SWEPCO Wins Arkansas Approval to Acquire 800 Megawatts of Wind Power

The Arkansas Public Service Commission on May 5 approved a settlement agreement, allowing Southwestern Electric Power Co. to acquire up to 810 megawatts of wind energy from three projects in Oklahoma. The company will invest $1.01 billion to own 54.5 percent of a 1,485-megawatt portfolio of wind projects, which it plans to buy with Public Service of Oklahoma. The agreement includes ratepayer protections including a cost cap guarantees and federal production tax credit eligibility.

The settlement allows for reallocation through the “flex-up” provision that will allow SWEPCO’s Arkansas retail customers to receive the benefits of the transaction even if one of the company’s other retail jurisdictions denies approval. The acquisition requires approvals from utility regulators in Arkansas, Louisiana and Texas. From SWEPCO’s pro-rata portion of 810 megawatts, 155 megawatts are expected to be allocated to Arkansas.

SWEPCO and PSO, subsidiaries of American Electric Power Company Inc., selected three wind facilities through competitive solicitation issued in January 2019. The portfolio consists of the 999-megawatt Traverse Wind, 287-megawatt Maverick Wind, and 199-megawatt Sundance Wind projects. The total purchase price for the facilities amounts to $1.86 billion, including interconnection and upgrade costs. The companies designed the acquisition to be scalable to allow for all or a subset to advance depending on regulatory outcomes.

Ratepayer protections include guarantees for a cost cap, eligibility for the federal production tax credit, a net capacity factor guarantee ensuring base case generation level for the selected facilities. The agreement will also enable Arkansas customers to receive the value of the settlement plus additional benefits that may be agreed upon or ordered in other SWEPCO jurisdictions or Oklahoma in connection with PSO.

Arkansas retail net benefits over the life of the project are projected to be $412.6 million for SWEPCO’s base case with all approvals, $651.3 million with Louisiana’s non-approval, and $713.2 million with Texas’ non-approval.

The Arkansas retail jurisdictional megawatts associated with the flex-up provisions are consistent with the company’s most integrated resource plan filed in December 2018, which projects the need for 1,400 megawatts of wind generation by 2024, with Arkansas retail jurisdictional share 270 megawatts.