AEP TCC subsidiary files request to increase rates charged to Retail Electric Providers in Texas

The rate case proceeding is being filed at this time as a result of actions taken by six cities located in TCC’s service territory - McAllen, Laredo, Corpus Christi, Harlingen, Edna and Victoria. The cities, which retain original jurisdiction over TCC retail distribution rates, passed resolutions in June and July 2003 requiring that TCC make filings to support its current rate levels.

The rate request involves the amounts that are charged the Retail Electric Providers for the delivery of electricity over TCC’s transmission and distribution lines. TCC’s costs to provide unbundled transmission and distribution service have been substantially greater than the costs established in the electric restructuring proceedings held by the PUCT in October 2001 to establish initial transmission and distribution rates in the new retail competitive market.

There will be no immediate impact on customer bills because the new rates, if approved, are not expected to go into effect until the second quarter of 2004, according to David Carpenter, AEP director of Texas regulatory services.

“Residential and small commercial customers of the affiliated Retail Electric Provider (CPL Retail Energy, which is now owned by Centrica) will see a slight increase in their bills after approval of the rate request," Carpenter said. "The rate change is due to a reduction of a pass-through rate credit, which was established in an earlier proceeding. The pass-through reduction would increase the monthly bill of a residential customer using 1,000 kilowatt hours (kWh) by approximately 40 cents. This is the only impact on ´Price to Beat´ rates.”

Once the TCC rate request is approved, subsequent actions taken by competitive Retail Electric Providers will determine the impact on non-Price to Beat customer bills.

Since implementation of retail competition, electricity users purchase their electric service from Retail Electric Providers, who include the price for delivery by a separate transmission and distribution company as a part of their overall price.

The rate increase’s monthly impact to Retail Electric Providers for a residential customer with 1,000-kWh of usage will be $4.76 or 17.4 percent.

The requested revenue requirement in this proceeding is based on a test year for the 12 months ending June 30, 2003. The test year revenue requirement requested in this proceeding reflects the ongoing level of activity, investment and expenses that TCC will incur to provide safe and reliable T&D service in its service area. TCC is requesting a return on equity of 12 percent with a capital structure of approximately 55 percent debt/45 percent equity. The proposed capital structure reflects the ongoing operations of the T&D utility. The capital structure has been adjusted to remove the debt and equity components associated with the TCC generating assets, which are in the process of being sold.

TCC is a transmission and distribution utility providing energy delivery service to a 44,000-square-mile area of south Texas. TCC’s service territory generally includes the southern portion of Texas from just south of San Antonio to the Mexican border and from Bay City west to Eagle Pass. Major cities in TCC’s service area include Corpus Christi, McAllen, Harlingen, Laredo and Victoria. TCC’s service territory is entirely within the Electric Reliability Council of Texas (ERCOT). All of the retail customers in TCC’s service territory have retail choice. TCC provides distribution service to approximately 700,000 end users receiving electric service from 28 retail electric providers.

TCC also provides wholesale transmission service in ERCOT. While TCC’s wholesale transmission rates are regulated by the Federal Energy Regulatory Commission (FERC), TCC is seeking approval of its wholesale transmission cost of service rates in this proceeding and will file with the FERC for approval of the rates established in this proceeding after a final order is issued by the PUCT.

American Electric Power owns and operates more than 42,000 megawatts of generating capacity in the United States and select international markets and is the largest electricity generator in the U.S. AEP is also one of the largest electric utilities in the United States, with almost 5 million customers linked to AEP’s 11-state electricity transmission and distribution grid. The company is based in Columbus, Ohio.