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Controversy blooms over SWEPCO rates

By Jo Lee Ferguson, Special to the News-Journal
Nov. 2, 2013 at 1:19 a.m.

Controversy around a new power plant is at the heart of multiple requests for state utility regulators to reconsider a rate increase recently granted to AEP Southwestern Electric Power Co.

Seven entities are contesting the Public Utility Commission's decision on the increase, which was about half what SWEPCO had requested. The three-member commission voted unanimously in October to grant an increase of about $39 million. The utility was seeking $83 million.

Motions for a rehearing on the decision were filed Wednesday by SWEPCO, Cities Advocating Responsible Deregulation, Cities Served by SWEPCO, state agencies represented by the attorney general's office, the Office of Public Utility Counsel, Texas Industrial Energy Consumers and staff members of the Public Utility Commission of Texas.

<h3>Taking a poll</h3>

Public Utility Commission spokesman Terry Hadley said commissioners would be polled during the next few weeks. If at least one of them wants to discuss the issue, the commission would consider voting on whether to grant a rehearing.

The filings, with some exceptions, focus on SWEPCO's newly constructed John W. Turk Power Plant in Arkansas. On one side, SWEPCO says it built the plant with the understanding it would be allowed to recover costs. On the other side, groups representing ratepayers question why Texas customers should face higher rates to pay for the plant, which serves customers in three states.

"The record is clear in this proceeding that the primary driver for Southwestern Electric Power Company's ... filing of this rate case was to put the Turk plant into rate base," the Cities Served by SWEPCO filing says. "The Public Utility Commission's ... determination to allow this grossly-imprudent plant in rate base is in error; it is contrary to the evidence and works a grave injustice on SWEPCO's Texas ratepayers."

The Texas Industrial Energy Consumers likewise takes issue with the Turk power plant, saying regulatort properly found SWEPCO "was imprudent in failing to monitor the economic viability of the Turk Plant after September 2008," and adding "that a prudent utility would have canceled the Turk Plant once it became uneconomic to complete it.

"The commission's decision would add $1.1 billion in Turk capital costs to rate base for Texas customers. Regulators in Arkansas, the state that will receive the jobs and tax revenues associated with the Turk Plant, will not permit any Turk capital costs whatsoever to be included in SWEPCO's rates."

The Cities Advocating for Responsible Deregulation filing says the commissioners' rate order results in "unaffordable prices" and asks for rehearing on four issues: settlement costs for litigation associated with Turk, incentive compensation, plant removal costs and inclusion of environmental costs in fuel rates.

<h3>Higher prices</h3>

"This rate increase results in unaffordable prices," CARD said in its filing. "The Order makes SWEPCO's commercial customers pay electric rates that are more than 27 percent higher than Arkansas companies that live just across the border. The differential for residential customers is more than 10 percent. This rate increase forces citizens and companies in northeast Texas to pay unaffordable prices that are uncompetitive when compared to electric rates in neighboring Arkansas."

Public Utility Commission staff also joined in asking for a rehearing, although not for the same reasons as other parties. The filing points out areas in which staff say the final order is not consistent with the commission's intent, such as a typographical error in the final order that amounted to $630,000.

<h3>Clerical errors</h3>

SWEPCO's filing also points out what it says are essentially clerical errors in the commission's order, while arguing for the commission to reconsider how it accounts for some of the Turk costs.

"The commission's decision that the Turk plant cost cap includes Allowance For Funds Used During Construction (AFUDC) is the single most important decision made by the commissioners of which SWEPCO seeks rehearing in this proceeding," the company's filing says. "That decision ... effectively disallows the Texas retail portion of the more than $300 million of AFUDC on SWEPCO's prudently constructed and now complete Turk plant."

SWEPCO serves 180,650 customers in Northeast Texas. It has 227,300 customers in Louisiana, where it's based, and 113,650 in Arkansas. SWEPCO is a unit of Ohio-based American Electric Power Co.



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