American Electric Power (NYSE:AEP) Chairman, President and CEO Nicholas Akins on July 27 said that given the benefits of the Wind Catcher Energy Connection, the project, which is in the developmental stages, “should be a no brainer.”
AEP on July 26 said that its utility subsidiaries, Public Service Company of Oklahoma (PSO) and Southwestern Electric Power Company (SWEPCO), will ask utility regulators in Arkansas, Louisiana, Oklahoma, and Texas to approve plans to purchase a 2,000-MW wind farm that is under construction in the western panhandle of Oklahoma, as well as to build an approximately 350-mile, dedicated, extra-high voltage power line to deliver the renewable energy to customers.
Speaking during AEP’s 2Q17 earnings call, Akins said that the project will benefit customers by about $7bn (net of cost, according to the July 26 statement) over its 25-year life; boost economic growth in the region; provide further diversification of generation resources by using indigenous and high-quality resources in the region; and provide AEP investors with the opportunity for earnings growth.
“This project is not presently in our capital plan because the various [regulatory] commissions need time for review, but this is a great project,” Akins said.
AEP said in its July 26 statement that PSO and SWEPCO plan to file July 31 with regulators for approvals; the project is also subject to FERC approval.
The total investment for the project will be $4.5bn, inclusive of all costs, AEP said, adding that the wind farm, which is under development by Invenergy, will be the largest, single-site wind project in the country when complete.
SWEPCO would own 70% of the project, including 1,400 MW of wind, while PSO would own 30% of the project, including 600 MW of wind, AEP said.
According to the project’s webpage, the project components include:
- Acquiring the Wind Catcher Facility from Invenergy when completed in late 2020; the wind farm features 800 GE 2.5-MW wind turbines. According to the project’s fact sheet, the facility is located in parts of Texas and Cimarron counties in western Oklahoma
- Building the 765-kV Wind Catcher Power Line. According to the fact sheet, the line would start at the wind facility, cross parts of Oklahoma, and end at a new substation near Tulsa; the line route is under development, and study segments will be presented for public input in the fall
- Building two new substations – one will be located at the wind facility and the other one near Tulsa
According to the webpage, right of way (ROW) acquisition would begin in spring 2018; ROW clearing and pre-construction would occur in late 2018; construction would begin in early 2019; the project would be in service in late 2020; and ROW restoration would be complete in fall 2021.
AEP said in its statement that the project will support 4,000 direct and 4,400 indirect jobs annually during construction, as well as 80 permanent jobs once operational. In addition, the project will contribute about $300m in property taxes over the life of the project, AEP said.
“AEP is moving to a cleaner energy future, driven by new technologies and the expectations of our customers and shareholders,” Akins said in the statement. “We are diversifying our generation mix to include more renewables, and we’re also investing in a smarter, more efficient and resilient electricity grid to support these new resources and technologies. This project is consistent with our strategy of investing in the energy resources of the future, and it will save our customers money while providing economic benefits to communities.”
During the earnings call, Akins discussed other matters, including several rate cases.
At SWEPCO, for instance, he noted that Texas rate case hearings concluded in June, and that the company expects “an order in November, with rates retroactively applying from May of 2017.”
The company requested a net revenue increase of $69m, with a requested return on equity (ROE) of 10%, he said.
Indiana Michigan Power (I&M) is working on rate cases in Michigan and Indiana, he said, adding: “The Michigan case filed in May included a $51.7m net revenue request, while the Indiana rate case, which was filed yesterday, included a $263m net revenue request. Both cases requested a 10.6% ROE.”
According to a separate July 26 statement, I&M is asking the Indiana Utility Regulatory Commission to approve its Building the Future plan, which would accelerate trimming and clearing of trees and other vegetation near power lines, and includes systematically updating I&M’s aging energy delivery system, using stronger poles and wires, as well as expanded technology to make the system more resilient to weather events and reduce the impact of weather-related outages. In 2018, I&M added, it expects to replace an estimated 1,400 poles, more than 20 miles of overhead lines, and more than 12 miles of underground lines in the Indiana service territory.
Akins said during the call, “New rates are expected to be effective in March of 2018 for Michigan, and July of 2018 for Indiana.”
Among other things, he also noted that PSO filed a rate case in June, requesting a net revenue increase of $156m, and an ROE of 10%.
“We expect rates to be effective in January of 2018, as a result of this case,” Akins said.
In other AEP news, Appalachian Power on July 24 said that it began installing upgraded meters in Virginia, noting that the installation is part of a routine service upgrade that will provide multiple benefits for customers. Plans are to install 54,000 advanced metering infrastructure meters in the Christiansburg, Blacksburg, Lynchburg, and Lovingston areas, the company said.
AEP on July 27 reported 2Q17 earnings, prepared in accordance with Generally Accepted Accounting Principles (GAAP), of $375m, or 76 cents per share, compared with GAAP earnings of $502m, or $1.02 per share in 2Q16.
Operating earnings – which the company noted is a non-GAAP measure representing GAAP earnings excluding special items – for 2Q17 were $370m, or 75 cents per share, compared with operating earnings of $466m, or 95 cents per share, in 2Q16, AEP said.
The difference between 2017 GAAP earnings and operating earnings was largely due to adjustments related to the sale of competitive generation assets, the company said.