LCRA and AEP to build new transmission lines in Texas

By the OGJ Online Staff

HOUSTON, May 24 -- American Electric Power Co. and the Lower Colorado River Authority have agreed to invest up to $500 million in transmission projects in the Texas market over the next 5 years.

Under a preliminary agreement approved by LCRA's board of directors Wednesday, LCRA will finance and own certain transmission system improvements and AEP will build and maintain them. The Texas Public Utility Commission must review and approve the projects.

The annual cost of system improvements and maintenance to the statewide transmission system is allocated to utilities according to their electric loads, and then consumers pay for the projects per kilowatt hour.

The Electric Reliability Council of Texas identified 30 projects needed in South and West Texas to support retail competition and growth in demands for electricity. The restructuring legislation authorized LCRA, a nonprofit self-funded electricity cooperative, to provide transmission services statewide when competition begins.

AEP and LCRA are already cooperating on a major project in West Texas. In that project, the LCRA and AEP will develop a $90 million, 150-mile portion of a proposed high-voltage power line. The new line will improve system reliability in the San Angelo area and will deliver wind-generated power from West Texas to help meet the state's renewable energy goals.

Critics say this system of sharing the costs of transmission projects rewards certain utilities and customers for not maintaining and expanding transmission systems when it was appropriate. By deferring investments, these utilities and their customers can impose the costs of upgrades required in their areas on all Texas consumers. In some territories, such as those served by Reliant Energy Inc. or City Public Service of San Antonio, electric consumers will end up paying more than their fair share for transmission, critics say.

ERCOT considers the transmission systems in those areas, paid through the rate base, to be adequate. But consumers served by Reliant's transmission system or City Public Service will have to pay again for projects in the rest of Texas, said a source close to City Public Service.

City Public Service has surplus generation that it sells on the wholesale market, so it must participate in ERCOT-mandated projects. City Public Service, a municipally owned utility, will not be participating in the January deregulation of the Texas retail electricity market.

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