SWEPCO seeks rate increase

by Kelly Bell/Special to ETR

The Southwestern Electric Power Company (SWEPCO) has submitted to the Public Utility Commission a request to increase the company’s Texas rates by 20%. This would amount to $75 million. SWEPCO is a unit of American Electric Power, and this would be its first rate increase in more than 25 years.

The $75 million would be comprised of a $27.1 million (7.23%) increase in supplying retail customers and investing in infrastructure and operating expenses, $16.3 million (4.35%) toward supporting greater vegetation management for better service reliability and cutting down on storm-caused power failures.

Another $31.6 million would fund simultaneous recouping of finance expenses from SWEPCO’s power plant construction program.

If approval is granted, the increase would be of about 21.5%, an extra $16 monthly on customer power bills for East Texans using 1000 kilowatt-hours monthly. SWEPCO acquired North Texas from another utility in 2007. Customers in that area are already paying higher rates because of that transition, and will therefore receive a smaller increase of about $6 monthly (7%.) The new rates would go into effect next spring, and consumers in both areas would be paying the same.

President and Chief Operating Officer Paul Chodak explained the rate change.

“SWEPCO needs the requested increase in order to continue to provide our customers with reliable power,” he said. “Since 1985, when our last major construction program was completed, SWEPCO has absorbed or offset the higher cost of serving customers through belt-tightening, but we are now out of belt notches. SWEPCO will continue to be one of the lowest cost providers in Texas even with the requested increase.”

External Affairs Manager Keith Honey answering as to why wait for 25 years to ask for a rate increase said, “We did not feel it was to the best interest of our customers, we could not justify it and it would have been in appropriate to do so because we keep our rates as low as we needed to.” According to Honey SWEPCO is at a good point to ask for an increase.
The company’s present rates are 31% below the average for comparable-sized Texas utilities, and a full 38% below the national average.

“We know there is no good time to raise rates, and we’re aware of the impact the economy is having on individuals, families and businesses,” Chodak said. “But our electric rates will continue to provide good value for the money. Even with this proposed increase our rates will continue to be well below the national and state averages for comparable investor-owned utilities.”

He went to great lengths to make certain his customers understand the great need the company has for the price increase and how SWEPCO is serving its consumers to the best of its ability.

“We have made sizable investments in our high-voltage transmission and local distribution systems, and we continue to face substantially higher costs of providing reliable electric service to our retail customers,” Chodak said. “For examples, in the last ten years salaries have increased by 33% for linemen and 42% for meter readers. In the area of commodities and raw materials, which are essential components in many aspects of utility service, the cost of copper has increased 310%, and cement has increased by 48% per cubic yard in the same time period. We have also made significant investments in our electric system as part of ongoing efforts to meet our customers’ growing electric needs.”

“For many years, we have been able to absorb or offset these kinds of non-fuel cost increases, but we have reached a point where a rate increase is necessary for us to be able to continue providing the kind of reliable power our customers need.”

The company is also seeking to offset financing costs during construction of the 600-megawatt John W. Turk, Jr. Power Plant and the 500-megawatt J. Lamar Stall unit. The Public Utility Commission of Texas approved construction of the Stall plant in March 2007, and on the Turk facility in July 2008.

Construction on both units is well underway.

“Recovery of financing costs while the plants are under construction, instead of at the end of construction, will help prevent compounding interest on these major investments,” Chodak said. “This will save over $300 million in financing costs that SWEPCO customers would otherwise have to pay over the life of the plant.”

The Turk Plant will be a base load unit with advanced coal combustion technology and intended to operate 24 hours per day. Stall Unit will be an intermediate facility using natural gas in a high-efficiency, combined cycle operation to meet system needs between base load and peak load.

SWEPCO has earmarked the income from the proposed rate increase to offset the expense of constructing, maintaining and operating the power plants, transmission and the customer service distribution lines and facilities of its electric system. These rates do not include the actual fuel portion of customers’ bills, which offsets only the costs of fuel and purchased power and is a pass-through from which the company receives no profit.

“Increases in electric bills over the past 25 years have been primarily due to fuel costs for power generation and increases in electricity usage,” Chodak said. “In fact, fuel prices would have been higher if not for SWEPCO’s balanced portfolio of both coal and gas generation. Most of our baseload generation comes from lower-cost coal and lignite, which offsets some of the impact of volatile natural gas prices.”

SWEPCO supplies 180,000 customers throughout North and East Texas. When its consumers in western Arkansas and Northeast Louisiana are included this total swells to 473,000. The company’s headquarters are in Shreveport, Louisiana. For more information of all aspects of SWEPCO and its operations please visit www.swepco.com. American Electric Power supplies electricity to more than five million customers spread over eleven states. For more information on its operations and general information please visit www.aep.com.

