Dive Brief:
- American Electric Power canceled its 2 GW Wind Catcher project on Friday after Texas utility regulators unanimously rejected it a day before, saying it did not provide enough benefit to customers.
- AEP said timely regulatory approval was necessary so it could finish the project by 2020 and be eligible for the full value of federal production tax credits for wind energy. The project had already been approved by regulators in Louisiana and Arkansas, as well as the Federal Energy Regulatory Commission, and a decision in Oklahoma was pending.
- AEP CEO Nick Akins said on an earnings call this week that the utility may be able to build more renewables through the individual resource plans of its utilities, but the larger project may be less costly.
Dive Insight:
AEP's 2 GW wind farm in the Oklahoma panhandle would have been the largest single renewable energy project in the United States, providing power for the company's customers in four states.
The Public Utility Commission of Texas (PUCT), however, took issue with exposing ratepayers to the cost of the project.
"Without significant safeguards — and I don't believe the [proposal] provides significant safeguards for ratepayers — I'm not there," PUCT Chair DeAnn Walker said during the open meeting Thursday.
Generation in Texas is typically built by private investors in the market operated by the Electric Reliability Council of Texas. But AEP subsidiary Southwestern Electric Power Co. (SWEPCO) does not operate in that market and asked regulators to allow it to finance the project through charges on customer power bills.
Doing so would save money over the life of the project and protect against the risk of natural gas price increases, the company argued.
Regulators, however, were skeptical, with Commissioner Arthur D'Andrea saying the company was "asking us for $4.5 billion of taxing authority."
"It's one thing when you need the generation going forward, but this is [AEP] saying 'we don't need it, we think it will lower their rates and it's a financial play,'" D'Andrea said. "You have a burden to show that the taxpayers ... really have something to gain from that, I'm not sure they met that burden here."
Earlier this week, AEP CEO Nick Akins said its utilities would look at siting smaller renewable energy projects in individual states if the massive proposal was rejected.
"If Wind Catcher were not to happen, there'll still be opportunities for those kinds of resources to be applied through our resource plans in those particular states," he told analysts on a second quarter earnings call. "But obviously, [we] don't want to miss the opportunity for Wind Catcher because it's a great way to deal with the resource plans in all of those states at one time rather than independently with perhaps less efficient projects."
The rejection of Wind Catcher would not alter AEP's overall financial situation, Akins said.
"Certainly, we would like Wind Catcher to be approved and move forward," he said, "but to reiterate, the foundation of this company remains solid and our growth plans continue to support a 5% to 7% growth rate trajectory regardless."
This post has been updated to reflect AEP's announcement that it would cancel the Wind Catcher project.
