AEP and MidAmerican Move Forward with Texas Transmission Joint Venture
Companies file for regulatory approval and rate recovery in Texas, name executive director and sign participation agreement
COLUMBUS, Ohio, Jan. 23, 2007 – American Electric Power (NYSE: AEP) 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 yesterday 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 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.
In his role as ETT’s president, Crowder, 42, will be responsible for the operation and growth of the company. He was most recently managing director – regional transmission organization and public policy at AEP. He has 16 years of experience in regulatory affairs and public policy, including state and federal public policy, and led AEP’s integration into the PJM Interconnection. Crowder has master’s and bachelor’s degrees in economics from New Mexico State University.
American Electric Power is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 36,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP’s utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east Texas). The company is based in Columbus, Ohio.
MidAmerican Energy Holdings Company, based in Des Moines, Iowa, is a global provider of energy services. Through its energy-related business platforms – PacifiCorp, MidAmerican Energy Company, CE Electric UK, Kern River Gas Transmission Company, Northern Natural Gas Company and CalEnergy – MidAmerican provides electric and natural gas service to more than 6.9 million customers worldwide. MidAmerican Energy Holdings Company subsidiaries PacifiCorp and MidAmerican Energy Company own and operate more than 18,000 miles of electric transmission lines. Information about MidAmerican is available on the Internet at www.midamerican.com.
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This report made by AEP and certain of its subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its registrant subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: electric load and customer growth; weather conditions, including storms; available sources and costs of, and transportation for, fuels and the creditworthiness of fuel suppliers and transporters; availability of generating capacity and the performance of AEP’s generating plants; the ability to recover regulatory assets and stranded costs in connection with deregulation; the ability to build or require generating capacity when needed at acceptable prices and terms and to recover those costs through applicable rate cases or competitive rates; the ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; new legislation, litigation and government regulation including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon and other substances; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery for new investments, transmission service and environmental compliance); resolution of litigation (including pending Clean Air Act enforcement actions and disputes arising from the bankruptcy of Enron Corp. and related matters); AEP´s ability to constrain its operation and maintenance costs; AEP´s ability to sell assets at acceptable prices and on other acceptable terms; the economic climate and growth in AEP´s service territory and changes in market demand and demographic patterns; inflationary and interest rate trends; AEP´s ability to develop and execute a strategy based on a view regarding prices of electricity, natural gas, and other energy-related commodities; changes in the creditworthiness of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading market; changes in the financial markets, particularly those affecting the availability of capital and AEP´s ability to refinance existing debt at attractive rates; actions of rating agencies, including changes in the ratings of debt; volatility and changes in markets for electricity, natural gas, and other energy-related commodities; changes in utility regulation, including implementation of EPACT and membership in and integration into regional transmission structures; accounting pronouncements periodically issued by accounting standard-setting bodies; the performance of AEP´s pension and other postretirement benefit plans; prices for power that AEP generates and sells at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation, and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.
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