SWEPCO to go it alone on coal plant | Arkansas Blog

SWEPCO to go it alone on coal plant

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American Electric Power, whose SWEPCO subsidiary has been stymied in court on getting Public Service Commission approval for a coal-fired generating plant in Hempstead County, filed a brief notice with the PSC today saying it will no longer seek PSC approval for the plant as part of the retail rate base.

This means the utility will take the option of building the plant as a "merchant plant" and recover costs by wholesale sales, including, presumably, to its subsidiaries, as well as to its retail customers in Louisiana and Texas, where regulators have signed off on the plant. The filing says:

SWEPCO hereby notifies the Commission that the construction and operation of the Turk Plant WiII proceed in accordance with the exemption set forth in Ark. Code Ann. 8 23- 18-504 (a)(5). Accordingly, SWEPCO will not seek to recover the costs of the Turk PIant in rates subject to regulation by the Commission.

SWEPCO had requested a rehearing of the state Supreme Court's reversal of PSC approval of the plant. A rehearing was denied today, prompting the decision to change direction. The Supreme Court denied the rehearing request without comment. This was expected because the earlier court ruling had been unanimous.

BE ADVISED: There's no clear path to construction of this plant, despite the tens of millions of dollars SWEPCO says it has already spent. A lawsuit pends in federal court over environmental issues and federal Judge Bill Wilson, in refusing to dismiss the suit, has already posed some tough questions. The Sierra Club, Audubon Arkansas and owners of a nearby hunting club on some prime forest and wetlands will continue their fight. (See news release on jump.)

WHAT'S MORE: Chuck Nestrud, who's representing opponents of the plant, says SWEPCO's decision not to proceed under the 1973 law setting out requirements for major power plants does not exempt it from a much older law, still on the books, that requires public utilities to obtain a "certificate of convenience and necessity."

"They must prove it is the best option, with the least harm and prove they have the need for the generating capacity," Nestrud said. "They can't meet those burdens."

He said his clients would be filing a motion soon to seek a ruling that SWEPCO must meet those standards. Intervenors also will likely seek to stop continued construction.

Other opponents of the plant assert that SWEPCO's decision not to return to the PSC for a fuller hearing is a tacit admission it can't prove the need for the plant for retail customers. So Arkansas will get all of the pollution but none of the benefits from this plant. But that's only if the continued fights over water and air pollution and Nestrud's argument that another form of permit is required all fail. Opponents also say Texas will fight because it approved the plant under the understanding that Louisiana and Arkansas also would pay. The plant also will cost more than Texas anticipated.

SIERRA/AUDUBON NEWS RELEASE

Little Rock, AR — On Thursday, June 24, 2010, the Southwestern Power Electric Company (SWEPCO) filed a notice with the Arkansas Public Service Commission (APSC) stating that it would not seek a Certificate of Environmental Compatibility and Public Need (CECPN) for its proposed 600 MW Turk coal-fired power plant. SWEPCO claims that it does not need a CECPN since it will no longer seek to recoup Turk’s costs from ratepayers.
Lev Guter, Associate Field Organizer with the Sierra Club, stated, “We are determined to defeat Turk and we remain steadfast in our fight. SWEPCO is taking an enormous gamble that it will eventually be able to operate its proposed Turk plant. Yet, the battle is far from over since SWEPCO is pushing feverishly ahead with a project that still has contested air and water permits. The utility's tactic now is to bypass regulations by wandering into uncharted and uncertain legal territory. What is certain, however, is that we will continue our legal challenges every step of the way. SWEPCO is jeopardizing Arkansans' public health and we will not stand for that.”
Ellen Fennell, Interim Director with Audubon Arkansas, stated, “Today’s action by SWEPCO affirms what we have contended all along. There is no public need for Turk. If there is need for Turk, SWEPCO would not have shirked away from proving it at APSC, which then would have allowed the company to recoup Turk’s costs from ratepayers. Arkansas does not need Turk, yet SWEPCO has decided to take advantage of one of the biggest loopholes in Arkansas’s laws so that it could continue to construct the plant. Arkansas should not become the dumping ground for power plants to serve Texas and Louisiana. SWEPCO, however, thinks otherwise.”
Sierra Club, Audubon Arkansas and the National Audubon Society filed for an injunction in U.S. District Court in the Western District of Arkansas, Texarkana Division to stop Southwestern Power Company’s construction of the proposed John W. Turk 600 MW coal-fired plant in Hempstead County.
SWEPCO’s proposed John W. Turk, Jr. coal-fired plant sits on 2,800 acres of previously forested land that contains wetlands.
The plant, already under construction, would cost upwards of $2 billion as well as contribute to climate change through releasing over 5 million metric tons of carbon dioxide each year. Turk’s construction not only would destroy 8 acres of highly ecologically valuable wetlands, but would also fill in 8,150 feet of stream.

