trending Market Intelligence /marketintelligence/en/news-insights/trending/oobhgkysulkcblxt4gdlwg2 content esgSubNav
In This List

Southwestern Public Service wind applications move closer to approval

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


Southwestern Public Service wind applications move closer to approval

New Mexico utility regulators aim to consider a final order on March 21 for Southwestern Public Service Co.'s application to construct the 522-MW Sagamore Wind Project in Roosevelt County, N.M., and the 478-MW Hale Community Energy facility in Hale County, Texas.

Because Southwestern Public Service, or SPS, a subsidiary of Xcel Energy Inc., operates its production and transmission system in western Texas and eastern New Mexico as an integrated whole and allocates costs to all system customers in both states, approval of regulators in both states is necessary for the projects to move forward. Arguing that a delay in cost recovery for the two major wind projects would make the proposed projects untenable, the utility has requested to begin recovering the costs as soon as the plants go into service.

Typically, New Mexico ratepayers do not have to start paying for new utility assets until they are included in base rates. The utility, which says that the wind farms will help save customers $2.8 billion over a 30-year period, has reached agreements with stakeholders in both states by promising benefits to customers that would start as soon as the plants are brought into service. At the same time, the projects are under a tight deadline to allow SPS to construct the Hale project by June 2019 and the Sagamore project by May 2020 in order to qualify for federal production tax benefits.

On March 6 SPS submitted a letter to the Public Utility Commission of Texas requesting that its application for the wind projects be placed on the Texas PUC's March 29 open meeting agenda for final approval. The letter noted the Texas PUC's staff filed testimony in support of the stakeholder agreement. (Texas PUC Case No. 46936)

In New Mexico, Public Regulation Commission, or PRC, Hearing Examiner Elizabeth Hurst recommended most of an agreement to approve the wind projects but continued to maintain that allowing the utility to begin recovering costs before the projects can be put in permanent rates would violate state law against retroactive ratemaking. (New Mexico PRC Case No. 17-00044-UT)

During the PRC's March 7 meeting, Commissioner Cynthia Hall said the utility's call for interim rates is supported by the state Renewable Energy Act's provision that utilities should have incentives to add renewables beyond the state's renewable portfolio standard.

If the early cost recovery proposal is rejected, SPS President David Hudson said in testimony before the PRC, SPS would argue for selling all the Hale and Sagamore wind energy into the wholesale market and retaining all revenue as well as the production tax credits until the projects are included in retail rates. However, that would remove more than $11 million in net benefits to SPS customers in the first 13 months of commercial operation, according to SPS.

The utility would provide those benefits if interim cost recovery is allowed, and there is ample support in case law for this arrangement, said SPS attorney Stephen Fogel.

As part of its Texas application, SPS also is asking the Texas PUC to approve a power purchase agreement with NextEra Energy Inc. subsidiary Bonita Wind Energy LLC, under which SPS will purchase an additional 230 MW of wind energy from the Bonita Wind Project in Cochran County, Texas. In New Mexico, SPS plans to acquire Invenergy LLC's ownership rights to the Sagamore Project.