In testimony filed before the Missouri Public Service Commission this past week, Empire District Electric Co. responded to regulators’ concerns over its proposed $1.5 billion wind-energy plan.
Last month, officials with the PSC staff and the Office of Public Counsel expressed concerns about the plan in PSC testimony, questioning the more than $300 million the company has said it can save customers over the next 20 years.
The plan calls for Empire to more than triple the amount of power it currently obtains from wind, creating an additional 800 megawatts of energy with a series of wind turbines to be placed somewhere in the region.
The company plans to pursue an equity partnership that would take advantage of $800 million in federal tax incentives for the project, making Empire’s total investment $700 million. Empire would also retire its coal-fired plant in Asbury more than 15 years early.
Part of Empire’s testimony from this past week addresses a claim made by Office of Public Counsel accountant John Riley that whatever partner Empire finds will be guaranteed a substantial return on investment, saddling the utility’s customers with uncertainty.
“While the tax equity partnership is structured in a way that plans for the tax equity partner to earn a targeted return, this return is not guaranteed,” Empire witness Todd Mooney said in testimony. “In fact, the return cannot be guaranteed; the tax equity partner must bear risks and enjoy rewards commensurate with an equity holder” due to IRS rules.
Mooney said the participation of a tax partner, in fact, helps to ensure a customer savings of $4 to $7 per megawatt-hour, even after accounting for the partner’s “targeted return.”
An Empire spokesperson on Monday declined to comment further, saying the company’s testimony adequately articulates its position.
Hampton Williams, acting public counsel for the Office of Public Counsel, said Monday that his office had not yet reviewed Empire’s most recent testimony but was meeting with its lead attorney in the case today to go over it. Williams said he could not comment on the testimony until after then. Evidentiary hearings have been scheduled for April 16-20 in the case, Williams said.
“That hearing is followed by two briefs that will be filed by the parties,” he said. “After that, the commission will consider the case, and we would not expect an order to be issued until likely June of this year.”
Timothy Wilson, a regional director of electric operations and services for Liberty Central, an Empire parent company, said in testimony that Empire has already received letters of understanding or interest from potential tax partners. Indications of such interest have been included with contractor proposals for work on the project, his testimony said.
Regulators also questioned the amount of money the plan would save customers by asserting that Empire’s estimates were based on conducting rate reviews with the PSC each year, when utilities typically do so every two to three years. Regulators had said in testimony that even the reduced costs of shuttering Asbury and pivoting to wind would have to be applied each year to achieve Empire’s projections.
But Christopher Krygier, director of rates and regulatory affairs for Liberty, testified that the company’s fuel adjustment charge would allow it to achieve savings because it is reviewed twice per year, outside of full-blown rate case proceedings.
“After Asbury is retired, the elimination of coal expense associated with the Asbury plant would be passed on to customers as a reduction to FAC costs,” he said.
The PSC staff had testified that Empire customers should not have to continue paying rates that reflect expenses from previous environmental upgrades made at the Asbury plant after it is retired.
Krygier said continuing to recover those costs is “critical” to the company’s plan and projections.
The role of the PSC’s staff in regulatory proceedings is to look out for the general public interest, including shareholders and communities. The Office of Public Counsel attempts to ensure that rate cases, acquisitions or other plans will not have a negative effect on utility customers.
The Missouri Department of Energy and environmental group Renew Missouri have also filed testimony in support of Empire’s plan.
The Public Service Commission will have to rule on the Empire application by June 30, and the project will need to be completed before the tax incentives run out in 2020.
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