American Electric Power’s AEP Texas on May 1 said that it has filed a request with the Public Utility Commission of Texas to adjust the transmission and distribution rates charged to retail electric providers (REPs), noting that it is seeking approval of a $38.3m increase in base rate revenues, which includes an $83m income tax refund associated with the Tax Cuts and Jobs Act of 2017 (TCJA) that the company proposes to implement through a four-year Income Tax Refund Rider (ITR).
The company said that it is also seeking approval for a reduction to its transmission cost of service of about $3.16m, as well as a one-time transmission credit of $29m associated with the effects of the TCJA.
AEP Texas noted that its filing includes a proposal to consolidate rates for the company’s North Division, which covers the west Texas service territory, and its Central Division, which covers the south Texas service territory.
If the commission approves AEP Texas’ request, the amounts charged to the REPs for a residential customer using 1,000 kWh a month of electricity in the AEP Texas North Division would decrease around $5.01 a month, the company said, adding that customers with a retail plan that charges 12.5 cents per kWh would see their rate decrease to 12.0 cents per kWh if their REP passes on the change in rates.
The amounts charged to the REPs for a residential customer using 1,000 kWh a month of electricity in the AEP Texas Central Division would increase around $4.75 a month, the company said, adding that customers with a retail plan that charges 12.5 cents per kWh would see their rate go to 12.97 cents per kWh if their REP passes on the change in rates.
The company noted that the Transition to Competition charge that is scheduled to expire in October 2020 will result in an $8.35 reduction in charges billed to the REPs for residential customers using 1,000 kWh a month in the Central Division, which means that residential customers throughout the AEP Texas service territory should ultimately see a decrease in charges.
AEP Texas also noted that it is requesting a return on equity of 10.5% with a capital structure of about 55% debt/45% equity.
In its application, the company said the expanding economy and population growth in its service territory, as well as the need to upgrade and maintain the existing transmission and distribution (T&D) infrastructure, has required it to invest almost $6bn in its T&D system since the close of the previous test year, June 30, 2006.
The company said that the additional T&D investment, for which AEP Texas requests a prudency determination, supports the new and expanding oil and gas businesses, as well as the expanding communities that create increased need for housing, schools, and commercial enterprises.
The company noted in its application that it has invested about $2.9bn in the transmission system since the last base rate case. AEP Texas said that major IPP projects that it has completed since the last rate case to connect customers to the AEP Texas transmission system include the approximately $108.2m Horse Hollow & Sea West Buffalo Gap Wind Interconnections. Those upgrades were required to accommodate the interconnection and dispatch of more than 1,200 MW of wind generation into the Bluff Creek substation that is located southwest of Abilene, the company said.
Of its request to consolidate its Central and North Divisions’ rates and tariffs, the company said that while it and its two divisions have been operated as a single business for the benefit of customers for more than a decade, the AEP Texas system is operated as a single system serving all its customers, rendering the allocation of cost on a divisional basis an outdated practice. As a result, the company said, consolidating rates is a natural progression from the foundation laid by the commission’s approval of the AEP Texas merger, and would support more efficient administration and regulation of the company’s rates.
The company noted that it used to consist of two separate corporate entities – AEP Texas Central Company (TCC) and AEP Texas North Company (TNC) – that were managed and operated as a single business under the brand name “AEP Texas.” In a separate docket, TCC and TNC sought and received commission approval to merge and change its name to AEP Texas Inc. The company added that after the merger, as ordered by the commission, it established the Central and North “divisions” within the merged utility and continued to maintain separate rates, riders, and tariff manuals for the divisions.