CHUCK NESTRUD'S STATEMENT

We are pleased that both appellate courts have now finally rejected SWEPCO's illegal scheme to build a coal fired power plant in Arkansas. SWEPCO's latest scheme, announced today, is as wrong as its first one and demonstrates that Swepco's plan has always been to build a coal plant in Arkansas for its Texas customers, at the expense of the Arkansas environment. That is offensive.

When SWEPCO started this project 4 years ago they claimed that the Turk plant was the best choice for their Arkansas ratepayers. Now, faced with adversity SWEPCO has abandoned their ratepayers. This has always been about what is best for SWEPCO, not Arkansas Ratepayers or the Arkansas Environment.

SWEPCO is still a public utility, regulated by the PSC, and still must obtain a certificate under laws that have been in place for over 70 years. There is no exemption under that law that SWEPCO can hide behind. It is time that the PSC enforce it's laws, and we plan to demand that they do so

SWEPCO NEWS RELEASE

SWEPCO changing Turk Plant status in Arkansas
Construction will continue under option to sell power in other markets

SHREVEPORT, La., June 24, 2010 — Southwestern Electric Power Company (SWEPCO), a unit of American Electric Power (NYSE: AEP), said today that construction of the John W. Turk, Jr. Power Plant will continue under an option to sell in other markets the power originally planned to serve the company’s Arkansas retail customers.

The action came after the Arkansas Supreme Court confirmed its May 13, 2010, ruling that overturned the Arkansas Public Service Commission’s (APSC) 2007 approval of the plant. Under the court’s ruling, SWEPCO no longer has a Certificate of Environmental Compatibility and Public Need (CECPN) for the Turk Plant to serve the company’s Arkansas retail customers.

Arkansas law provides two options for the construction of new generating facilities. One is for a regulated utility to serve its retail customers and seek cost recovery through APSC-approved rates. The second option is selling power in other markets, which does not require a CECPN. Both types of plants have been built in Arkansas.

SWEPCO does not intend to file a new application for a CECPN because of the substantial delay and cost that would result. SWEPCO will file notice with the APSC regarding the change in status of the plant. The change applies only to the Arkansas portion of the Turk Plant capacity and does not require APSC approval.

"This decision means we will not be able to use electricity supplied by the Turk plant to serve SWEPCO's retail customers in Arkansas, as was originally planned in this important project," said Michael G. Morris, AEP chairman, president and chief executive officer. "But the Turk Plant will also serve SWEPCO’s retail customers in Louisiana and Texas, where the plant has received regulatory approval. We will continue construction in order to fulfill our obligations in Louisiana and Texas in the most cost-effective manner. We will secure other markets for the 88 megawatts of Turk Plant capacity that would have served our Arkansas retail customers.”

Venita McCellon-Allen, SWEPCO president and chief operating officer, said, “Arkansas customers have been served for decades by SWEPCO plants in Louisiana and Texas. Planning the Turk Plant to serve SWEPCO’s retail customers in three states follows that same historic practice. To meet the future energy needs of our Arkansas customers, we must now look to other resources for a supply of base load power that is reliable and available at the most reasonable cost possible.”

