Texas regulators approve, with conditions, merger involving AEP TCC, AEP TNC, AEP Utilities

The Public Utility Commission (PUC) of Texas, in a Dec. 12 final order, approved the application for approval of the proposal by AEP Texas Central Company (TCC), AEP Texas North Company (TNC), and AEP Utilities Inc., to merge AEP TCC and AEP TNC into AEP Utilities, and then rename that corporate entity AEP Texas Inc.

The State Office of Administrative Hearings (SOAH) administrative law judge (ALJ) in October issued a proposal for decision recommending that the PUC find that the proposed merger is consistent with the public interest if certain conditions are imposed. The ALJ in November filed a letter recommending a modification to the proposed language in ordering paragraph 5, the PUC added, noting that it adopts that proposal for decision as modified by the ALJ, except as provided by the final order.

The PUC said that it finds that AEP Texas should be required to prepare a study at least four months in advance of filing a system-wide rate case, and to reflect that determination, the PUC adds “new finding of fact 78A.”

As noted in the final order, “finding of fact 78” states that consummation of the merger transaction will have no effect on the status quo regarding FERC jurisdiction over AEP TCC and AEP TNC wholesale transmission rates in ERCOT. “Finding of fact 78A” states that it is reasonable to require AEP Texas to file a proposal for setting system-wide rates, along with an underlying study and supporting data, at least four months prior to filing a case proposing system-wide rates with the commission, the final order said.

The PUC also said that it also makes non-substantive changes to findings of fact and conclusions of law for such matters as capitalization, spelling, punctuation, style, grammar, and readability.

As TransmissionHub reported, AEP TCC, AEP TNC and AEP Utilities Inc., on Sept. 12 filed a proposal for decision with the PUC that granted their application, which was filed in June.

As noted in that proposal for decision, AEP TCC and AEP TNC are Texas corporations providing transmission and distribution (T&D) service to retail electric providers (REPs) within portions of the ERCOT region of Texas. AEP Utilities, the proposal for decision added, is a Delaware corporation that is the immediate parent company of TCC and TNC, and all three entities are wholly owned subsidiaries of American Electric Power (NYSE:AEP).

AEP TCC and AEP TNC are separate legal entities and transmission and distribution utilities (TDUs) operating in ERCOT, but those companies are managed and operated, to a great extent, as a single business under the brand name, AEP Texas.

AEP Texas will continue to maintain separate certificates of convenience and necessity (CCNs) for the AEP TNC and AEP TCC divisions and CCN filings will continue to be handled in the same manner as currently, according to the PUC’s final order.

The merger will create a larger and stronger financial platform from which to access financial markets, which will support the continued and increasing investment in the T&D grid needed to provide reliable service to customers, according to the final order. Furthermore, the merger will result in three primary benefits for the companies and their customers: improved access to financing; efficiencies in financial reporting; and efficiencies in regulatory filings, the final order said.

AEP Texas has agreed that it will not seek recovery of the direct costs to achieve the proposed merger, and there is no credible evidence that the proposed merger will adversely affect the reliability, availability, or cost of service, the final order said.

Among other things, the final order said that as a condition of approval for the transaction, AEP Texas is ordered to provide rate credits to its customers. AEP Texas is to provide set rate credits of $630,000 per year to account for savings stemming from lower debt-issuance costs, and is to submit a yearly compliance filing detailing the amount of debt it issued in the prior year. AEP Texas is to then provide its customers with an additional rate credit equal to 90% of 0.2% of that total debt issuance, the PUC added.

Those credits will terminate on the effective date of AEP Texas’ next base-rate case, and any rate credits awarded as a result of the final order are to be divided between AEP Texas’ existing AEP TCC and AEP TNC customers based on asset allocation, the PUC said.

About Corina Rivera-Linares 3058 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.