A Texas Court of Appeals in Austin has turned back an appeal by El Paso Electric Co. (EPE) challenging a state commission ruling that disallowed rate recovery of the utility's investment in the Palo Verde Unit 3 nuclear generating plant as excess capacity. It rejected the utility's claim that use of the plant for base-load and offsystem wholesales warranted cost recovery.
The Palo Verde disallowance had come in a 1992 commission rate order. That order postponed Unit 3 cost recovery until the capacity became "used and useful" in increments for system capacity requirements, since EPE had imprudently failed to reduce its massive investment in the project, according to state regulators.
The commission's decision to delay recovery of Unit 3 costs pending capacity need was reasonable, according to the court. It rejected EPE's allegations that the commission must include utility plant in rate base if it is "actually being used" to produce power. The court also noted that the commission had fairly balanced concerns over the utility's financial health by allowing an "interim adjustment to rate of return" to reflect ratepayers benefits, and by permitting the utility to retain certain revenues from offsystem sales. El Paso Elec. Co. v. Texas PUC, No. 03-93-0061-CV, Apr. 5, 1995 (Tex.Ct.App.).
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