American Electric Power’s (NYSE:AEP) Southwestern Electric Power Co., (SWEPCO), on May 8 said the Arkansas Public Service Commission has determined that the $4.5bn Wind Catcher Energy Connection project is in the public interest.
The commission’s decision approved provisions of a settlement agreement submitted in a Feb. 20 joint motion by the commission’s General Staff, the Arkansas Attorney General, SWEPCO, Walmart Stores, Inc., and Sam’s West, Inc., SWEPCO said.
The project, which involves a major wind farm and a dedicated power line, is designed to bring low-cost and reliable energy to AEP customers in Arkansas, Louisiana, Oklahoma, and Texas, according to SWEPCO. The project includes the acquisition of a 2,000-MW wind farm under construction in the Oklahoma Panhandle, and construction of an approximately 350-mile dedicated power line that will carry the wind energy to the Tulsa area, where the existing grid will deliver it to customers, the company said.
SWEPCO said that it will own 70% of the project, while its sister company, Public Service Company of Oklahoma (PSO), will own 30%.
The wind farm is under development by Invenergy in Cimarron and Texas counties in the Oklahoma Panhandle, SWEPCO said, adding that it and PSO will purchase the facility at completion, which is scheduled for 4Q20. The project is also subject to the approval of SWEPCO’s applications in Louisiana and Texas, and PSO’s application in Oklahoma, as well as at FERC, SWEPCO said.
The company noted that the major elements of the settlement agreement approved by Arkansas regulators are guarantees agreed to by SWEPCO, including a cap on construction costs, qualification for 100% of the federal production tax credits (PTCs), as well as minimum annual production from the project.
SWEPCO said that it anticipates the project will save its customers more than $4bn over the 25-year life of the wind farm, compared to the projected costs of buying power on the open market. Cost savings include no fuel cost for wind, which lowers SWEPCO’s overall fuel and purchased power costs; full value of the federal PTC, which is available for construction of new wind farm projects; and the cost-efficient delivery of the wind generation to customers through the new power line. Customers will see savings primarily through a reduction in the fuel portion of their bills, beginning in 2021, SWEPCO said.
The economic impact of the project will include manufacturing key components of the project’s wind turbines in states served by SWEPCO, the company said. GE Renewable Energy, which will provide 800 of its 2.5-MW wind turbines for the Wind Catcher facility, anticipates that a significant number of turbine blades will be manufactured in Arkansas, SWEPCO said.
According to the Arkansas regulators’ May 8 order, the settling parties presented substantial evidence that the project – with the settlement guarantees and ratepayer protections – will lower SWEPCO’s overall cost to serve customers, continue SWEPCO’s strategy of diversifying its generation mix as outlined in its 2015 integrated resource plan (IRP), and serve the renewable goals of SWEPCO’s customers.
The net present value savings of the project are about $1.5bn, with an Arkansas jurisdictional share of 19%, or about $290m, the order said, adding that for a typical residential customer using 1,000 kWh, the monthly bill is projected to decrease by $2.46 (2.55%) in 2021; $2.97 (3.08%) in 2022; and $2.75 (2.85%) in 2023.
Among other things, the order noted that under the settlement, the company commits to a total company cost cap on investment for the wind facility, Gen-Tie, and all Southwest Power Pool (SPP)-assigned generation interconnection costs of 107.5% of estimated cost, which is $3.29bn, excluding AFUDC. The cost cap is to be increased solely to include additional project costs reasonably incurred by the company due to events of force majeure – that is, any event that is not within the company’s reasonable control – and changes in law affecting the project’s costs; otherwise, costs above the cost cap will not be recoverable through retail rates, the order said.