The project, which Excel unveiled last March, calls for a $1.6 billion investment in two huge wind farms, including a 522-megawatt facility in eastern New Mexico, and a 478-MW farm in Texas. Once built, those farms, combined with an agreement to also acquire 230 MW of wind energy from a nearby facility owned by NextEra Energy — would provide enough electricity to power about 440,000 average homes annually.
The company says the project could save customers of Xcel subsidiary Southwest Public Service Co., which serves about 385,000 people in New Mexico and West Texas, about $2.8 billion in electric costs over 30 years by offsetting higher fuel costs from natural gas and other sources.
But PRC utility staff say the projected savings aren’t guaranteed. They want to impose protections for ratepayers in case the expected benefits don’t materialize as a precondition for approval. That includes independent, annual reports on savings generated each year, with a guarantee from SPS to send money back to customers if the system doesn’t produce the promised benefits.
“SPS’ proposal is fraught with risks borne largely by ratepayers and offers little assurance to ratepayers that the claimed benefits will be realized,” said John Reynolds, economic bureau chief for the utility division, in written testimony to the commission.
Imposing such guarantees would be unprecedented. But Reynolds said it’s justified because the project itself is unprecedented.
Utilities generally build new facilities to meet electric demand, but SPS doesn’t need that wind electricity right now to serve its customers. Rather, it proposes to take advantage of today’s low costs for wind generation to save money in the future.
“SPS is telling customers: ‘I have a deal for you. Give me $1.6 billion for a project you don’t need and you may be able to save more than the cost of that project, but there’s no guarantee that you will,'” Reynolds said.
Brooke Trammell, SPS director of customer and community relations, said the utility wouldn’t oppose “reasonable” protections for ratepayers. But the PRC utility division also wants to deny the company any return on investment for the first one to two years of operation.
That’s how long it will take the PRC to set new rates for SPS to start charging ratepayers for the wind facilities, and the utility needs interim cost recovery.
“We can’t just forego two years of recovery that we would never get back,” Trammell said.
The commission must approve the project by next March, at the latest, for SPS to receive federal tax credits for wind facilities, which are now being phased out. A public hearing is set to begin on Nov. 27.