AEP, LCRA Reach Transmission System Reliability Agreement

American Electric Power (AEP) and the Lower Colorado River Authority (LCRA) last Wednesday said that they have reached a joint development agreement designed to improve the capacity and reliability of electric transmission systems in South and West Texas.

Under the agreement, which has yet to be finalized, LCRA will finance and own transmission system improvements, while AEP will build and maintain them. 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 is working with utilities and state regulators to prepare the state's system for retail competition starting in January 2002 and has identified more than 30 transmission projects needed in South and West Texas to support retail competition and growth in demands for electricity. The Texas Public Utility Commission (PUC) must review and approve proposed transmission projects before construction can begin. "This is a key step in defining AEP's role for future transmission projects," said Richard Verret, AEP's senior vice president for transmission. "This partnership is a forward-thinking approach in a changing industry."

LCRA's board of directors has authorized its staff to negotiate a final agreement and the two organizations expect to execute the final agreement within the next few weeks. "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."

Last week's announcement by LCRA and AEP builds on an existing working relationship between the two. AEP and LCRA have already agreed to work together on developing a $90 million, 150-mile portion of a proposed high-voltage power line in West Texas, pending approval from the state 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 LCRA to provide transmission services statewide as part of the 1999 legislation allowing retail competition. The annual cost of system improvements and maintenance to the statewide transmission system is allocated to utilities according to their electric loads and then to consumers through a per-kilowatt-hour fee, ensuring that utilities and consumers pay only their share of transmission costs.

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