Electricity utilities would be able to charge ratepayers in advance for transmission improvements needed to develop wind power generation in Oklahoma, if House Bill 2813 is successful. The only way utilities will be able to build new transmission infrastructure in western Oklahoma is by shifting the risk of the investment onto ratepayers, say the bill’s backers.
Already, about 4,000 megawatts of wind-generated capacity has been built or will soon be completed in western Oklahoma, said state Rep. Weldon Watson, R-Tulsa, author of HB 2813. Paul Renfrow, vice president of public affairs for OG&E, the incumbent electricity utility based in Oklahoma City, said the area is estimated to hold the potential for as much as 20,000 megawatts of wind-generated power in the future.
However, wind power companies are reluctant to build more wind capacity in western Oklahoma, where there are few customers and no transmission infrastructure to get the power from their wind farms onto the regional power grid. On the other hand, electricity providers are reluctant to build transmission in areas where there are few power plants and few customers.
Utilities like OG&E would be more willing to take the first step in developing western Oklahoma’s wind potential by building the needed transmission if they could be assured of recovering their costs, said Renfrow.
“Otherwise, we have to just lay out $200 million with no assurance of recovery,” said Renfrow, estimating the cost of building the transmission at no less than $1 million a mile.
OG&E officials announced in October their plans to quadruple the company’s wind power production over the next few years, increasing its wind power capacity from 170 megawatts to 770 megawatts while building high-capacity transmission lines from Oklahoma City to Woodward and eventually to Guymon.
Traditionally, electricity utilities front the cost for infrastructure improvements. Once those improvements are built and providing a benefit to ratepayers, the companies justify their expenditures to the Oklahoma Corporation Commission. The commission would then allow the companies to recoup costs for reasonable expenditures by charging customers more for their electricity. Utilities are not permitted to recoup costs for expenditures the commission finds excessive or unwarranted.
When it comes to building transmission lines to support Oklahoma’s growing wind power industry, the utilities need to be able to raise rates first – long before the infrastructure is built – so the companies can pay for construction costs on an as-you-go basis, said Renfrow. When and if the commission is able to identify expenditures it finds unreasonable, HB 2813 would allow regulators to challenge those expenditures, said Renfrow.
“This tells the Corporation Commission you have to presume this is recoverable,” Renfrow told members of the House Energy and Technology Subcommittee on Telecommunications of HB 2813. “It’s a short-term exposure to our customers, a short-term increase for a tremendous long-term benefit. In the long term, ratepayers save money.”
HB 2813 would stipulate that the costs would be related to upgrades needed to develop wind generation in Oklahoma, would be approved by regional transmission organization Southwest Power Pool, and would be placed into service before Dec. 31, 2013.
The traditional model might take up to five years for the company to recoup its investment – and customers would wind up paying for five years of finance costs, said Alan Decker, director of regulatory affairs for Tulsa-based Public Service Company of Oklahoma. Decker said the commission has in the past allowed utilities to recoup costs before an asset was put into service, though in those instances the facilities in question were nearly completed. The commission has not yet approved recovery for projects still in the planning stages.
Last year, utilities had their first experience in trying to implement a new law the utilities had supported. The Legislature passed a law to allow utilities to obtain approval from the commission to recoup costs for facilities that had not yet been constructed. The commission voted to deny the utilities’ application for recovery on a proposed coal-fired plant called Red Rock, finding the utilities did not provide enough information for the commission to make an informed decision.
Allowing utilities to collect extra money from ratepayers to pay for construction work in progress, or CWIP, allows utilities to take on projects they might otherwise have found too risky, said Renfrow.
That should be a concern for lawmakers, said Steve Edwards of the Oklahoma Industrial Energy Consumers. Increasing utility costs put a strain on businesses without providing an accompanying benefit for years to come.
“When the Sinclair refinery, one of our members, decided to increase capacity and put a billion dollars in the ground, they didn’t ask QuikTrip to pay for it in advance,” said Edwards. “We want renewable, we like wind, but we want to find ways to minimize the risk to jobs.”
Watson said the state’s utilities have consistently provided more jobs for Oklahomans than any other industry. The committee voted to approve HB 2813, which will next be heard by the full House Energy and Technology Committee.
by Janice Francis-Smith
13 February 2008
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