Regulators ponder coal-fired power plant

Regulators ponder coal-fired power plant

Oklahoma Corporation Commission members (from left) Jeff Cloud, Jim Roth and Bob Anthony listen to testimony Monday in a hearing concerning the proposed Red Rock power plant.

By JASON WOMACK World Staff Writer
7/10/2007

AEP-PSO is among the companies proposing to build a facility near Red Rock.

OKLAHOMA CITY -- The Oklahoma Corporation Commission began a regulatory hearing Monday that could determine whether a $1.8 billion power plant is built near Red Rock.

The three-member commission will decide -- after a 10-day proceeding -- whether the power produced by the proposed 950-megawatt, coal-fired plant in north-central Oklahoma would be useful to consumers.

The decision could ultimately determine if the utilities participating in the construction of the plant would be able to recover their costs through electricity rates.

Stuart Solomon, president and chief operating officer of American Electric Power-Public Service Company of Oklahoma, testified that the company does not need regulatory approval to proceed with construction. But "pre-approval" by the commission would provide more certainty in the regulatory process, he said.

"I don't want to submit my customers or my shareholders to undue risk," Solomon told the commissioners.

AEP-PSO, the state's second-largest electricity provider, plans to invest $900 million, or half of

the total cost of the plant, through a joint venture with Oklahoma Gas & Electric Co. and the Oklahoma Municipal Power Authority.

OG&E, the state's largest electricity provider, would own 42 percent of the finished facility, and the OMPA would have an 8 percent interest.

The plant is tentatively scheduled to begin production in 2011.

Under state law, if the commission determines that there is a need for construction of the generation facility, the plant's costs would be subject to recovery. The amount that may be recovered through rates would be determined during separate proceedings.

The proposed plant is billed as the largest project of its kind in the nation.

The facility will have to overcome at least one other regulatory hearing before construction can begin. This month, the commission is expected to render a decision in a pending rate case that includes a mechanism allowing AEP-PSO to recover the financing costs associated with construction.

"We think it benefits everyone to make this determination up front," Solomon said.

While AEP-PSO is waiting on a rate decision from the OCC, it raised rates Friday by $8.6 million since a deadline had passed for the commission to act.

As a result, residential customers using 1,000 kilowatt hours of electricity per month will see an increase of $1.67 on their electric bills. The amount may have to be adjusted after the OCC hands down its order.

As for Red Rock, AEP-PSO contends it needs the plant and its generation capacity to meet the growing needs of its 520,000 customers and to meet the needs of future customers.

In the power plant hearings, Commissioners will consider testimony by the utilities proposing the facility, and by business and consumer groups, that will address the costs associated with construction.

Assistant Attorney General Bill Humes, who is representing consumers at the hearing, said his office is performing its statutory duty.

"We have to ensure there is a true need," he said, "so that the power will be used and useful to the citizens of Oklahoma, and the costs are reasonable."

AEP-PSO maintains that the plant will also improve the energy diversity of the utility, creating a more balanced power portfolio.

"People need to realize that prices have gone up 50 percent solely due to the cost of natural gas," Solomon said. "It's important that we are not overly dependent on natural gas."

AEP-PSO is allowed by law to pass on fuel cost increases to customers.

The company derives two-thirds of its power from natural gas, a commodity that traditionally has more price volatility than coal, according to the testimony.

The choice of coal as the plant's fuel, however, has raised concerns about the possible environmental impact.

During the public comment portion of the hearing Monday, members of the Green Party of Oklahoma urged commissioners to consider global warming issues.

Jean McMahon, a member of the party, intended to address the commission in a polar bear suit. She changed clothes once she became too hot.

"Global warming is a moral issue," she said, "I'm going to take it to the street in my polar bear outfit."

Carl Reynolds, another state Green Party member, told the commissioners that coal is one of the worst polluters.

"Coal is not clean," he said. "We shouldn't doom our children to a 50-year investment in dirty energy."