The Southwestern Electric Power Company (SWEPCO) has submitted to the Public Utility Commission a request to increase the company’s Texas rates by 20%. This would amount to $75 million. SWEPCO is a unit of American Electric Power, and this would be its first rate increase in more than 25 years.

The $75 million would be comprised of a $27.1 million (7.23%) increase in supplying retail customers and investing in infrastructure and operating expenses, $16.3 million (4.35%) toward supporting greater vegetation management for better service reliability and cutting down on storm-caused power failures.

Another $31.6 million would fund simultaneous recouping of finance expenses from SWEPCO’s power plant construction program.

If approval is granted, the increase would be of about 21.5%, an extra $16 monthly on customer power bills for East Texans using 1000 kilowatt-hours monthly. SWEPCO acquired North Texas from another utility in 2007. Customers in that area are already paying higher rates because of that transition, and will therefore receive a smaller increase of about $6 monthly (7%.) The new rates would go into effect next spring, and consumers in both areas would be paying the same.

President and Chief Operating Officer Paul Chodak explained the rate change.

“SWEPCO needs the requested increase in order to continue to provide our customers with reliable power,” he said. “Since 1985, when our last major construction program was completed, SWEPCO has absorbed or offset the higher cost of serving customers through belt-tightening, but we are now out of belt notches. SWEPCO will continue to be one of the lowest cost providers in Texas even with the requested increase.”

External Affairs Manager Keith Honey answering as to why wait for 25 years to ask for a rate increase said, “We did not feel it was to the best interest of our customers, we could not justify it and it would have been in appropriate to do so because we keep our rates as low as we needed to.” According to Honey SWEPCO is at a good point to ask for an increase.
The company’s present rates are 31% below the average for comparable-sized Texas utilities, and a full 38% below the national average.

“We know there is no good time to raise rates, and we’re aware of the impact the economy is having on individuals, families and businesses,” Chodak said. “But our electric rates will continue to provide good value for the money. Even with this proposed increase our rates will continue to be well below the national and state averages for comparable investor-owned utilities.”

He went to great lengths to make certain his customers understand the great need the company has for the price increase and how SWEPCO is serving its consumers to the best of its ability.

“We have made sizable investments in our high-voltage transmission and local distribution systems, and we continue to face substantially higher costs of providing reliable electric service to our retail customers,” Chodak said. “For examples, in the last ten years salaries have increased by 33% for linemen and 42% for meter readers. In the area of commodities and raw materials, which are essential components in many aspects of utility service, the cost of copper has increased 310%, and cement has increased by 48% per cubic yard in the same time period. We have also made significant investments in our electric system as part of ongoing efforts to meet our customers’ growing electric needs.”

“For many years, we have been able to absorb or offset these kinds of non-fuel cost increases, but we have reached a point where a rate increase is necessary for us to be able to continue providing the kind of reliable power our customers need.”

The company is also seeking to offset financing costs during construction of the 600-megawatt John W. Turk, Jr. Power Plant and the 500-megawatt J. Lamar Stall unit. The Public Utility Commission of Texas approved construction of the Stall plant in March 2007, and on the Turk facility in July 2008.

Construction on both units is well underway.

“Recovery of financing costs while the plants are under construction, instead of at the end of construction, will help prevent compounding interest on these major investments,” Chodak said. “This will save over $300 million in financing costs that SWEPCO customers would otherwise have to pay over the life of the plant.”

The Turk Plant will be a base load unit with advanced coal combustion technology and intended to operate 24 hours per day. Stall Unit will be an intermediate facility using natural gas in a high-efficiency, combined cycle operation to meet system needs between base load and peak load.

SWEPCO has earmarked the income from the proposed rate increase to offset the expense of constructing, maintaining and operating the power plants, transmission and the customer service distribution lines and facilities of its electric system. These rates do not include the actual fuel portion of customers’ bills, which offsets only the costs of fuel and purchased power and is a pass-through from which the company receives no profit.

“Increases in electric bills over the past 25 years have been primarily due to fuel costs for power generation and increases in electricity usage,” Chodak said. “In fact, fuel prices would have been higher if not for SWEPCO’s balanced portfolio of both coal and gas generation. Most of our baseload generation comes from lower-cost coal and lignite, which offsets some of the impact of volatile natural gas prices.”

SWEPCO supplies 180,000 customers throughout North and East Texas. When its consumers in western Arkansas and Northeast Louisiana are included this total swells to 473,000. The company’s headquarters are in Shreveport, Louisiana. For more information of all aspects of SWEPCO and its operations please visit www.swepco.com. American Electric Power supplies electricity to more than five million customers spread over eleven states. For more information on its operations and general information please visit www.aep.com.

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February 09, 2010