On March 14, AEP Texas Central Company (TCC) issued approximately $800 million of securitization bonds related to the capacity auction issue in its transition to competition.  The bonds have an effective weighted average interest rate of 2.28% and will be repaid over the next 12 years and seven months.    

The capacity auction issue involves the valuation of electric generating capacity during the first two years after the start of retail competition within the Electric Reliability Council of Texas (ERCOT).  TCC appealed initial decisions on the PUCT’s valuation to the courts and the issue ultimately was decided by the Texas Supreme Court, which lead to the issuance of the securitization bonds.

On Jan. 12, the Public Utility Commission of Texas (PUCT) unanimously approved a financing order that allowed AEP Texas Central Company (TCC) to move forward with the securitization process. 

Background

TCC and stakeholder groups agreed to the securitization figure in a settlement approved by the PUCT on Dec. 15, 2011. The uncontested settlement resolved all remaining issues associated with the transition to retail competition which began in 2002.  In 2005 the PUCT issued its initial decision on several transition to competition issues, which TCC subsequently appealed to the courts. In July 2011, the Texas Supreme Court reversed a key portion of the PUCT’s initial decision and ruled in favor of TCC.  

Impact on Customers

The financing order allowed TCC to sell bonds to recover the amounts approved by the PUCT and to implement a Transition Charge. The impact of this Transition Charge (TC-3) on consumer bills will be $3.36 a month for a residential consumer using 1,000 kilowatt-hours of electricity a month.  The estimated impact of the increase for this consumer will be 3% based on the PUCT’s retail electric service rate comparison for the TCC service territory. (See below website for more information)

                           (http://www.puc.state.tx.us/industry/electric/rates/RESrate/rate12/Jan12Rates.pdf)

The surcharge went into effective on March 14 and will remain in effect for 12 years and 7 months.