Texas rate case settled, should be good for future solar customers

el paso rate case solar

The solar industry in Texas is growing, and an unopposed settlement agreement filed by the El Paso Electric Co. for its rate case pending before the Public Utility Commission of Texas (the PUCT) should help clear future hurdles for distributed generation.

If approved by the PUCT, the Unopposed Settlement would resolve EPE’s rate case, including the revenue requirement for Four Corners Generating Station. The costs of serving residential customers with solar systems will be addressed in a future proceeding.

“While we did not anticipate some of the delays that occurred following the filing of the first proposed settlement in March, we are pleased to have been able to reach a resolution,” said Mary Kipp, El Paso Electric CEO. “We are fortunate to live in a growing region. The Company set a new native peak of 1,892 MW on July 14, 2016, which surpassed last year’s peak by more than five percent.”

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Sean Gallagher, vice president of state affairs for the Solar Energy Industries Association (SEIA), had this to say on the unanimous settlement filed to resolve El Paso Electric’s 2015 rate case:

“While it took some work to get here, we now have a unanimously supported settlement that will allow solar customers – and those interested in going solar down the line – the freedom to do so without fear of penalty.

“SEIA is pleased that the El Paso Electric Company withdrew its original proposal. This proposal would have implemented demand charges on residential customers, resulting in confusion and undue financial burden.

“Texas has some of the strongest solar resources in the nation and we’re looking forward to working with El Paso Electric so solar growth can continue, further cementing the state’s role as one of the top solar states in the country.”

Background

On August 10, 2015, EPE filed a request for an increase in non-fuel base revenues of approximately $71.5 million with the City of El Paso, other incorporated municipalities in its Texas service territory and the PUCT. When EPE filed its rebuttal testimony on January 15, 2016, it modified the requested increase to $63.3 million.

On March 29, 2016, EPE and other settling parties filed with the PUCT a Non-Unanimous Stipulation and Agreement and motion to approve interim rates (the “Non-Unanimous Settlement”). Four parties to the rate case opposed the Non-Unanimous Settlement. Interim rates were approved by the PUCT effective April 1, 2016, subject to refund or surcharge. Subsequent to filing the Non-Unanimous Settlement, the case has been subject to numerous procedural matters, including a May 19, 2016 ruling by the PUCT that EPE’s initial notice did not adequately contemplate the treatment of residential customers with solar systems contained in the Non-Unanimous Settlement.

El Paso Electric is a regional electric utility providing generation, transmission and distribution service to approximately 400,000 retail and wholesale customers in a 10,000 square mile area of the Rio Grande valley in west Texas and southern New Mexico. El Paso Electric has a net dependable generating capability of 1,990 MW.

The terms of the Unopposed Settlement

  • An annual non-fuel base rate increase of $37 million, lower annual depreciation expense of approximately $8.5 million, a return on equity of 9.7% for AFUDC purposes, and including substantially all new plant in service in rate base, all as outlined in the original non-unanimous settlement;
  • An additional annual non-fuel base rate increase of $3.7 million related to Four Corners Generating Station costs;
  • Removing the separate treatment for residential customers with solar systems; and
  • Allowing EPE to recover most of the rate case expenses up to a date certain.

The Unopposed Settlement is subject to approval by the PUCT. At this time, EPE cannot predict when it will record the revenue and other impacts of the Unopposed Settlement for financial reporting purposes. Regardless of such timing, the new rates will relate back to consumption on or after January 12, 2016.

The settlement documents were filed with Administrative Law Judges assigned to oversee EPE’s Texas rate case, who have been asked to return the settled case to the PUCT for approval.

EPE continues to meet the needs of its growing service territory with two generating units coming online in 2016. EPE anticipates filing new rate cases in Texas and New Mexico in early 2017.

 

 

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