PSEG CEO talks of the “Ëœdumbing down of the transmission system’

Public Service Electric and Gas invested $1.3 billion during the first half of the year as part of its planned capital program for 2015 of $2.6 billion, which included upgrades to the electric and gas distribution and transmission systems, Public Service Enterprise Group Chairman, President and CEO Ralph Izzo said on July 31 during the company’s 2Q15 earnings conference call.

He said, “PSE&G’s focus on improving the resiliency of the grid and increasing operational efficiency has also translated into strong performance in a number of areas of customer satisfaction, including price” and billing and payment, among others.

Izzo also noted that PSE&G was recently assigned a share of the transmission upgrade work at Artificial Island, adding that PJM Interconnection’s decision will increase PSE&G’s transmission-related capital spending by $100m to $130m over the next four years.

“This project will add to PSE&G’s robust pipeline of projects that will drive high single-digit growth in PSE&G’s earnings over the three-year period ending in 2017,” he said.

As TransmissionHub reported, PJM on July 29 said that its Board of Managers has approved the PJM staff recommendation to accept LS Power’s proposal to build a 230-kV line under the Delaware River in order to resolve operational performance issues around the Artificial Island area in southern New Jersey.

In a separate July 29 statement, the board said that it has also approved the designation of PSE&G and Pepco Holdings for the expansion of interconnection facilities. Those projects will resolve the operational performance issues around the Artificial Island area and provide important transmission support for the sub region, the board said.

In its statement, PJM said that the Artificial Island “open window” was the first competitive solicitation for transmission solutions that was consistent with FERC Order 1000, although it was begun before PJM had a FERC-approved compliance filing with Order 1000.

The open solicitation sought transmission improvements to provide the ability to generate maximum power from all three Artificial Island nuclear units while maintaining transmission system voltage within limits during various contingencies and line outages, PJM said.

The recently approved investment in Artificial Island, PSEG Power’s announced acquisition — through its unit PSEG Fossil, as noted in a June 17 company statement — of the 755 MW Keys Energy Center project from Genesis Power and an energy-focused private equity fund managed by Ares EIF Management, as well as the “Gas System Modernization Program, if approved, would expand our previously announced capital program for 2015 through “Ëœ19 by 15[ percent] to 20 percent or $2.2 billion,” he said.

During the question-and-answer portion of the call, Izzo said of the Artificial Island process: “[T]here’s no way to make this process look pretty. This was a painful process and I’d like to chalk it up to the growing pains associated with [FERC] Order 1000.”

He continued, “My concern — and I’ve expressed this to FERC and to PJM – is that we may be heading for a ubiquitous dumbing down of the transmission system as opposed to robust solutions that have advantages over the long term. The cheapest solution in the short term may not be the cheapest solution of the long term.”

Izzo said that he still believes that “not only did we have the more robust solution, but we had a lower-cost solution, so this is going to be challenging.”

Efficient markets, he said, work when good information is available to both suppliers and buyers, adding, among other things, “these are technically detailed, painful reviews done by a handful of assessors.”

He also said, “[I]t’s showing some real challenges in terms of me having confidence that over the long term, Order 1000 will yield a strong transmission system that won’t be constantly second-guessed or challenged.”

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