Saturday, August 18, 2018

UPDATED: Texas Regulators Fear Customer Risk from Wind Catcher

By Tom Kleckner

AUSTIN, Texas — Regulators threw a wrench in American Electric Power’s massive Wind Catcher Energy Connection on Thursday, expressing concerns over whether the company will protect ratepayers from the project’s risks.

Public Utility Commission Chair DeAnn Walker made that clear following oral arguments in the contested proceeding involving AEP subsidiary Southwestern Electric Power Co. and several consumer groups (Docket No. 47461).

PUC of Texas Commissioners Shelly Botkin, DeAnn Walker and Arthur D’Andrea | © RTO Insider

“I’m going to be upfront with you,” Walker said, addressing AEP CEO Nick Akins, her fellow commissioners and others in the PUC’s hearing room. “At this point, I can’t approve the [project].”

Walker said she would need additional consumer protections from SWEPCO, which would own 70% of the $4.5 billion project. It includes a 2-GW wind farm being built by Invenergy in the Oklahoma Panhandle and a 360-mile, 765-kV line from the facility to Tulsa. Sister company Public Service Company of Oklahoma would own the other 30%.

The two utilities would purchase the wind facility upon its completion, scheduled for the fourth quarter of 2020.

“I have issues and concerns … on the financial impacts to the company,” Walker said, alluding to a recent court decision remanding a SWEPCO rate case back the PUC.

The Texas Court of Appeals for the Third District on July 10 granted a rehearing request by the Texas Office of Public Utility Counsel (OPUC), Texas Industrial Energy Consumers (TIEC), and Cities Advocating Reasonable Deregulation (CARD), reversing a district court’s ruling that the utility’s John W. Turk, Jr. Power Plant should be included in cost recovery (No. 03-17-00490-CV).

PUCT’s DeAnn Walker, Arthur D’Andrea listen as Thompson & Knight’s Rex VanMiddlesworth makes a point. | © RTO Insider

Commissioner Arthur D’Andrea said he too would like to see the parties develop additional consumer protections. “But it doesn’t do us any good to protect the consumers, and then have the company fail,” he said.

Moody’s Investors Service’s also recently issued a downgrade watch for Sempra Energy following its $9.45 billion acquisition of Texas utility Oncor earlier this year. (See Texas PUC OKs Sempra-Oncor Deal, LP&L Transfer.)

As is their normal practice following oral arguments, the commissioners will review the arguments and the financial data submitted before issuing a decision. The PUC’s next scheduled open meeting is July 26.

“I’d like some time to look at the transcript,” D’Andrea said.

“I am really struggling with where I am on this,” Walker said. “I was hoping to get more solid on where I am.”

The commission was unmoved by the AEP delegation’s reminder that it faces a time crunch to take advantage of expiring federal production tax credits. Paul Chodak, AEP’s executive vice president of utilities, said the company must give contractors a notice to proceed by Aug. 6 to qualify. He said the company is already moving dirt, securing rights of way and spending “tens of millions of dollars” in legal fees.

AEP’s Paul Chodak (left) and Nick Akins | © RTO Insider

“We are on a critical path. Whatever the answer is, we would like it as quickly as possible,” Akins said. “If it’s a bad answer, we can deal with that. If it’s a good answer, we can certainly deal with that too.”

“We’re very aware of the timing implications,” Walker responded.

She encouraged AEP and the other parties to try and “address the customer benefits or protections” before the next open meeting. “Right now, I think there’s more that can be done for the consumers,” Walker said.

“We’re hopeful we can have additional settlement discussions with the intervenors, especially given the PUCT’s encouragement,” said SWEPCO spokesperson Carey Sullivan.

PUC staff, which oppose Wind Catcher, met after the hearing with OPUC, TIEC, CARD and fellow intervenor Golden Spread Electric Cooperative. The group did not commit to further settlement discussions.

SWEPCO operates in East Texas, Louisiana and Arkansas. AEP says Wind Catcher will save SWEPCO’s Texas customers $1.7 billion over 25 years. Company representatives pointed to settlement agreements in Arkansas and Louisiana that insulate customers from the project’s risks, including a cap on construction costs, minimum production levels and qualification for 100% of the federal PTCs. They also noted components of Wind Catcher’s 800 turbines will be built in Texas and Houston-based Quanta Services will build the transmission line.

Representatives of TIEC and CARD argued Wind Catcher would saddle Texas consumers with hundreds of millions of dollars in future rates, saying it would be more expensive and less efficient than the recently approved Xcel Energy wind facility. (See Texas PUC Issues Final Order for SPS Wind Farm.)

“This project is not needed in any traditional sense,” said TIEC’s Rex VanMiddlesworth, pointing to AEP’s argument that Wind Catcher will provide a hedge against higher natural gas prices. “All these parties that have dug into that — staff, the cities and OPUC — have disagreed with that and have presented [countering] evidence. If [SWEPCO’s estimate] was the case, we’d all be saying we want it, like we did for the [Xcel] wind facility.”

“Our concern is not the accuracy of SWEPCO’s forecasts. … Our concern is that the risk of those projections being accurate is on the ratepayer,” said CARD’s Alfred Herrera. “Our concern is that when this project goes into the rate base, the customer will pay.

“SWEPCO is asking you to approve a multibillion project and guarantee its returns,” Herrera said. “That’s the effect of what will happen if this plant comes into the rate base. That’s not how competitive markets work. If this deal is such a good deal, then let the competitive market build it.”

PUC staff oppose an administrative law judge’s preliminary decision approving AEP’s application, saying “the evidence presented does not support a sufficient probability of improvement of service or lowering of costs to ratepayers.”

Staff are recommending that the commission condition its approval on a requirement that SWEPCO guarantee tax credits in the amounts represented by the utility, and some level of net benefits to customers.

PUC Grants Utilities’ SMT Rehearing Request

The PUC granted a motion for rehearing and issued a final order for Smart Meter Texas (SMT), a website that provides customers and authorized market participants access to electric usage data (Docket No. 47472).

The utilities involved in SMT (AEP Texas, CenterPoint Energy Houston Electric, Oncor and Texas-New Mexico Power) filed the request in June “to address limited clarifications.”

The utilities agreed to provide on-demand meter readings as a substitute for home area network (HAN) functionality. Walker filed a memo clarifying that the utilities can’t discontinue support of a customer’s existing HAN device unless the customer requests that the device be disconnected.

SMT allows customers to download and view their energy data or share them with competitive service providers, companies that market energy efficiency, demand response, distributed generation and other services. (See “Commission Streamlines Smart Meter Texas Portal,” Texas PUC Issues Final Order for SPS Wind Farm.)

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