NJ Utility to Benefit From Upgrades to Regional Power Grid
With the retirement of many coal plants, the operator of the nation’s largest power grid has ordered $2 billion in upgrades to the region’s transmission system, including a $37.5 million project in Morris County.
Jersey Central Power & Light’s 6.4-mile 230-kilovolt line from Whippany to Montville was one of 130 projects approved by the PJM Interconnection Board last week as part of its efforts to maintain the reliability of the system serving more than 60 million people in 13 states and Washington D.C.
The JCP&L project was the only one involving a utility in New Jersey, where other proposed transmission upgrades of both electricity and natural gas have churned up controversy and opposition.
It also comes at a time when big energy companies are shifting the bulk of their capital investments into transmission lines rather than power plants, a trend spurred by falling prices for electricity and the handing out of special incentive rates from the Federal Energy Regulatory Commission to modernize the nation’s power grid.
Beyond dealing with the retirement of older power plants, the transmission projects could help reduce congestion on the grid, a problem that costs New Jersey ratepayers more than $1 billion each year.
The $2 billion worth of projects approved by PJM is one of the biggest upgrades ordered by the grid operator, according to Paula DuPont Kidd, a spokeswoman for PJM. On a dollar basis, more than half of the improvements are in Ohio. The proposed retirement of generation along Lake Erie will require significant transmission upgrades, particularly around Cleveland.
The northern Ohio region took a double hit when PJM released Friday the results of its capacity auction -- an event that sets prices power suppliers will earn for providing the reserve power needed to meet peak electricity demand. The prices there will be $357 per megawatt hour, a significant spike over the $225 per megawatt hour capacity prices that suppliers got in northern New Jersey last year, which generated a lot of controversy. The spike in Ohio was attributed to the retirement of numerous coal plants.
Since November, generator owners in PJM have announced plans to retire nearly 14,000 megawatts of capacity between May 2012 and the end of 2015 -- enough power to supply Indiana’s electricity needs for a year.
Despite those retirements, PJM officials say they have plenty of resources to keep the lights on. "The transmission upgrades the board has approved ensure we will continue to deliver power to wherever people need it," said Terry Boston, PJM president and chief executive officer.
Jeff Tittel, director of the New Jersey Sierra Club, had a different view. "It’s more about giving an automatic return to utilities for building power lines so they can make more money than they can for selling electricity," he said.
New Jersey regulators also are concerned. The Board of Public Utilities has repeatedly contested special incentive rates awarded by FERC to Public Service Electric & Gas for a series of transmission projects, primarily because they give the utility a higher rate of return on the investments they make.
For instance, PSE&G will earn a 12.93 percent rate of return on its $790 million Susquehanna-Roseland project, a transmission line that cuts through three areas of the national park system in the northern New Jersey Highlands. Typically, the utility earns a 11.68 rate of return on its transmission investments. Environmental groups are challenging the project in the courts.
JCP&L’s Whippany to Montville project is part of a $200 million, multiyear program of targeted transmission and subtransmission upgrades, which was started last year, according to Ron Morano, a spokesman for the utility, which serves 1 million customers.
Morano said the program encompasses 50 projects, which include equipment upgrades, adding equipment at substations, and new transmission lines. Morano did not respond to requests to answer what the impact of the project would be on customers’ bills.
JCP&L has been under fire from state regulators for its slow response in responding to power outages last year, first from Hurricane Irene, and then from a rare October snowstorm. In addition, the state Division of Rate Counsel has accused the utility of overearning on its regulated rate of return, an issue that is subject to an ongoing proceeding
PSE&G also plans to ramp up spending on its electric and gas distribution systems over the next three years, targeting $5.4 billion in expenditures, two-thirds of which will be spent on electric transmission.
At an analysts’ conference in March, PSE&G officials said the investments are being driven by mandates from PJM to improve reliability and to replace aging infrastructure. By 2014, transmission is expected to make up 41 percent of the utility’s rate base, nearly doubling what it was in 2011.