Coal-powered giant clears key hurdle for $2B wind plan

Source: By Edward Klump, E&E News reporter • Posted: Thursday, May 28, 2020

Public Service Co. of Oklahoma is one of the units of American Electric Power Co. that are seeking to acquire a stake in new wind farms. PSO currently receives electricity from wind turbines in Grady County, Okla., through a power purchase agreement. Public Service Company of Oklahoma

American Electric Power Co. is set to spend about $2 billion on wind generation for customers in at least three states — Arkansas, Louisiana and Oklahoma — as it continues to navigate pushback in Texas.

The company’s closely watched, multistate proposal calls for AEP utilities to acquire three planned Oklahoma wind farms known as the North Central Wind Energy Facilities. The acquisitions could occur in 2020 and 2021 as projects are completed.

The Louisiana Public Service Commission provided crucial backing yesterday as it voted in support of a settlement agreement that covers a portion of the plan, following similar endorsements this year from regulators in Arkansas and Oklahoma. A proposal for decision from Texas administrative law judges filed this week recommends denial.

But having three of four requested state approvals — as well as the blessing of the Federal Energy Regulatory Commission for the acquisition plan — gives Ohio-based AEP enough support to go ahead. The project would have a capacity of about 1,485 megawatts, and some states could take on more of the project if Texas doesn’t take part.

“We’re pleased to see Louisiana join Oklahoma and Arkansas in approving this clean, affordable energy resource,” Stan Whiteford, a spokesman for AEP’s Public Service Co. of Oklahoma unit, said in a statement. “We appreciate all of the parties involved for their willingness to work together so we can move forward and deliver these benefits to our customers.”

The outlook for North Central represents a dramatic change for AEP from 2018, when the company saw its $4.5 billion Wind Catcher plan fizzle in the same region. That happened in the wake of a rejection by the Public Utility Commission of Texas, whose chairwoman cited concerns about not having sufficient safeguards for ratepayers (Energywire, July 27, 2018).

CEO Nick Akins of AEP, one of the largest U.S. utility companies, expressed disappointment at the time that his company couldn’t move ahead with a plan to lower power costs and provide more clean energy and diversity for customers. The North Central plan is another attempt by the company to invest in renewable resources as AEP seeks to lower its reliance on coal.

AEP’s coal-fueled generating capacity dropped from about 70% in 2005 to 45% last year, according to a company presentation from March. It could cut coal to about a 28% share of capacity by 2030. Capacity for hydro, wind, solar and pumped storage is projected to climb from about 17% in 2019 to 37% by 2030, AEP said.

Key aspects of the current proposal compared with Wind Catcher include a smaller capacity, no big transmission element and wiggle room for states.

In a statement yesterday, Southwestern Electric Power Co. (SWEPCO) said the Louisiana commission “approved an option that could increase Louisiana’s allocation to an estimated 464 MW from the original 268 MW.” And the company said Arkansas regulators also accepted an option to boost the state’s allocation when they approved the project. State approvals also included various conditions meant to help protect customers.

“It behooved AEP, I think, in this case to try to create as much flexibility” as it could, said Paul Patterson, an analyst with Glenrock Associates LLC.

A ‘monumental victory’

With its new plan, AEP has projected savings over time of about $3 billion for customers of two of its utilities — Public Service Co. of Oklahoma (PSO) and SWEPCO. Some 810 MW would go to SWEPCO, with 675 MW going to PSO. The projects are expected to utilize production tax credits — one at 100% of what’s available and two at 80%.

The plan drew applause from the Alliance for Affordable Energy, a New Orleans-based consumer and environmental advocacy group. Jessica Hendricks, state policy director at the alliance, called the Louisiana decision “a monumental victory for Louisiana’s ratepayers.”

“Not only will SWEPCO customers receive the numerous benefits associated with renewable energy, including reduced costs, the Company has demonstrated that this is only the start of renewable resource development,” Hendricks said in a statement. “We’re excited to see the groundwork being laid for a clean, and affordable, energy transition in Louisiana.”

PSO and SWEPCO also were part of the Wind Catcher proposal, which AEP said could have provided savings of more than $7 billion, according to a 2017 news release.

AEP’s Wind Catcher plan called for acquiring a 2,000-MW wind farm in Oklahoma that Invenergy LLC was working on, with some 1,400 MW slated for SWEPCO and 600 MW tied to PSO. The plan also envisioned a 765-kilovolt power line, which would have run hundreds of miles in Oklahoma.

Texas is the U.S. leader in installed wind capacity, but its positioning on the current AEP plan likely rests on how the state’s three-member PUC decides to proceed on a project envisioned within a regulated setup. The proposal for decision from administrative law judges echoes some past concerns critics lobbed at Wind Catcher.

“SWEPCO has not met its burden of proof to show that the Project will result in lower costs to SWEPCO’s Texas customers,” the judges said in their recent filing on the current plan. “Credible evidence shows that the Project could result in costs increases to the Company’s customers over the life of the Project.”

Invenergy also is the developer of projects tied to North Central, and it’s looking ahead. The three proposed wind sites in the plan are located in north-central parts of Oklahoma.

“The Sundance Wind Energy Center is targeted to begin operations in late 2020, while the Maverick Wind Energy Center and Traverse Wind Energy Center are targeted to begin operations in late 2021,” Beth Conley, an Invenergy spokeswoman, said in a statement.

Invenergy also is coping with the disease caused by the novel coronavirus, which has affected projects for companies across the world.

“Construction will proceed as close as possible to the original timeline while adhering to operating procedures put in place as a response to the COVID-19 pandemic,” Conley said.