Texas Judge Rejects Hempstead Coal Plant

LITTLE ROCK (AP) -- A Texas administrative law judge has recommended that regulators reject a Southwestern Electric Power Co. plan to build a $1.3 billion coal-fired power plant in southwest Arkansas that also would serve Texas customers.
The written recommendation said SWEPCO wrongly calculated future demand for electricity among its customers in Texas, Arkansas and Louisiana, and failed to prove the proposed 600-megawatt John W. Turk plant near Texarkana would be needed.
Wendy K.L. Harvel, a law judge with the Texas State Office of Administrative Law Hearings, agreed with Texas Industrial Energy Consumers, which opposes the plan, and with the staff of the Texas Public Utility Commission that SWEPCO should have excluded projected load amounts related to wholesale customers.
Harvel said in her findings Thursday that because the utility is not obligated to continue to sell to wholesalers once a contract expires, including the wholesale figures would mean residential and commercial customers could end up paying higher rates for a plant that does not sell wholesale in the amounts originally estimated.
In addition, she said, including the wholesale figures runs counter to efforts to move toward a more competitive electricity market.
The Texas commission has scheduled a Feb. 22 meeting to discuss the recommendation.
SWEPCO has said it plans to build the plant, regardless of whether Texas grants the "certificate of need." The company hopes to complete the project in 2011.
In a statement Monday to The Associated Press, SWEPCO said that Texas approval of the Turk plant would ensure "that Texas customers continue to benefit from a stable, reliable and affordable supply of electricity as demand increases across the region."
The company said that without Texas approval, the 158 megawatts allocated for Texas customers would be sold elsewhere and electricity needed in the area would be supplied from "the much more volatile purchased power market."
The utility said its service to wholesalers, such as cooperatives and municipalities, has been of direct economic advantage to its non-wholesale customers.
"If SWEPCO were to reduce or abandon its wholesale customer base, as has been suggested by some parties in the Texas case, the cost of facilities and service would have to be spread over a smaller customer base, thereby hurting all of SWEPCO's existing retail customers in the future," the statement said.
In her findings, the law judge said that if the Texas commission denies the certificate, the Turk plant would not be included in SWEPCO's customer rate base in Texas and SWEPCO then would have to shift the costs of the plant to ratepayers elsewhere. Shreveport, La.-based SWEPCO has about 464,000 customers in Texas, Arkansas, and Louisiana.
In Arkansas, the Public Service Commission agreed with SWEPCO in 2006 that the company needed more electricity to meet a nearly 2 percent annual increase in demand among its customers. Last year, the PSC found by a 2-1 vote that the plant would be "environmentally compatible" and said the project could proceed on a 2,875-acre site near Fulton. The PSC also set certain conditions on the project to address environmental concerns.
Meanwhile, SWEPCO continues to seek permit approval from the Arkansas Department of Environmental Quality and from Louisiana regulators.