Joint Venture to Develop Oklahoma Power Plant

Issue 8 and Volume 110.

Two utility companies with the same need found a mutually beneficial way to solve an increasing baseload need: one with an existing site ready for expansion, the other with the capital and experience to make it happen.

In December 2005, Public Service Co. of Oklahoma (PSO), a unit of American Electric Power, sent out Request for Proposals (RFP) seeking new baseload generation to be online by 2011. In mid-July, PSO chose to pursue a joint venture with Oklahoma Gas and Electric Co. (OG&E) and the Oklahoma Municipal Power Authority (OMPA) to build a 950-MW coal-fueled plant at the site of OG&E’s existing Sooner plant near Red Rock, in north central Oklahoma.

The plan calls for OG&E to build one 950-MW ultra-supercritical coal unit to be called the Red Rock Generating Facility near Red Rock, Okla. The Red Rock facility will be built using flue gas desulfurization and selective catalytic reduction to limit emissions of sulfur dioxide and nitrogen oxides. Selection of the plant’s engineering, procurement and construction (EPC) services has not yet been determined.

The plant will use Powder River Basin (PRB) coal and the Sooner plant’s existing rail infrastructure. Currently, Burlington Northern Railroad brings in 4 million tons of coal annually for the Sooner plant. Alford said the Red Rock facility is expected to bring in an additional 3.5 million tons.

The 950-MW coal plant would sit next to OG&E’s existing Sooner station in Oklahoma.
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PSO will own 50 percent of the new unit, OG&E will own approximately 42 percent and OMPA will own approximately 8 percent. Final cost estimates for the new facility have not been determined, preliminary cost estimates are approximately $1.8 billion. According to OG&E, the companies hope to have a contract in place by August with construction expected to begin in 2007. The facility should be operational in 2011.

PSO plans to finance its $900 million stake in the plant with 55 percent debt and 45 percent equity, which is in target with the company’s long-range projections through 2008, according to Whiteford. OG&E is still exploring options to provide $756 million of the project cost and OMPA will finance its $144 million interest through tax-exempt municipal bonds.

“By participating in this multi-owner project, we will gain economies of scale not available to us alone and provide long-term benefits to our member customers,” said Roland H. Dawson, OMPA General Manager.

To sweeten the deal, legislation signed into law last year makes it easier for energy companies to finance new projects. Oklahoma House Bill 1910 provides utilities a process to recover costs from the construction of new generating facilities.

This will be the first project in the state that utilizes the provisions of Oklahoma House Bill 1910, said Pete Delaney, OGE Energy Corp. Executive Vice President and COO, in a press release. The legislation allows utilities to seek pre-approval of certain types of construction projects. – Amethyst Cavallaro