas exclusively as a fuel source for Unit 4 at the H. Wilson Sundt Generating Station in Tucson, removing another 120 MW of coal-fired capacity.
  • The company also is planning for the 2017 shutdown of Unit 2 at the San Juan Generating Station in New Mexico. TEP owns 170 MW of that coal-fired unit.
  • By the end of 2014, TEP expects to have more than 340 MW of total renewable generating capacity, including solar and wind, enough to meet the electric needs of more than 71,000 homes.

TEP’s plan will cut the company’s carbon dioxide emissions by 25 percent by 2020 “without compromising the affordability, safety or reliability of its service,” Hutchens said.

TEP serves about 414,000 customers in Southern Arizona.

Contact Assistant Business Editor David Wichner at dwichner@tucson.com or 573-4181.

Senior reporter covering business and technology for the Arizona Daily Star/Tucson.com