American Electric Power Co. Inc. subsidiary Public Service Co. of Oklahoma, or PSO, did not show a need for additional generation capacity and did not follow competitive bidding rules before it announced its multibillion-dollar Wind Catcher wind energy and transmission project, Oklahoma Attorney General Mike Hunter charged.
AEP announced July 26 that it planned to purchase the planned 2,000-MW Wind Catcher project, which is being billed as the largest wind farm in the U.S. and second-largest in the world, and build a roughly 350-mile, 765-kV transmission line to carry the power from the Oklahoma panhandle east to the Tulsa area to serve its subsidiaries PSO and Southwestern Electric Power Co.
The overall project is estimated to cost $4.5 billion, and PSO said in a July 31 application to the Oklahoma Corporation Commission, or OCC, for cost recovery that its 30% share would cost about $1.36 billion. AEP said the project will save customers of its two utilities $7 billion, net of its cost, over 25 years.
Hunter in a motion filed with the OCC on Aug. 11 said, however, that the project will result in annual rate increases for PSO customers of $80 million beginning in 2021, increases separate from a general rate case that PSO has launched. Combined, Hunter said, PSO customers could see rate increases of roughly $250 million a year by 2021.
In his motion, Hunter said PSO's application should be dismissed. The company has said the wind project would provide some capacity benefits — the delay of the need for additional gas-fired resources — but "even under PSO's own modeling, the benefits from this additional capacity are significantly less than the contemplated investments, with substantial additional investments in generation plant to follow regardless."
Commission rules allow cost recovery for a new generation facility, but Hunter said PSO has not followed them. A utility can get preapproval before starting construction — if the commission first determines there is a need for the generating unit — and if a competitive bidding process has been conducted. PSO's parent, AEP, reached an agreement with Wind Catcher developers Invenergy LLC and GE Renewable Energy to begin construction in 2016 so as to take full advantage of federal production tax credits. Because of that, Hunter said, PSO should not be able to request cost recovery until after Wind Catcher is in service and PSO demonstrates it is "used and useful" to customers.
Also, Hunter said PSO should not be granted a waiver from commission rules after it so "flagrantly" ignored them. "The reason given by PSO for its noncompliance [with the competitive bidding process] is that it was waiting to evaluate the project, but that is exactly what could have been achieved through competitive bidding or at least pre-construction review," he said. (OCC Cause No. PUD 201700267)