OKLAHOMA CITY – American Electric Power (AEP) is proceeding with plans to buy three wind farms under construction in north-central Oklahoma.
The chief executive officer of the utility, parent of Public Service Co. of Oklahoma (PSO), said it remains committed to pursuing the plan even though Texas regulators turned thumbs down recently on a proposed cost-recovery mechanism for the utility in that state.
“We are disappointed that our...customers in Texas will not be able to benefit from the low-cost wind energy the North Central projects will provide,”
AEP CEO Nicholas Akins said. “The regulatory approvals we have received in Arkansas, Louisiana, Oklahoma, and at the Federal Energy Regulatory Commission will allow us to move ahead with the North Central wind projects at full scale, saving our customers in those states approximately $3 billion over the next 30 years.”
PSO, SWEPCO SPENDING $2 BILLION TO BUY 3 OKLAHOMA WIND FARMS
PSO and SWEPCO plan to spend $2 billion to buy three wind farms under construction across parts of seven Oklahoma counties (Alfalfa, Blaine, Custer, Garfield, Kingfisher, Major and Woods). PSO’s investment in the projects will be $908 million, said Stan Whiteford, PSO’s region communications manager.
The projects include a 287-MW facility (“Maverick”) being built southwest of Enid, a 199-MW wind farm (“Sundance”) under construction south of Alva near Cleo Springs, and a 999-MW facility (named “Traverse”) being built north of Weatherford. The Traverse development reportedly will be the largest single-phase wind farm ever built in the U.S.
The smallest wind farm, Sundance, will consist of 72 wind turbines and is expected to be completed by the end of this year, Whiteford said. Maverick will have 103 turbines and Traverse will have 359 turbines, he said; those two wind farms are expected to be completed by the end of 2021. The entire project is expected to be fully operational by early 2022.
All three wind farms are being developed by Invenergy, a power generation developer based in Chicago, Ill., and GE is supplying the numerous wind turbines.
The three projects will generate more than 5.7 million megawatt hours of wind energy annually for customers in the three states.
One megawatt is equal to 1,000 kilowatts. Although usage varies widely, the “typical” PSO residential customer uses about 1,100 kilowatt hours (kWh) of electricity per month, Whiteford said.
PSO AUTHORIZED TO RECOVER COSTS WITHOUT RATE HIKE
As an AEP subsidiary, PSO obtained cost recovery approval from the Oklahoma Corporation Commission. A sister subsidiary, Southwestern Electric Power (SWEPCO), obtained cost recovery mechanism approvals involving its customers in Arkansas and in Louisiana.
A settlement agreement approved by the Corporation Commission ensures the Sooner State will continue to be a leader in commercial wind power “while keeping its position as one of the lowest-cost states for electricity,” the agency announced.
The agreement allows PSO to recover its expenses without imposing any rate increase because cost savings resulting from the project will be passed on to customers. PSO serves more than three dozen cities and towns in southwest Oklahoma.
SWEPCO will own 810 MW of the wind generation, or approximately 54.5% of the projects, and PSO will own 675 MW, or almost 45.5%.
One industry news source wrote that the Texas portion would have been almost 21% of the North Central project: 309 MW of the 1,485 MW. Instead, Oklahoma, Arkansas and Louisiana will finance a larger share and receive more of the power.
“SWEPCO’s Texas customers will not get any of the power from the North Central facilities,” Whiteford said. “The portion that would have gone to those customers will now go to SWEPCO’s customers in Arkansas and Louisiana.”
SAVINGS ANTICIPATED FROM TAX CREDITS, USE OF WIND. SOLAR
PSO contends that initially the new assets will achieve savings from federal production tax credits the utility expects to receive for acquiring its share of ownership in the three wind farms.
Customers will subsequently benefit via reduced costs of generating electricity from wind rather than from coal or natural gas. The utility is reducing its appetite for coal and increasing its reliance on renewable wind and solar power, Akins said.
Wind power already produces 22% of the energy PSO delivers to its customers, Whiteford said in March. When the three new wind farms go online, wind power will generate 34% of the energy PSO delivers, he said.
Electricity generation from coal constitutes only 17% of PSO’s energy mix, Whiteford said, and that percentage is declining. PSO owns 15% of a coal-fired power plant at Vernon, Texas, which will be shuttered in October, and the company’s only other coal-fired plant, at Oologah, will be retired in 2026, he said.
The coronavirus pandemic is taking a toll on AEP’s finances. The utility anticipates that its commercial electric load this year will drop 6% and its industrial load will fall 8%, but forecasts that its residential load will increase 3%, CEO Akins said during an interview in May.
PSO, based in Tulsa, says it supplies electricity to more than 550,000 customers in southwestern and eastern Oklahoma. Its service territory in southwest Oklahoma includes:
Altus, Apache, Arapaho, Blair, Burns Flat, Cache, Carnegie, Cement, Cyril, Davidson, Duke, Duncan, Elgin, Elmer, Fletcher, Fort Cobb, Gotebo, Gould, Grandfield, Granite, Hobart, Hollis, Humphreys, Lawton, Lone Wolf, Manitou, Martha, Mountain Park, Mountain View, Roosevelt, Rush Springs, Snyder, Sterling, Temple, Terral, Tipton and Waurika.
PSO is one of the largest property taxpayers in Oklahoma; its ad valorem tax bill in 2019 was approximately $40 million, Whiteford said.
AVERAGE RETAIL PRICE OF ELECTRICITY IN OKLA. 48TH LOWEST IN NATION
The agreement endorsed by the Corporation Commission “addresses key concerns,” Commissioner Bob Anthony said. The arrangement “includes ratepayer protections such as a cost cap guarantee and off-system sales” to other users of the electric grid, which will benefit PSO customers.
According to the U.S. Energy Information Administration, the average retail price of electricity in Oklahoma in 2018 (the latest year for which statistics are available) was 8.09 cents per kilowatt hour, 48th lowest in the nation.
Rates in other states included Arkansas, 7.78¢ per kilowatt hour; Louisiana, 7.71¢/kWh; Texas, 8.48¢/ kWh; New Mexico, 9.35¢/ kWh; Missouri, 9.93¢/kWh; Kansas, 10.72¢/kWh; New York, 14.83¢/kWh; California, 16.58¢/kWh; Connecticut, 18.41¢/kWh; Alaska, 19.36¢/ kWh; and Hawaii, 29.18¢/kWh.