a snapshot of transmission investment

There are 150,000 miles of transmission lines in the United States and if all goes well, we’ll be adding thousands more in the near future.

Most industry analysts think the Energy Policy Act of 2005 (EPAct) will boost investment in transmission, and according to almost all analysts, it’s not a moment too soon. But while studies suggest that the downward trend in investment dollars has reversed, it’s still below 1975 levels.

“In the 1990s, we were building 12,000 miles of line a year at 230 kV and above, but by 1999 that had dropped to below 6,000 miles a year,” said Terry Winter, American Superconductor executive vice president and COO, in his keynote speech at the DistribuTECH conference in February.

A study completed by the Edison Electric Institute (EEI) before the passage of EPAct found that the industry is planning to invest at levels not seen in nearly 30 years. Data from the May 2005 report, “Survey of Transmission Investment: Historical and Planned Capital Expenditures (1999-2008),” show that transmission investment increased at an annual rate of 12 percent from 1999 to 2003.

The Federal Energy Regulatory Commission (FERC) points out, however, that investment made in 2003 was still below 1975 levels.

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Many transmission projects are currently on the drawing board, but measuring how fast the projects are progressing, what’s being spent and who is going to do what, is tricky.

big picture, difficult to focus

It’s hard to find a lens wide enough to get the big picture of transmission investment. Data is captured following different criteria, for one thing, wrote Energy Security Analysis Inc., in a report prepared for EEI in July 2005. For instance, some reports do not reflect improvements to existing transmission lines.

“If the objective is to present a reasonable estimate of the future expansion of the North American power grid, therefore, the answer is somewhere between the minimalist picture presented by NERC and the very expansive view created by assembling all the projects under serious development,” wrote ESAI.

In the report, ESAI created a transmission development database of close to 3,000 projects.

But even if we only take a “snapshot” of transmission investment in the United States today, it reveals the interesting mix of players and investors involved. Transcos, merchant transmission companies, political entities, participating transmission organizations and conventional IOUs: every area of the country is developing its own solutions to the problem of how to build needed transmission and pay for it.

out west

The Arizona Public Service Company (APS), National Grid USA and the Wyoming Infrastructure Authority (WIA) signed a Memorandum of Understanding (MOU) in early March to collaborate in developing new electric transmission lines between Arizona and Wyoming. This expands on previous announcements by APS to begin development of the TransWest Express Project and announcements by the WIA and National Grid on their joint undertaking of the Wyoming-West transmission study.

Utilities in the West are attracted to Wyoming as an abundant source of low-cost wind and clean coal generation. APS’ TransWest Express Project is designed to help meet growth in demand with that in mind. The company envisions construction of two new 500-kV transmission lines that would run from northern Arizona, through Utah, and up to Wyoming.

Concurrently, the WIA and National Grid are working together in the Wyoming-West Transmission Study to examine possibilities for new transmission lines from Wyoming to major metropolitan markets throughout the West. Recognizing a significant overlap between these two initiatives, the three parties have agreed to work together and actively cooperate to move the initiatives forward.

Formed in 2004 by the state of Wyoming, the WIA can participate in planning, financing, constructing, developing, acquiring, maintaining and operating electric transmission facilities and their supporting infrastructure. Legislation in 2004 provided the WIA with bonding authority and other powers to promote transmission development in the state and throughout the region.

The governors of California, Nevada, Utah and Wyoming are also working together to spearhead development of a new interstate high-voltage electric transmission line across the western U.S., originating in Wyoming with terminal connections in Utah, Nevada and California.

The Rocky Mountain Area Transmission Study (RMATS) is trying to find ways to wheel clean coal and renewable power from the Intermountain West to Utah, Nevada and California. In the West, load has grown more than 60 percent in the last 20 years, while high-voltage transmission has expanded less than 20 percent. California’s power needs alone are projected at 1,000 MW a year of new capacity, net of retirements.

In January 2006, Sierra Pacific Resources announced their intention to develop a coal-fired power complex in eastern Nevada, which would include a 250-mile transmission line. This would be the first electric connection between the northern and southern parts of the state and would also help the company address Nevada’s renewable portfolio standards. The power facility would be the largest energy development project in the state since Hoover Dam.

The cost of the initial power complex and transmission line project is expected to exceed $3 billion.

way-out west: California

Pacific Gas & Electric (PG&E) is planning to build a 230-kV transmission line that will link San Francisco with the peninsula to the south. Estimates for the 27-mile-long Jefferson-Martin line put the project at $220 million.

Twenty-four miles of the Jefferson-Martin line will be underground. A second transmission line, all of it underground, is also expected to open this spring. The 115-kV Potrero-Hunters Point Cable Project will connect two power switchyards in San Francisco.

The two transmission lines are the last of nine that were planned to ensure electric reliability in accordance with the California Independent System Operator.

The Transbay project will also serve San Francisco. “Even though San Francisco is a peninsula, electrically it’s an island,” said Lindsay Martin, Siemens’ business development manager for the high-voltage systems division.

Several transmission projects are in the works for San Francisco.
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The line will deliver power right to the center of the city. “It’s not possible to build a large generating station within the city and building an overhead line in Northern California is almost impossible from a permitting standpoint. This is dial-in energy.”

The Transbay project is scheduled to start in 2006, with a target completion date in 2009. Babcock and Brown is the developer while Siemens is engineering and designing the system. Transbay will be a participating transmission organization (PTO) treated just like any other utility in the Cal ISO grid. Estimated cost for the project is $300 million.

In early March, San Diego Gas & Electric (SDG&E) began construction of the west leg of a 52-mile transmission project that will create a loop around the San Diego region. It’s designed to provide more reliability and access to a proposed power plant in the Otay Mesa area.

