A proposed order prepared by the Docket Management Section of the Public Utility Commission (PUC) of Texas calls for the approval of Southwestern Public Service’s (SPS) March 2017 application to amend a certificate of convenience and necessity (CCN) to acquire, build, own, and operate two wind generating facilities.
SPS also sought approval of a purchased power agreement (PPA) with Bonita Wind Energy, as well as approval of certain principles related to the regulatory treatment of the wind facilities.
The proposed order added that an unopposed stipulation (referred to as the agreement) was executed that resolves all of the issues between the parties to the proceeding (PUC Docket No. 46936). The signatories to the agreement include commission staff, SPS, Texas Industrial Energy Consumers, Alliance of Xcel Municipalities, Office of Public Utility Counsel, U.S. Department of Energy, Golden Spread Electric Cooperative, Tri-County Electric Cooperative, and Texas Cotton Ginners’ Association.
The proposed order noted that Bonita Wind Energy is a company formed by NextEra Energy’s (NYSE:NEE) NextEra Energy Resources, and that the PPA includes two projects:
- Phase I in Crosby County with about 80 MW
- Phase II in Cochran County with about 150 MW
According to SPS, the Bonita PPA would provide SPS with about 1 million MWh of wind energy per year over the 30-year term of the contract for both phases.
The wind facilities consist of an approximately 239-turbine, 478-MW wind generating plant and associated facilities, including the facilities’ land and land rights, located in Hale County, (referred to as Hale), as well as an approximately 261-turbine, 522-MW wind generating plant and associated facilities, including the facilities land and land rights, located in Roosevelt County, N.M., (referred to as Sagamore), the proposed order added.
SPS entered into the Bonita PPA as part of the transaction to acquire the rights for the Hale wind facility, the proposed order added. The transaction under which SPS acquired the Hale wind facility and entered into the Bonita PPA is referred to as the Hale transaction, the proposed order said, noting that collectively, the wind facilities and Bonita PPA are referred to as the wind facilities.
Discussing fuel costs, PTCs, and temporary rates, the proposed order noted that in regard to the Sagamore and Hale projects, the signatories agreed, for instance, that at the start of commercial operation, SPS would offer the energy produced by each project into the Southwest Power Pool (SPP) Integrated Marketplace and would credit eligible fuel expense with the Texas retail portion of the sales revenues.
Discussing capital cost cap, the proposed order noted that with respect to the Hale and Sagamore projects, the signatories agreed, among other things, that for Texas retail ratemaking purposes, the gross plant-in-service amount combined for the Hale and Sagamore projects to be included in SPS’ rate base in the initial rate cases for the projects would not exceed $1,675 per kW installed (total company).
The proposed order also discussed the minimum production guarantee, noting that with respect to the Hale and Sagamore projects, the signatories agreed, for instance, that SPS would track the combined annual energy production from the wind facilities. SPS would guarantee the minimum output of the wind facilities at an annual 48% net capacity factor (NCF), starting for each of the wind facilities with the beginning of the first calendar year after commercial operation. The proposed order added that for calendar years one through four, if the production for the preceding calendar year is below a 48% NCF, then SPS would credit to fuel expense the grossed-up federal production tax credits (PTCs) not generated due to the wind facilities’ under-production as well as the additional energy costs incurred due to the wind facilities’ under-production based upon a redispatch of SPS’ owned or controlled thermal system resources with and without the wind facilities.
The proposed order further noted that the signatories agreed that SPS would credit customers with 100% of the PTCs related to the actual output generated by turbines placed in service at the wind facilities after Dec. 31, 2020, even if SPS receives no PTCs associated with that output due to the facilities’ failure to qualify for the PTCs.
A March 19 filing accompanying the proposed order from Irene Montelongo, director, Docket Management, to the commissioners, noted that the commission will consider the docket at an open meeting scheduled for April 12, and that parties are to file corrections or exceptions to the proposed order by April 4.