Swepco Faces Challenges at PSC and in Federal Court

Swepco Faces Challenges at PSC and in Federal Court

Southwest Electric Power Co. of Shreveport is facing legal and environmental pressure on two fronts, with the Sierra Club filing a Public Service Commission request to force a resubmission of the utility’s 20-year resource plan and the city of Prescott suing it for $3.3 million over what the city sees as excessive power transmission charges.

Sierra Club filed a docket intervention request with the Arkansas Public Service Commission asking the regulatory body to require Swepco, which has about 120,000 Arkansas customers, to analyze the economic value of its coal-burning Dolet Hills generation plant near Mansfield, Louisiana.

The environmental group has repeatedly raised concerns about the economic viability of the Dolet Hills power station, suggesting that its continued operation may actually be costing Swepco customers money. Swepco is a subsidiary of heavily coal-dependant American Electric Power of Columbus, Ohio.

The lawsuit filed by Prescott, doing business as the Prescott Water & Light Co., alleges in U.S. District Court in Texarkana that the utility engaged in misconduct leading to additional costs of $700,000 a year to Prescott’s 1,700 electricity customers through an accumulation of continuing transmission fees. Those fees stemmed from a change that meant Entergy Arkansas could no longer provide the city with wholesale power. Swepco has not filed an answer but is reviewing the filing, a spokesman said. He added that the Sierra Club participated in a PSC Stakeholder Committee that evaluated the resource plan and concluded that Swepco had exceeded guidelines for "a robust stakeholder engagement."

"The committee encouraged SWEPCO to expeditiously implement the findings of the IRP and immediately proceed with the addition of significant amounts of renewable energy, which we have done with our pending request for 1,200 megawatts of additional wind energy," said Peter Main of AEP. "Not satisfied with these major steps toward more renewable energy, the Sierra Club continues its efforts to undermine other resources serving our customers. The Arkansas Public Service Commission will determine whether the Sierra Club will be allowed to intervene beyond its role as one of many stakeholders in the IRP process."

Glen Hooks, Arkansas Chapter director for the Sierra Club, said that while Swepco “is ignoring the costs and value of the Dolet Hills plant,” the plant’s co-owner, Cleco Holdings, has announced it will operate the plant only seasonally, and that the reduction in operation will save Cleco customers $40 million a year.

“If Swepco wants to keep an aging and dirty coal plant like Dolet Hills operating, the utility needs to show that the unit has values to customers,” Hooks told Arkansas Business. “In many places around the country, cleaner options like solar and wind power have become even less expensive than burning dirty coal.”

Hooks described the club’s request as something like “utility regulation 101,” a demand for the company to show that its spending is reasonable. He suggested that many coal plants are more expensive than other market options nowadays.

“The Sierra Club asked Swepco to properly analyze the value of Dolet Hills in its IRP, but they did not do so,” Hooks added. “We are now requesting that the Public Service Commission require this analysis.”

Rising Costs to City

In the Prescott case, the city’s costs for wholesale electric power soared some 10 percent after Entergy stopped serving the town in 2006, leading Prescott to find another source. Prescott got power from EAP until 2009, when it became a wholesale customer of Swepco.

The complaint, filed April 5 by Jim L. Julian and Mark W. Hodge of the Barber Law Firm in Little Rock and by A. Glenn Vasser of McKenzie, Vasser & Barber of Prescott, Swepco agreed to deliver wholesale power and to act as the city’s agent on all transmission matters in the power market. Prescott, a town of about 3,000, said it lacked the resources to build its own electric substation, and feared that power flowing through the town’s existing Entergy-owned substation would be subject to “rate pancaking and congestion charges” after Entergy joined a regional transmission authority in 2012, meaning the power headed to town would cross through two energy transmission systems, Southwest Power Pool and Midcontinent Independent System Operator.

Those concerns were confirmed in 2014 as costs rose dramatically, the suit says, adding that many promises by Swepco officials to address the added fees were never fulfilled. Plaintiffs are the city, Nevada County resident Tommy Poole, the Bank of Delight and Firestone Building Products Co. The plaintiffs include three sorts of customers of Prescott Water & Light, Poole as a residential customer, the bank as a commercial customer and Firestone Building Products as an industrial customer.

Swepco reneged on promises to build a Prescott substation, and made more empty promises when Prescott was considering a new interconnection to Entergy via a company called GridLiance, the lawsuit alleges.

The city’s claims against Swepco include detrimental reliance, breach of fiduciary duty and negligence, and seeks damages of $3.28 million it says it paid in fees resulting from Swepco misconduct. It also asks for damages that continue to be incurred, along with court costs and attorney’s fees.