The landscape of future electrical power production in Oklahoma may have shifted somewhat Friday.
Public Service Co. of Oklahoma announced it won't pursue further efforts to gain approval from state regulators for its proposed Wind Catcher Energy Connection project.
Its announcement came a day after regulators in Texas rejected the proposal, which Southwestern Electric Power, Public Service Co.'s sister utility, had submitted to them.
If it had ultimately been approved in Texas and Oklahoma (approvals already had been given by regulators in Arkansas and Louisiana), the largest single wind project proposed in the nation would have been built to supply power to about 1.1 million customers served by the two utilities.
The utilities failed to provide an answer that satisfied regulators as to what would be most economical for consumers.
Natural gas-fired power generation is competitive with wind-produced energy, thanks to an abundant, cheap supply of fuel and ever-improving efficiencies in the equipment used to make the power.
An analyst said Friday it doesn't appear that will change anytime soon.
Details of the deal
PSO had asked the Oklahoma Corporation Commission to determine there was a need for the Wind Catcher Connection to get preapproval to recover its costs from ratepayers.
If the deal had been approved, the utility would have been allowed to recover about $1.4 billion, its cost to buy 30 percent of the 2,000-megawatt Wind Catcher farm that was being built in Oklahoma's Panhandle.
Along with co-owning the generating facility with Southwestern (both are subsidiaries of American Electric Power), the two also had proposed building and operating a power line hundreds of miles in length that would have carried electricity from the farm into the grids they operate. The project's expected total cost was $4.5 billion.
While PSO had been successful in getting support from a major retailer, industrial consumers and associated power businesses, its plans were opposed from the outset both by the Oklahoma Attorney General and the commission's Public Utility Division.
There were legal problems with the project that conflicted with Oklahoma rules and law because the project hadn't been competitively bid and because work on it had started before PSO had filed its cost recovery request.
State officials also questioned whether customers would financially benefit from the project during its 25-year life.
PSO had agreed the project would add costs to consumers' bills. But it also predicted its wind energy would be more affordable than other alternatives, and based that on future natural gas pricing that critics said was unrealistic.
They had backed that prediction by guaranteeing they would reimburse customers for part of the project's costs if those price projections were wrong.
Regulators weren't buying the prediction, though, and wanted more stringent reviews of the project's performance than what the utility was willing to accept.
In Texas, Southwestern also struggled to persuade regulators its customers would enjoy more affordable power through Wind Catcher than what might be provided from other potential sources.
"Without significant safeguards for ratepayers, I am not there," said DeAnn T. Walker, the Texas Public Utility Commission's chairman, at Thursday's meeting.
"The costs are known, but the benefits are based on a lot of assumptions that are questionable."
Reaction to rejection
Steven Fate, PSO's vice president of regulatory and finance, said the utility was disappointed by Texas regulators' rejection of the plan.
"Wind Catcher represented an extraordinary opportunity to provide our customers with low-cost, clean Oklahoma energy and create a positive economic impact across the state,” Fate stated.
State Rep. David Perryman, D-Chickasha, also expressed disappointment the project was being shelved. Perryman, the House minority leader, stated he felt the project had been under attack by the fossil fuels industry and the politicians it supports.
"The $300 million in Oklahoma property taxes that this project would have generated, the $65 million in state and local revenue, the 4,400 indirect jobs during construction and 80 permanent jobs once it went online will be hard to replace.
"But the greatest impact of this project's cancellation will be consumers losing $7 billion in utility rate savings over the next 25 years," he said.
Whether or not those savings were real was the issue, Oklahoma Attorney General Mike Hunter stated in a release expressing his reaction to the news.
“Our position was never critical of the company, the benefits of wind or other forms of renewable energy," Hunter said. "It was about protecting the ratepayers and ensuring they did not shoulder the risks of this $4.5 billion project."
Tony Say, a natural gas analyst who is the president of Oklahoma City-based Clearwater Enterprises, said this week that the cost of power produced by natural gas is competitive to that produced by wind.
And while he agreed it is difficult to say with certainty how the costs of the two sources of energy will compare in 25 years, he also said doesn't see the current situation changing anytime soon.
"There is just a lot of gas out there and a lot more potential to bring on more," Say said on Friday.
"Economically, when you are looking at these power generation plants, they are getting more efficient ... I think it is probably going to stay that way.
"You just don't need a huge wind project right now."