American Electric Power’s (NYSE:AEP) Southwestern Electric Power Company (SWEPCO) on Feb. 28 said that it is seeking approval of the Arkansas Public Service Commission for a net annual increase of $45.6m in the company’s non-fuel base rates, plus $12m for increased vegetation management that is designed to help prevent tree-related outages on the distribution system and allow faster restoration when outages occur.
If approved, the new rates would likely go into effect in the first billing cycle of January 2020, the company said, adding that the combined $57.6m request would result in an overall bill increase of about $22.60 per month, or 24%, for an Arkansas residential customer using 1,000 kWh per month.
SWEPCO said that since its last base rate review 10 years ago, its operations and maintenance expenses, as well as its capital investments in generation, transmission, and distribution facilities, have increased. Base rates refer to the costs of building, maintaining, and operating SWEPCO’s electric system, the company said, noting that base rates do not include the fuel portion of the customer’s bill.
SWEPCO said that it is also requesting that $28.9m for costs currently recovered through separate charges on customers’ bills be moved into base rates. Those existing costs include construction of a high-efficiency, combined cycle natural gas plant; power plant environmental retrofits to meet federal mandates; and recovery of costs related to energy efficiency programs, the company said.
The Stall Plant in Shreveport, La., began commercial operations in 2010, providing 508 MW of high efficiency, combined-cycle natural gas power for customers, SWEPCO said.
The new environmental controls, which were completed between 2013 and 2016, have allowed these power plants to comply with U.S. Environmental Protection Agency (EPA) regulations: Flint Creek at Gentry, Ark.; Welsh Units 1 and 3 at Pittsburg, Texas; Pirkey at Hallsville, Texas; and Dolet Hills at Mansfield, La. SWEPCO added that the Texas and Louisiana plants serve customers in Arkansas, just as Arkansas plants serve Texas and Louisiana customers.
According to the Feb. 28 application filed with the commission, since its last rate adjustment in 2009, SWEPCO has invested nearly $700m in environmental upgrades at its Flint Creek, Welsh, Dolet Hills, and Pirkey generating plants to enable continued operation of those facilities in compliance with the Clean Air Act and regulations promulgated by the EPA.
SWEPCO also said in its application that it needs increased revenue through revised rates in order to have a reasonable opportunity to recover prudently incurred costs and a fair opportunity to earn a reasonable return on investment. Accordingly, SWEPCO is seeking an increase in revenue to recover a retail revenue deficiency of $74.5m in base rates. That amount includes additional capital investments and increased O&M expenses since the 2009 rate case, as well as SWEPCO’s request for rate base treatment for the Stall plant and the environmental retrofits currently recovered through riders, SWEPCO added.
Eliminating those existing riders results in a net annual increase of $57.6m, representing a $45.6m increase in the company’s non-fuel base rates, plus $12m for increased vegetation management.