AEP scraps 2,000-MW wind project in wake of PUC order

American Electric Power on July 27 cancelled its proposed Wind Catcher Energy Connection project in Oklahoma, which would have been the largest single wind farm in the United States and the second largest wind project in the world.

“We are disappointed that we will not be able to move forward with Wind Catcher,” Nicholas Akins, AEP’s chairman, president and CEO, said in a statement.

“To realize the full benefits of Wind Catcher for customers, timely approvals were required from all jurisdictions so we could complete the project by the end of 2020 and be eligible for 100 percent of the federal production tax credit.” The PTC is being phased out on an 80%, 60%, 40% schedule, ending after 2019.

AEP’s announcement came a day after the Public Utility Commission of Texas unanimously rejected Southwestern Electric Power Co.’s application for Certification of Convenience and Necessity for the $4.5 billion project.

The rejection was “based on concerns about uncertain benefits and inadequate protections for Texas consumers,” Texas PUC spokesman Andrew Barlow said.

SWEPCO is a subsidiary of AEP. SWEPCO would have owned 70% of the project upon completion, and AEP subsidiary Public Service Co. of Oklahoma would have owned the other 30%. Invenergy is developing the 2,000 MW project, which also included a dedicated 350-mile, extra-high voltage transmission line.

Some construction had already begun on the wind project to ensure it would be eligible for the production tax credit, which is being phased out in stages.

The project called for wind turbines in the Oklahoma Panhandle to deliver energy to customers of SWEPCO and Public Service Co. of Oklahoma in Louisiana, Arkansas, Texas and Oklahoma. The project had already been approved by regulators in Arkansas and Louisiana, and regulatory approval was pending in Oklahoma.

Before it could have appealed the PUC’s decision, SWEPCO would have to file a motion to rehear, and the commission would have 55 days to respond.

In an earnings conference call the day before the PUC’s decision, Akins said the Wind Catcher project would lower customer bills, provide a valuable hedge, and ensure diversity of generation supply. “It is a win-win. It will define the utility of the future,” he said.

Much of the nearly hour long PUC meeting was taken up by discussions of assumptions and forecasts regarding the forward price of natural gas. AEP argued that the wind project would provide a hedge against rising natural gas prices and save ratepayers money in the long run.

PUC Chair DeAnn Walker said she was considering drafting conditions to an approval but in the end did not because, at that point in the proceeding, they would not be in the record and available for approval for all parties.

In the end, Walker and the other two commissioners rejected the project’s application, saying that SWEPCO had not demonstrated its need. “I don’t believe the benefits are there for the ratepayers,” Walker said.

“The strategic investments we are making in AEP’s regulated businesses will continue to support our 5 percent to 7 percent earnings growth rate,” Akins said in the July 27 statement. “We are investing in a cleaner, smarter energy system for our customers.”

During the earnings call with analysts, Akins said AEP’s projected earnings growth rate was not dependent on approval of the Wind Catcher project. He also unveiled the company’s 2021 capital expenditure plan, which calls for $6.3 billion of investments, 75% of it in transmission and distribution assets, and all of it in regulated businesses.

During the earnings call, he also said AEP would “continue to look at other renewable opportunities. If Wind Catcher does not to happen there will still be other opportunities.”