The benefits of low-cost wind energy, customer risk and how potential savings for electricity customers are calculated were among the issues debated Friday in a regulatory hearing to dismiss a preapproval case for Public Service Co. of Oklahoma's $4.5 billion Wind Catcher project.
Oklahoma Attorney General Mike Hunter's public utility unit wants the Oklahoma Corporation Commission to dismiss the case, saying PSO didn't follow competitive bidding rules and didn't show a need for additional generation capacity.
PSO and its sister utility Southwestern Electric Power Co. announced the Wind Catcher project last month. It will take electricity from 800 wind turbines in the Oklahoma Panhandle across a dedicated 350-mile transmission line to a PSO substation north of Tulsa. From there, it will be used by 1.1 million PSO and SWEPCO customers. The project, which needs regulatory approval in four states, is expected to be in service by late 2020.
PSO wants a commission waiver from competitive bidding rules and preapproval to recover costs from customers once the project is in service. PSO's share of the project is about $1.36 billion.
In Friday's hearing, Assistant Attorney General Dara Derryberry said commission rules only allow preapproval for generation capacity. She said PSO's reasons for the project from a low-cost energy and generation diversity standpoint were laudable but didn't outweigh the law and commission rules.
Derryberry said PSO couldn't ask for a waiver of competitive bidding rules because construction has already started on the wind farm. Commission rules allow a pre-construction review as an alternative to competitive bidding, but PSO didn't ask for that either, she said.
Derryberry said PSO was free to pursue the project and come back later for commission approval. She also questioned some of PSO's assumptions on customer savings, including the future price of natural gas.
"The attorney general would certainly not oppose rate review at the appropriate time, but not at this time," Derryberry said. "This shifts the $1.3 billion risk from the company to customers without fully knowing what's in place."
Supporting the dismissal was Oneta Power LLC, which runs a natural gas plant in Coweta. An attorney for the company, Jon Laasch, said the plant had made the shortlist for a recent PSO request for proposal, or RFP, for new generation. Just before the Wind Catcher public announcement, that RFP was abruptly canceled, he said.
PSO responds to AG
Jack Fite, an attorney for PSO, said it was unlikely the utility would pursue the Wind Catcher project if the commission dismissed the preapproval case at this point. PSO filed its application July 31, and a procedural schedule for a hearing date and testimony deadlines has not yet been approved in the case.
"Just because the case goes on, it doesn't mean the relief will be granted," Fite said of final approval by the commission. "PSO has a very high standard to meet because of the amount of dollars."
Fite said the attorney general's office was valuing "process over substance" in arguing for dismissal of the case. He said the preapproval law refers to generation facilities, not generating capacity, so it could apply to a wind farm. PSO said its customers would save money on their bills in the first year of operation, with estimated total savings of $2.2 billion through 2045.
"This case should not be about three words in a commission rule stopping over $2 billion in benefits to Oklahoma customers," he said.
The project would mean a $78 million increase in PSO's rates in 2021 to pay for PSO's share of the Wind Catcher infrastructure. Those higher costs would be offset by federal wind production tax credits and fuel savings, PSO said.
Separately, the utility also has a pending rate case where it requested a $156 million increase. If approved, that would hike residential bills by $14 per month.
Derryberry said PSO chose when to file the preapproval case for the Wind Catcher project.
"The attorney general's motion is based on noncompliance with a process set forth in law to protect consumers," she said. "The law doesn't let the utility 'test out' a project."
Tom Schroedter, an attorney for Oklahoma Industrial Energy Consumers, said the case should go forward. He said keeping the case going doesn't mean his clients support PSO's application.
"If you decide today to dismiss this case, you are sort of throwing the baby out with the bath water," Schroedter said.
Administrative Law Judge Mary Candler is expected to issue her ruling on the dismissal Aug. 24. Parties can appeal her decision to the three-member Corporation Commission.