In the Hole | Shale Watch

In the Hole



Coal is dirty.

SWEPCO is asking for a rate increase in Texas, partly to help pay for the Turk Plant being built in Hempstead County, Arkansas.  According to the East Texas Review:

The company is also seeking to offset financing costs during construction of the 600-megawatt John W. Turk, Jr. Power Plant and the 500-megawatt J. Lamar Stall unit. The Public Utility Commission of Texas approved construction of the Stall plant in March 2007, and on the Turk facility in July 2008.

Construction on both units is well underway.

“Recovery of financing costs while the plants are under construction, instead of at the end of construction, will help prevent compounding interest on these major investments,” Chodak said. “This will save over $300 million in financing costs that SWEPCO customers would otherwise have to pay over the life of the plant.”

The requested rate increase seems similar to the one SWEPCO is asking for here in Arkansas.  The general rule has been that customers don't have to pay until the plant is built and delivering power. If approved, the rate increase would make a difference of over $250 million and probably over $300 million that customers would front to help finance the plant, so that the company doesn't have to borrow it elsewhere, arguably at higher rates.

As a policy matter, the risk has been placed on the company in the past so customers don't take the risk of involuntarily investing large amounts of money into company property that may never be completed, or where there might be imprudent cost overruns - a hightened risk here, since there are adverse court decisions on the books. 

The Arkansas Court of Appeals overturned Public Service Commission approval of a construction permit for SWEPCO's coal plant due to inadequate assessment. It ordered a new PSC hearing on environmental and other issues.  That decision has since been appealed and should be ruled on by the Arkansas Supreme Court sometime after Labor Day.  The National Audubon Society and the Sierra Club have since asked SWEPCO to stop construction.  If the Supreme Court decides not to review the decision SWEPCO will have to go back to the drawing board and begin hearings with the PSC anew.  They could also decide the whole effort isn't worth the trouble.     

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