SWEPCO’s decision on power plant has risks

— The road that Southwestern Electric Power Co. is taking to get its $2.1 billion coalfired plant, which is being built in Hempstead County, to interstate “merchant” status stands to have some bumps.

The shift away from being a facility under the authority of the Arkansas Public Service Commission and serving Arkansas retail customers has certain disadvantages, a company spokesman said Friday.

If the commission’s approval of the 600-megawatt John W. Turk Jr. plant had not been overturned by the state Supreme Court, the utility would have recovered its costs by raising the rates of its Arkansas customers.

“That’s the way regulated utilities work,” Peter Main, a SWEPCO spokesman,said Friday. “That was our preferred path for the Turk plant. To say that we wanted to be merchant all along is not true.”

In May, the state Supreme Court overturned the commission’s approval of the plant.

In response, SWEPCO announced Thursday that it would not continue to battle opponents and the high court for plant approval, and instead would sell electricity generated by the plant to other utilities wholesale and to customers outside Arkansas.

The Turk plant originally was intended to serve customers in Arkansas, Texas and Louisiana, Main said, and that’s why the company has not pursued merchant status during the past 2 1/2 years. SWEPCO has 113,500 customers in Arkansas and 360,000 in the other two states.

“We are a regulated utility and have an obligation to serve our customers’ power needs today and plan to meet them tomorrow,” Main said. “We had another option available to us (becoming a merchant plant), and we still have the obligation to meet the future needs of our customers in Texas and Louisiana.”

The utility will continue to operate its two other facilities in Arkansas - the 300-megawatt natural gas fired plant in Tontitown and a 528-megawatt coal-fired plant near Gentry - under the authority of the Public Service Commission.

But the Turk plant now will be operating on the interstate market with no guarantee that it will have sufficient numbers of customers.

There is another gamble, according to DavidCruthirds, a Houston regulatory attorney.

SWEPCO faces “quite a bit of risk” in continuing to build the plant after the Supreme Court’s rejection.

“If they end up losing (legal or regulatory battles), they could end up having to tear it down,” Cruthirds said. The plant is about one-third complete.

SWEPCO received its air quality permit for the plant from the Arkansas Department of Environmental Quality in November 2008, and the state Pollution Control and Ecology Commission affirmed the permit in January. It received its final water permit from the U.S. Army Corps of Engineers in December.

But, the Sierra Club and other opponents of the plant filed lawsuits over those two permits.

“We believe there are serious legal defects in theair and water permits,” said Lev Guter, associate field organizer for the Sierra Club.

Based on its June 1 status report on permits filed with the Public Service Commission, SWEPCO must receive about 15 environmental permits and authorizations from the state and the Corps of Engineers for the Turk plant, not counting local permits.

The Arkansas Department of Environmental Quality has deemed SWEPCO’s application for a solid-waste permit to be complete, but the permit is not expected to be issued until this fall. And some of the permits that SWEPCO needs have not been scheduled for approval yet, said John Hendricks, manager of air-quality services for American Electric Power Co., SWEPCO’s parent.

“I believe we will receiveour remaining permits,” Hendricks said. “We’ve met all of the requirements.”

At a press conference Thursday in Texarkana, Venita McCellon-Allen, SWEPCO’s president, said the plant’s construction has helped the community.

Payroll for the plant is $3.9 million a week, McCellon-Allen said. About 1,250 people are working on it, and about 150 more are expected to join the project.

McCellon-Allen expects some opposition to the company’s change of plans, principally from the Hempstead County Hunting Club, the Sierra Club and the National Audubon Society.

“They’re formidable opponents, and we cannot underestimate them,” she said. “We think they will challenge us early, often, all day and every day. They’re creative and very well funded.”

News, Pages 15 on 06/30/2010