Federal funding to help upgrade coal-powered turbine at Apache Generating Station

A federal investment in Cochise County could keep a major source of electricity serving Tucson and other Southern Arizona communities operating for years longer than previously planned. The U.S. Department of Energy is awarding Arizona Electric Power Cooperative more than $20 million to modernize the Apache Generating Station’s remaining coal powered turbine, a project expected to be finished by the end of 2030. The plant is south of Willcox and east of Benson, making its future relevant to residents and businesses throughout the region that rely on the cooperative’s power system.

The grant will support repairs and upgrades to the turbine’s mechanical and electrical systems. AEPCO expects the full project to cost more than $60 million, with most of that amount coming from nonfederal funding. The cooperative has said the work will restore and improve the facility’s 195 megawatt unit, increasing its reliability, capacity and efficiency. Michael Nelson, AEPCO’s executive director of power production, said the turbine has not undergone an upgrade of this scale in nearly five decades.

For customers, the stated goal is to produce electricity more reliably and at a lower cost. Nelson said greater efficiency should reduce the expenses passed along to the cooperative’s distribution members. Department of Energy Acting Assistant Secretary Curt Coccodrilli, who toured the station, described the investment as a less expensive option than constructing an entirely new generating facility. He said the federal money, combined with roughly $30 million in cooperative funding, will help keep power available where it is most needed.

The project also represents a significant change from AEPCO’s recent plans for the Apache station. Less than two years ago, the cooperative received federal money intended to support renewable energy and help phase out coal. AEPCO had previously said it would end coal production at Apache by 2027, and in September 2024 it committed to transitioning the plant to natural gas by the following year. The new federal support means the coal turbine is now expected to remain in operation, although AEPCO has not publicly clarified whether the investment changes its transition commitment.

The Apache station is Southern Arizona’s last remaining coal plant and one of three still operating in the state. The others are the Coronado Generating Station, operated by Salt River Project, and the Springerville Generating Station, operated by Tucson Electric Power, with one unit owned and operated by SRP. Both of those facilities are expected to transition fully to natural gas by 2031. Arizona Public Service is also reconsidering its planned exit from the Four Corners Generating Station in New Mexico, citing growing electricity demand and the need to preserve reliable service.

The federal announcement comes as Arizona’s energy policy is becoming a major political issue. President Donald Trump announced the new coal funding on June 4, and the Apache project is part of his administration’s effort to modernize the coal industry. Coccodrilli said coal remains a low cost source of baseload power and argued that keeping existing facilities operating can support miners, families and local economies. The administration also granted Apache an exemption from certain Environmental Protection Agency rules concerning toxic pollutant emissions in 2025. Any regulations affecting the turbine during the modernization would be determined by the EPA.

AEPCO says it remains committed to reducing emissions by 70% by 2031. Chief Executive Officer Patrick Ledger did not appear on camera but said the investment should allow the cooperative to produce more electricity at a lower cost. The broader state energy mix is already shifting away from coal. Federal energy data cited by 13 News shows coal producing about 8% of Arizona’s electricity, while natural gas and renewable sources together account for nearly 65%. Coal generation has declined nationally as older plants face higher operating costs, stricter environmental requirements and competition from solar, wind and natural gas.

The timing could also affect utility affordability, an issue that matters to Tucson households already watching electric bills. It remains unclear how the Apache project will affect rates, although AEPCO’s leadership expects continued operation of the turbine to help lower prices over time. The construction phase is expected to create several hundred jobs. Completing the work will require extensive engineering and equipment built specifically for the Apache facility, a process Nelson said will take years because of the specialized manufacturing involved.

The debate over Apache reflects a larger disagreement about how Arizona should meet rising electricity demand. State regulators repealed renewable energy requirements that previously called for the largest utilities to obtain 15% of their power from renewable sources. Republican candidates and officials have promoted an all of the above strategy that includes coal, natural gas and renewable energy, while clean energy advocates argue that coal is both economically and environmentally unsustainable. That divide is central to this year’s Arizona Corporation Commission race, where two seats on the all Republican commission are being contested. For Tucson and the rest of Southern Arizona, the Apache decision means the region’s energy transition will be slower and more complicated than earlier plans indicated.