Arkansas PSC staff say more proof needed for Crossroads rate recovery

Witnesses for the staff of the Arkansas Public Service Commission said in Oct. 26 testimony that Oklahoma Gas and Electric needs to file for approval of a wind project in a general rate case, not as a project subject to interim special rate treatment.

Regina Butler, a Senior Rate Case Analyst for the staff, noted that on Aug. 31, OG&E filed an application under the Arkansas Clean Energy Development Act that the Crossroads Wind Generation Facility be declared a clean energy resource and/or a renewable energy resource, and that the development of Crossroads and the use of this energy in Arkansas is in the public interest. OG&E further sought approval to recover the Arkansas jurisdictional costs of the project through a temporary surcharge, called the Crossroads Recovery Rider (CRR), until such costs are included in OG&E’s base rates as part of its next general rate proceeding.

The CRR would become effective in the month following a commission order approving the rider and continue until new rates are implemented after the next OG&E Arkansas general rate case. The CRR includes a final true-up provision to align revenues recovered with actual costs when the rider is terminated with any over- or under-recovery being refunded or collected through the Energy Cost Recovery Rider.

“The components of the revenue requirement for Crossroads are generally consistent with costs that are recoverable in base rates; however, the appropriate venue for a comprehensive review of the revenue requirement is a general rate case,” Butler wrote. “A more detailed and exacting revenue requirement determination, consistent with the provisions of Arkansas law should be and is reserved for OG&E’s next general rate case. Nothing in my testimony is intended to represent a finding of value for ratemaking treatment of any costs of Crossroads other than as to the reasonableness of the development of the revenue requirement for purposes of this case.”

Consultant John Athas of La Capra Associates Inc., testifying for the PSC staff, said in his own Oct. 26 testimony: “Based on my analysis, the Company has not provided adequate evidence to determine whether Crossroads is in the public interest to serve its Arkansas customers at this time.”

Crossroads is a 98-turbine, 227.5-MW wind plant located in Dewey County, Okla. It began initial operation in September 2011 and commercial operation on Jan. 17, 2012. Crossroads interconnects to OG&E’s 345 kV Woodward-to-Oklahoma City transmission line.

After an investigation, the Oklahoma Corporation Commission (OCC) in 2010 approved a settlement agreement concerning the facility, Athas noted. The agreement contained several provisions, including preapproval of the project as a self-build facility, cost caps for different build configurations, production bandwidth adjustments, waivers of Oklahoma competitive bidding requirements, obligations for an updated integrated resource plan, the approval of an interim cost recovery rider, as well as other regulatory provisions, he said. Oklahoma customers are allocated the vast majority of the benefits and costs of the project.

OG&E said it has invested more than $437m in the development and construction of Crossroads. However, to date, OG&E is not recovering operating costs or earning a return on this investment in Arkansas. The utility said that Arkansas customers have already received a benefit from the Crossroads facility. During the period from September 2011 through June 2012, fuel costs to Arkansas customers were approximately $1.2m lower due to integration of Crossroads into the company’s generation fleet, it said, with more fuel savings ahead.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.