AUSTIN – The Lower Colorado River Authority (LCRA) and American Electric Power (NYSE:AEP) have announced a joint development agreement that will improve the capacity and reliability of electric transmission systems in South and West Texas.
AEP is the parent company of AEP-West Texas Utilities that provides electric services in Clarendon and Hedley.
At its meeting May 23, the LCRA Board of Directors authorized their staff to negotiate a final agreement. The two organizations expect to execute the final agreement within the next few weeks.
Under the agreement, the LCRA will finance and own transmission system improvements, and AEP will build and maintain them. The Public Utility Commission of Texas must review and approve proposed transmission projects before construction can begin.
Over the next five years the public/private venture will construct up to $500 million of transmission projects identified by the Electric Reliability Council of Texas (ERCOT) as crucial to supporting a competitive retail electric market in Texas. ERCOT, manager of a statewide power grid that serves 85 percent of the electric consumers in Texas, is working with utilities and state regulators to prepare the system for retail competition beginning in January 2002.
The agreement will benefit consumers and support retail competition. AEP, with more than 32,000 miles of transmission lines, has the expertise to build and maintain transmission infrastructure. The LCRA, as a nonprofit utility, can provide transmission projects at a lower cost than investor-owned utilities.
Transmission improvements made by the LCRA and AEP also will enhance the ability of power generators to transmit electricity throughout the state.
“For 60 years the LCRA has proven our ability to provide reliable, cost-effective transmission services in Central Texas,” said LCRA General Manger Joe Beal. “This agreement represents a winning combination for the people of Texas.”
“This is a key step in defining AEP’s role for future transmission projects,” said Richard Verret, AEP’s senior vice president for Transmission. “We have had a long tradition of innovation and excellence with designing, building, and maintaining transmission facilities. This partnership is a forward-thinking approach in a changing industry.”
AEP and LCRA have already been working together 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, pending approval from the PUC. The new line will improve system reliability in the San Angelo area as well as statewide and will deliver wind power from West Texas to help meet the state’s renewable energy goals.
The Texas Legislature authorized the LCRA to provide transmission services statewide as part of the 1999 legislation allowing retail competition because the LCRA can build and own transmission lines at a lower cost than most utilities, saving money for Texas consumers. The annual cost of system improvements and maintenance to the statewide transmission system is allocated to utilities according to their electric loads, then to consumers through a per-kilowatt-hour fee. This ensures that utilities and consumers pay only their share of transmission costs.
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