|
PRESS RELEASE
May 23, 2001
|
 Print Version
|
LCRA, AEP Announce Long-Term Agreement to Improve Transmission System Reliability
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.
At its meeting May 23, the LCRA Board of Directors authorized 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. ERCOT has identified more than 30 transmission projects needed in South and West Texas to support retail competition and growth in demands for electricity.
The agreement will benefit consumers and support retail competition. AEP 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. We look forward to working with AEP to support competition and transmission system reliability in South and West Texas," said LCRA General Manager 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.
American Electric Power is a multinational energy company based in Columbus, Ohio. AEP owns more than 38,000 megawatts of generating capacity, making it one of America's largest generators of electricity. The company is also a leading wholesale energy marketer and trader, ranking second in the U.S. in electricity volume. AEP provides retail electricity to more than 7 million customers worldwide and has more than $45 billion in assets, primarily in the U.S. with holdings in select international markets. Wholly owned subsidiaries are involved in power engineering and construction services, energy management and telecommunications.
The LCRA is a nonprofit, self-funded conservation and reclamation district dedicated to providing public services to the people of Texas. The LCRA generates, sells and transmits wholesale electricity to cooperatives and city-owned utilities that serve more than 1 million people. The LCRA also sells water; develops and operates water and wastewater utilities; manages the lower Colorado River; protects the river's water quality; owns and operates parks; promotes soil, water and energy conservation; and offers economic and community development assistance to rural communities in its service area.
Fact Sheet: Joint Development Agreement Between the LCRA and AEP
Q. What are the LCRA and AEP?
A. The Lower Colorado River Authority (LCRA) is a conservation and reclamation district created by the Texas Legislature in 1934. The LCRA manages the lower Colorado River and provides electricity, water, water and wastewater utilities, parks, environmental stewardship and economic development services to communities in Central Texas. (www.lcra.org)
American Electric Power (NYSE: AEP), a multinational energy company based in Columbus, Ohio, is one of largest generators of electricity and one of the leading wholesale energy marketers and traders in the United States. AEP also is the parent company of Central Power and Light (CPL) and West Texas Utilities (WTU), retail electric utilities serving South and West Texas. (www.aep.com)
Q. What is the joint development agreement recently announced by the LCRA and AEP?
A. The LCRA and AEP have agreed to jointly develop projects to improve the capacity and reliability of electric transmission systems in South and West Texas. The two organizations expect to execute a final agreement within the next few weeks. The long-term agreement will support retail electric competition scheduled to begin in 2002 and will benefit consumers. Under the agreement, the LCRA will finance and own specific transmission system improvements and AEP will build and maintain them.
Q. How will the agreement support retail competition?
A. The success of retail competition in Texas depends on the ability of transmission systems to deliver electricity to consumers statewide. The Electric Reliability Council of 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 a competitive retail electric market. ERCOT has identified about 30 projects in South and West Texas that will enhance the ability of power generators to transmit electricity throughout the state. These projects will be built by the LCRA and AEP in order of priority.
Q. How will the agreement benefit consumers?
A. Besides supporting retail competition, projects carried out through the agreement will improve electric system reliability locally as well as systemwide. The LCRA and AEP plan to upgrade aging and inadequate lines and construct new lines needed to provide a reliable electric supply. The agreement also will lower transmission costs to utilities and consumers statewide.
Q. How will the agreement lower costs to consumers?
A. As a nonprofit utility, the LCRA's total cost for a transmission project is lower than that of an investor-owned utility. This is important to consumers because the total annual cost of all transmission services and projects in Texas is spread among utilities according to their electric loads, and passed on to consumers through a per-kilowatt-hour fee. The lower the cost of service, the lower the cost to consumers.
Q. Why is the LCRA expanding its transmission services to other areas of Texas?
A. Since the 1930s the LCRA has developed, operated and maintained an extensive transmission system covering 53 counties in Central Texas. In 1999 the Texas Legislature passed Senate Bill 7 to allow retail competition in Texas. Recognizing industry and consumer concerns about the lack of adequate transmission infrastructure to support competition, the Legislature authorized the LCRA to provide transmission services outside its traditional service area.
Q. Is this LCRA's first project in other areas of the state?
A. No. In a separate project, the LCRA and AEP will develop a $90 million, 150-mile portion of a proposed high-voltage power line in West Texas, 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. In addition the LCRA is building another line in West Texas, also to deliver wind energy to the rest of the state.
Q. Will the agreement affect LCRA's services in Central Texas?
A. Not at all. The LCRA will continue to provide the same services in its traditional service area. These include generating and transmitting electricity to public utilities, including municipalities and electric cooperatives, that serve more than 1 million people; managing the lower Colorado River and Highland Lakes; protecting water quality and the environment; supplying water to cities, industries and farmers; providing water and wastewater utilities; developing parks; and assisting communities with economic development.
Q. Will the agreement affect AEP's operations and services?
A. No. AEP, one of the nation's largest utility companies and the parent company of WTU and CPL, already has extensive experience in the transmission business and operates more than 38,000 miles of transmission lines in 11 states. Projects carried out through the agreement will improve the reliability of electric service for consumers in South and West Texas by building new transmission lines and upgrading existing ones to increase their capacity.
Q. Will the LCRA pay taxes on the transmission lines developed through the agreement?
A. Yes. The LCRA has formed a taxpaying affiliate company, LCRA Transmission Services Corporation, in keeping with legislative requirements for utilities to separate transmission and generation operations before retail competition begins. The affiliate will finance transmission projects with taxable bonds and will pay property taxes on transmission infrastructure. All of the projects developed through the agreement with AEP will be carried out through the affiliate. In addition, the LCRA is planning to transfer its existing transmission assets to the affiliate by the end of the 2001. These assets also will be placed on property tax rolls.
Q. How will the agreement affect LCRA employees?
A. The agreement represents major growth in LCRA's transmission business, totaling as much as $500 million in the next five years. The LCRA likely will hire employees to support the new projects. Employees also will have the opportunity to learn about other regions of the state as the LCRA begins to serve communities outside its traditional service area for the first time.
Q. Where can I get more information?
A. Contact Mark McDonald, LCRA, by telephone at 1-800-776-5272, Ext. 2007, or by e-mail at mark.mcdonald@lcra.org to learn more about the LCRA and its agreement with AEP.
| Contact | |
|---|---|
| Dottie Roark | 512-225-7024 |