PSO’s major new wind farm project raises questions about need, bids
State rules traditionally have required utilities seeking preapproval for customer paid-for power upgrades to prove that new power is needed and to competitively bid projects to bring that power online.
But in this era where Oklahoma is one of the nation’s leaders in generating affordable wind power, arguments are underway about whether those absolutes are applicable.
Building wind generating facilities remains a complex proposition, especially when factoring in applicable federal renewable energy production tax credits and getting transmission lines built to get the electricity from turbines to customers.
However, the wind energy industry has taken flight, boosting the availability of power for utilities. The quest, therefore, has moved to utilities finding the most affordable power they can.
These issues and others likely will play a role in upcoming deliberations on the Oklahoma Corporation Commission’s schedule this month as Public Service Co. of Oklahoma seeks preapproval to recover its costs in a $4.5 billion wind farm and electric transmission project.
PSO’s Wind Catcher Connection involves 800 turbines in the Oklahoma Panhandle and a dedicated transmission line to take the electricity to 1.1 million customers of PSO and its sister utility, Southwestern Electric Power Co.
PSO is asking the commission to grant it preapproval to recover its
share of the project costs from customers when Wind Catcher becomes operational in late 2020. Its share of the project is estimated at $1.36 billion, and in testimony filed in the case, PSO estimates the Wind Catcher project would add another $78 million to customer rates in 2021.
The utility has said it expects those costs will be offset by comparatively lower energy costs and a federal tax credit for wind generation, though.
Attorney General Mike Hunter, whose office represents consumers in utility cases, and the Corporation Commission’s public utility division are involved, as are more than a half dozen other organizations.
Hunter himself appeared before the commission before Christmas to argue that PSO failed to meet requirements for the utility to obtain preapproval to recover its costs because it hadn’t adequately demonstrated the new power is needed and because construction of the wind farm wasn’t competitively bid.
Hunter called those important principals of rate regulation.
“Rules matter when a public utility wants to increase its rate base,” he said, noting that a review of Wind Catcher and the benefits it might bring to rate payers would be more “traditional” after the project is operational.
“At the end of the day, what’s the need for this project?” asked Hunter.
PSO argued a potential of saving hundreds of millions of dollars is cause enough for the commission to consider whether to give it preapproval to recover its costs.
It also has filed testimony that indicates it is prepared to include sweeteners in its deal that it says will guarantee its customers will get more-affordable power as well as address concerns of critics of the plan.
These include an investment cost cap equal to 110 percent of PSO’s original filed capital estimates of $1.444 billion, a guarantee that the project will qualify for 100 percent of the federal wind production tax credit — those credits are being phased out over time under federal law — a guarantee Wind Catcher will produce a minimum annual production at the busbar of 2,220 gigawatt hours on a 5-year average (42 percent of its capacity); and a guarantee that 100 percent of off-system energy sales benefits associated with Wind Catcher would be allocated to customers.
The company also said it would agree to notify the corporation commission if terms more favorable to customers are agreed to in any of the state utility commissions under which its sister company, Southwestern Electric Power Co., is seeking approval of the project, and that it would incorporate those terms into the agreement to benefit its Oklahoma customers.
“While these guarantees do not result in a completely risk-free proposal, they do mitigate a significant amount of risk for customers, and set a floor of at least $163 million in savings over the life of the project,” Steven L. Fate, regulatory and financial vice president for PSO, testified as part of the filing.
“This project, including the material guarantees and the likely significant benefits to ratepayers, is reasonable and in the public interest,” Fate concluded.
Corporation commission officials said a hearing is planned for 1:30 p.m. Thursday before Administrative Law Judge Mary Candler to give members of the public an opportunity to comment on the proposal.
There also is a hearing on the merits of the case set for 8:30 a.m. on Jan. 8 before Candler, as well, officials said.