American Electric Power’s (NYSE:AEP) Southwestern Electric Power Co. (SWEPCO) on June 20 said that the Louisiana Public Service Commission has approved the company’s $4.5bn Wind Catcher Energy Connection project.
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 would carry the wind energy to the Tulsa area, where the existing grid would deliver it to customers in Oklahoma, Louisiana, Arkansas, and Texas, the company said.
SWEPCO noted 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.
Key elements of the settlement agreement approved by Louisiana regulators are guarantees agreed to by SWEPCO, including a cap on construction costs, qualification for 100% of the federal production tax credits (PTCs), and minimum annual production from the project, the company said.
SWEPCO said that it anticipates the project would 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. The company noted that cost savings include no fuel cost for wind; full value of the PTC; and delivery of the wind generation to customers through the new line. Customers would see savings primarily through a reduction in the fuel portion of their bills, beginning in 2021, SWEPCO said.
The economic impact of the project would include manufacturing in Louisiana of key components of the project’s 800 wind turbines to be supplied by GE Renewable Energy, SWEPCO said.
According to the motion that was adopted by Louisiana regulators:
* The company is to pay the total fuel replacement energy costs of the system if wind generation falls below 46% during the lifetime of the project without limitation to the number of years in use. The motion also calls for no fuel costs of sub 46% performance by the system to the ratepayers. That is to be a guarantee of production equivalent to 90% of the company’s projected values; the 46% performance is to be set at the eastern bus bar in Tulsa adjusted for line losses. In the event the plant performs below a specified capacity factor, SWEPCO is to make customers whole for not only the replacement energy costs associated with any underperformance, but for the total replacement energy costs for the total life of the facility without limitation to the number of years in use, as well as any lost PTCs if the plant does not perform accordingly
* SWEPCO is to accept all force majeure risk during the construction phase of the project and is to not seek to recover any such costs from Louisiana customers, should they be incurred. The company is to accept the complete risk of force majeure above the 103% cost cap
* SWEPCO can seek recovery of prudently incurred capital costs associated with force majeure events during operations, with the commission maintaining the right to evaluate prudency of such costs. During the operational phase of the project, SWEPCO will agree to exclude any hours caused by force majeure events – such as tornadoes – from the minimum production guarantee for the life of the project. Any capital costs attributed to force majeure will be included in the revenue requirement of the 10-year customer savings guarantee
* SWEPCO will agree to report to commission staff on the 10-year customer savings guarantee on a semi-annual basis. If a report indicates that the project is not performing as projected beginning at the end of the first full year of operations, staff is to ask the commission to open a docket to investigate what is causing the underperformance
* SWEPCO agrees to expand the 10-year customer savings guarantee to protect customers from any change in federal law that would potentially reduce or eliminate the federal PTC
In its statement, SWEPCO said that the Wind Catcher project remains subject to the approval of SWEPCO’s application in Texas and PSO’s application in Oklahoma. Six parties have joined with PSO in a settlement agreement pending before the Oklahoma Corporate Commission, SWEPCO said, adding that the Arkansas Public Service Commission approved the project in May.