American Electric Power and MidAmerican Energy Holdings Company are moving forward with formation of Electric Transmission Texas LLC (ETT) as a joint venture to build transmission facilities in Texas. ETT filed with the Public Utility Commission of Texas for approval to operate as an electric transmission utility in Texas. The filing also seeks to establish initial rates for ETT.
Additionally, Calvin Crowder recently was named executive director of ETT. It is anticipated that Crowder will be named president of ETT when the joint venture begins operations. The companies also executed a participation agreement creating the framework for ETT to build and own new transmission facilities within the Electric Reliability Council of Texas (ERCOT) when ETT receives regulatory approval and other closing conditions are met.
“There is a critical need to expand the Texas electric transmission grid to meet growing energy demands, reduce congestion, and support development of the Competitive Renewable Energy Zones being established in Texas,” said Crowder. “The creation of this transmission utility company, backed by the expertise and assets of two leading utilities, is the right approach to accelerate construction of additional, much-needed transmission infrastructure in Texas.
“Governor Perry, ERCOT and the Public Utility Commission of Texas (PUCT) have recognized the need for new transmission investment in the state and put in place recovery mechanisms to support transmission development. ETT can bring critically needed transmission online quickly by employing the expertise and capital of two transmission leaders. AEP brings more than 100 years of expertise in planning, siting, building and operating transmission to this venture as owner and operator of the nation’s largest transmission system. MidAmerican is the fifth-largest owner of transmission in the United States and has significant capital resources to support transmission development,” Crowder added.
In its PUCT filing, ETT requests approval to operate as an electric transmission utility in Texas. ETT also is seeking approval to contribute transmission assets currently under construction by AEP subsidiary Texas Central Co. (TCC) to the joint venture company. The assets, valued at approximately $76 million, include a variable frequency transformer, a device that will facilitate bidirectional power flow between the U.S. and Mexico transmission grids, and other associated transmission system facilities designed to strengthen transmission grid reliability in the Laredo, Texas, area and reduce the need for older reliability-must-run generation in that area.
Upon receipt of all required regulatory approvals, AEP Utilities, a subsidiary of AEP, and MEHC Texas Transco LLC, a subsidiary of MidAmerican Energy Holdings Company, each will acquire a 50 percent interest in the joint venture, resulting in the equity ownership of the new company being split 50-50 between AEP and MidAmerican subsidiaries. The anticipated utility capitalization structure of ETT is targeted at 40 percent equity and 60 percent debt. ETT is requesting an 11.25 percent return on equity in the initial rate filing.
AEP and MidAmerican expect ETT to invest in additional transmission projects in ERCOT. The companies anticipate in excess of $1 billion in projects could be included in the new company during the next several years. ETT will operate as a transmission utility and would be subject to the rules and regulations governing utilities within ERCOT. An AEP subsidiary initially will act as project manager for the planning, construction and operation of the transmission lines and facilities for ETT.
TCC expects to make a regulatory filing at the Federal Energy Regulatory Commission for transfer of the transmission assets from TCC to ETT in the coming weeks. AEP and MidAmerican anticipate ETT will begin operations in the second half of 2007. The company will be based in Austin, Texas.