By early next year, American Electric Power (AEP) plans to have in place a joint venture company to fund and own new electric transmission assets in Texas.
AEP President and CEO Mike Morris says Texas needs transmission investment to address congestion and to support the state’s competitive generation market. Texas expects its population to grow by about six million people within the next decade. To meet future demand plans call for adding up to 17 coal-fired plants, as many as nine nuclear plants and 3,500 MW of wind capacity.
Morris says Texas Governor Rick Perry recognizes the need to grow power infrastructure to meet demand. “As owner of the nation’s largest and most robust transmission system, AEP has extensive expertise in transmission planning, siting, construction and operation, both in Texas and throughout our service territories in 10 other states,” said Morris. “Meeting the transmission needs in Texas is a good business opportunity for us.”
Creating a joint venture company to pursue Texas transmission opportunities allows the participants to share the capital investment. AEP envisions the joint venture company investing up to $1 billion in new transmission projects. The venture company would be created as a utility that would own the assets and be subject to the rules and regulations governing utilities within the Electric Reliability Council of Texas (ERCOT). AEP would be responsible for developing, building and operating the Texas assets for the joint venture company.
Morris said Texas has encouraged investment in transmission infrastructure by streamlining the annual review process for recovery of transmission costs, thus reducing regulatory lag while offering a return on equity that is similar to other state regulatory returns.
The existing bulk power system within ERCOT is comprised of 38,000 miles of transmission lines. ERCOT plans to add 1,601 miles of 138-kV and 835 miles of 345-kV transmission lines in the 2006-2010 time period. ERCOT members invested more than $345 million in new transmission lines and system upgrades in 2005 and are planning transmission capital expenditures of more than $2.2 billion over the next five years.
Major transmission constraints expected in the next several years include transfers into the Dallas-Ft. Worth area from northeast and central Texas; transfers into Houston from north and south Texas; and transfers out of the west Texas wind generation area.
AEP’s utility units include AEP Ohio and AEP Texas. The company also has utility units in Virginia, West Virginia, Tennessee, Indiana, Michigan, Kentucky, Oklahoma, Arkansas and Louisiana.
– Steve Blankinship