SWEPCO owns 440 megawatts, or 73 percent, of the $1.7 billion plant’s 600-megawatt capacity. SWEPCO’s share of the plant cost is an estimated $1.3 billion.

Approximately 88 megawatts, or 20 percent of SWEPCO’s capacity in the plant, was designated for SWEPCO’s retail customers in Arkansas. Under the change in status for the Arkansas portion of the plant’s output, other options include wholesale or out-of-state retail markets.

Today’s Arkansas Supreme Court decision denied separate petitions by SWEPCO and the APSC for a rehearing of the court’s May 13 ruling that reversed the APSC’s decision to approve the Turk Plant in 2007. The court also denied SWEPCO’s motion to delay the effective date of the May 13 decision pending a request to the U.S. Supreme Court to review the case.

“While we are certainly disappointed in the decision, we respect the opinion of court,” McCellon-Allen said. “Without the CECPN, we are turning to another option available to SWEPCO under Arkansas law.”

The APSC granted SWEPCO’s application for a CECPN Nov. 21, 2007, and issued an amended CECPN Dec. 31, 2007. In a June 24, 2009, ruling, the Arkansas Court of Appeals overturned the APSC’s decision. On May 13, 2010, the Arkansas Supreme Court upheld the Court of Appeals, reversed the CECPN and remanded the case to the APSC.

The Louisiana Public Service Commission and Public Utility Commission of Texas approved construction of the plant in 2008. SWEPCO began construction of the plant after receiving an air permit from the Arkansas Department of Environmental Quality in November 2008. SWEPCO has continued construction during the appeal process.

As of May, 31, 2010, approximately $1.01 billion had been spent on the Turk project, including $786 million by SWEPCO for its 73 percent share of the plant. As of May 31, SWEPCO and the joint owners had an additional $436 million in contractual commitments for the plant.

Construction of the plant itself is about 28 percent complete. The overall project, including engineering and related activities, is about 37 percent complete.

SWEPCO’s balanced approach to new generation includes coal and natural gas plants. The 600-megawatt (MW) coal-fueled Turk Plant in southwest Arkansas is a base load facility designed to meet customers’ need for power that is consistently available 24/7. The projected completion date for the Turk Plant is October 2012. The 508-MW combined-cycle, natural gas-fueled Stall Unit is an intermediate facility designed to provide power that is quickly available as customers’ needs increase and decrease. The Stall Unit began commercial operations June 16 in Shreveport, La. The 300-MW simple-cycle, natural gas-fueled Mattison Plant in Tontitown, Ark., was completed in 2007 and is now helping to meet peak demand on the SWEPCO system.

“Together, these three plants will allow SWEPCO to continue the fuel diversity that has resulted in some of the lowest electricity prices in the region for many years,” McCellon-Allen said.

The Turk Plant's "ultra-supercritical" advanced coal combustion technology will use less coal and produce fewer emissions, including carbon dioxide, than traditional pulverized coal plants. The plant will use low-sulfur coal and will include state-of-the-art emission control technologies, including a design that allows for the retrofit of carbon dioxide controls. “It will be one of the cleanest, most efficient coal-fueled plants in the United States,” McCellon-Allen said.

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SWEPCO serves more than 473,500 customers in three states, including 113,500 in western Arkansas, 180,000 in Northwest Louisiana, and 180,000 in East and North Texas. SWEPCO’s headquarters are in Shreveport, La. News releases and other information about SWEPCO can be found at www.swepco.com.

American Electric Power is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP’s transmission system directly or indirectly serves about 10 percent of the electricity demand in the Eastern Interconnection, the interconnected transmission system that covers 38 eastern and central U.S. states and eastern Canada, and approximately 11 percent of the electricity demand in ERCOT, the transmission system that covers much of Texas. AEP’s utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east and north Texas). AEP’s headquarters are in Columbus, Ohio. News releases and other information about AEP can be found at www.aep.com.

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