PJM backs LS Power for key transmission project

OREANDA-NEWS. April 29, 2015. The PJM Interconnection plans to recommend that developer LS Power build a 230kV underwater transmission line to relieve constraints near a major nuclear complex in New Jersey, a reversal from earlier plans to award the project to incumbent utility Public Service Electric & Gas (PSE&G).

PJM staff endorsed the LS Power project after finding its flexibility made it more likely to be permitted than other proposals. PJM cited greater cost certainty, given LS Power's commitment to cap the costs of the submarine line under the Delaware river at \\$146mn. The full costs of the project will rise to \\$263mn-\\$283mn after including related substation upgrades and reactive power equipment.

The selection process for the project, which will relieve a constraint near the 3,800MW Artificial Island nuclear complex, has been closely watched because it is the first time PJM has opened up transmission project to competition. The Federal Energy Regulatory Commission has required grid operators and electric utilities to make transmission projects more competitive.

But PJM can expect complaints that it failed to follow its own rules in choosing among 26 competing proposals. The grid operator last year had endorsed a 500kV overhead transmission line proposal by PSE&G. But that decision faced criticism because the recommendation only came after the utility's \\$1bn proposal was cut down to \\$297mn by PJM staff.

PJM's board last summer deferred a vote on whether to approve the 500kV project, citing criticisms over about the selection process and a last-minute commitment from LS Power to cap the costs of its 230kV transmission proposal.

The grid operator in response allowed four finalists to submit new cost caps for their proposals and launched a new review of which project to endorse. PSE&G in its revised proposal said it would cap the costs of an overhead transmission line at \\$221mn, with total costs estimated at \\$277mn-\\$285mn.

PJM staff at a meeting today to discuss the Artificial Island project said the two proposals both provided the lowest costs among the four finalists, but LS Power had fewer exclusions on how costs might escalate. The LS Power proposal, which entails a power line installed under the Delaware, also minimized permitting risks and offered other reliability benefits, staff found.

The endorsement prompted criticism from officials at PSE&G, who questioned if the full costs of installing the transmission line had been adequately accounted for.

Delaware Public Service Commission utility analyst John Farber also worried that because the project is lower voltage, most of its costs under PJM methodology would be allocated to customers in Delaware.

PJM staff will recommend building the project at the next meeting of its board on 20 May. The project is expected to take about four years to obtain required permits and complete construction.