Almost 10 miles of the new line will be underground, with the remaining portion placed on new or existing poles within SDG&E’s utility corridor. The project will cost approximately $210 million. The line is scheduled to be in service by the summer of 2007.

in the heartland

In mid-March, emergency conditions on the system that transmits power through part of Wisconsin Public Service Corp.’s territory forced the company to enact a number of contingency plans.

Teresa Mogensen, director of operations for American Transmission Co., said, “The plan of last resort-rotating blackouts-was narrowly avoided. ATC has an ambitious plan to upgrade the transmission system, and situations such as this underscore the need for those improvements.”

Included on the list of ATC projects to strengthen reliability in north-central Wisconsin are the Arrowhead-Weston project, a 220-mile, 345-kV line under construction between Wausau and Duluth, Minn., and the Venus-Metonga project, an $8.7 million project. Work on this 13-mile, 138-kV line should begin later this year. Several other 345-kV lines have been proposed.

ATC was the first multi-state, transmission-only utility in the United States. The company owns approximately 8,900 miles of transmission lines and 460 substations with a total investment of $1.3 billion in facilities in portions of Wisconsin, Michigan’s Upper Peninsula and Illinois.

BPA and creative financing

The Bonneville Power Administration owns and operates 75 percent of the Pacific Northwest’s high-voltage grid. That includes 15,000 miles of transmission line and 285 substations in Oregon, Washington, Idaho, Montana and sections of Wyoming, Nevada, Utah and California.

Since 2001, BPA has invested more than $1 billion in transmission system projects. The Kangley-Echo Lake 500-kV line was the first major transmission line built by BPA’s Transmission Business Line (TBL) in 16 years. The Grand Coulee-Bell 500-kV transmission line project was energized in December 2004. It came in at $16 million under budget.

Schultz-Wautoma is the third major transmission project BPA has completed in the last five years. The line was developed to improve reliability and add additional capacity to the grid in central Washington.

The issue is money and how to get it. BPA has a statutory cap on Treasury borrowing of $3.75 billion, which Congress increased by $700 million three years ago. But BPA still has to be creative; to construct the Schultz-Wautoma 500-kV line they turned to non-federal financing.

Portions of the project are financed under a lease-purchase agreement with a private financier, while BPA owns and finances other parts of the project through traditional U.S. Treasury borrowing. BPA will pay back $119 million in taxable bonds that were issued in March 2004 and will lease the assets for 30 years, but will manage construction and exclusively operate the line. At the end of the lease, after the bonds are repaid, BPA has the option to purchase the line.

InfraSource Services Inc., a specialty contractor servicing utility transmission and distribution infrastructure in the United States, completed construction of the Schultz-Wautoma transmission line on schedule and under budget. The line was energized on December 2005 at a cost of $175 million.

InfraSource has built more than 400 miles of transmission in all regions of the country and was recently awarded two significant transmission line projects in Texas at a total estimated value of $35 million.

one unhappy camper: Maine

Lawmakers in Maine are considering a bill that would allow the state to drop out of ISO New England. Maine is fighting with southern New England over a rate increase to be imposed by the ISO.

FERC was holding talks to resolve differences over the ISO’s plan to increase rates in a year, but the Maine PUC abandoned the settlement talks and now the issue is heading to the court.

A manufacturers’ association has suggested that Maine pull out of the New England power grid and plug into Canada’s. The Industrial Energy Consumer Group says that while existing transmission lines can’t handle that connection, a new transmission line will be built in a couple of years and it could. The group says that New Brunswick and Nova Scotia would make better partners for Maine because of similar industries and populations.

Discontent has also manifested at the federal level. U.S. Rep. Tom Allen (D-ME) has joined Maine Public Utilities Commission Chairman Kurt Adams and others who argue that locational installed capacity (LICAP) will cause the largest rate hike in New England history without giving energy consumers any guarantee that it will result in additional generating capacity to meet future demand. Lawmakers are requesting an oversight hearing on RTOs.

“Nationwide, RTO administrative costs have reportedly more than doubled in recent years, rising from $425 million in 2000 to $1.04 billion in 2004,” Rep. Allen said. “I believe that the Energy and Commerce Committee has a responsibility to find out whether RTOs are doing the job they were created to do.”

L.I. plugs into N.J.

The Neptune Regional Transmission System (RTS) is building a 660-MW line from New Jersey to Long Island, N.Y., to help meet the generation needs of the Long Island Power Authority (LIPA).

Neptune RTS chose Siemens Power Transmission and Distribution to construct the undersea high voltage direct current (HVDC) transmission link, connecting Long Island to the mainland. Neptune RTS, the project developer, will make the electrical connection available to supply power from the PJM Interconnection grid to cover increasing demand on Long Island. Siemens will also provide the initial operation and maintenance services for the system during a five-year period.

Neptune and LIPA signed a 20-year contract, giving LIPA all transmission rights when the line goes into service. Project construction began in the fall of 2005, with installation of the submarine cable scheduled to begin this summer. Construction should be finalized in early 2007.

“It’s the most important energy project in the history of Long Island because for the first time, Long Island will become part of the national energy grid, and for the first time, we’ll be able to import power from the south, where it’s a heck of a lot cheaper,” said LIPA chairman Richard Kessel.

At the other end of the cable, things weren’t so rosy. The PJM Interconnection urged federal regulators to reject the interconnection service agreement (ISA) request.

Entering into an ISA without finishing ongoing transmission studies would unfairly shift costs related to the proposed Neptune project onto other transmission owners and users, PJM said in a Federal Energy Regulatory Commission filing in January of this year. FERC backed Neptune, and ordered PJM to provide the interconnection.

“I do not think there is any energy project, anywhere, that has ever been more important,” said LIPA’s Kessel.

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