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NJ Consumers Could See Small Hike in Electric Bills With Grid Upgrade

Tom Johnson | March 11, 2013

Reliability and retirement of older power plants helping drive new transmission projects.

With many power plants being shut down because of tougher environmental regulations at the state and federal levels, the operator of the nation’s largest power grid is authorizing more than $2.4 billion in new transmission projects in the region, including many in New Jersey.

The retirement of the power plants is not unexpected, given the more stringent rules to control emissions from older, more polluting plants. Also contributing to the phase-out: historically low natural-gas prices, which have made it tougher for coal plants to compete with the cheaper fuel.

The upgrades, however, could modestly increase electric bills for consumers, who already pay some of the highest energy bills in the nation.

The grid operator, PJM Interconnection, says it has identified more than 130 updates required to deal with potential reliability problems resulting from the power plan retirements. The projects range from equipment upgrades, new substations, substation expansion, rebuilding existing lines, and adding new transmission lines.

The planned improvements come at a time when some of the region’s big energy companies are investing the bulk of their capital into their transmission systems, a strategy that reaps better returns and involves fewer risks than building new conventional power plants. These have suffered from lower electricity prices resulting from the discovery of massive natural gas deposits in the Marcellus Shale region in Pennsylvania, New York, and elsewhere.

The advantage of the new approach rewards utilities with a higher rate of return than they would otherwise receive from their state regulatory authorities. Transmission projects are subject to review by the Federal Energy Regulatory Commission (FERC), an agency that consumers view as more sympathetic to improving the reliability of the power grid on the part of the utilities.

Some of the projects in the PJM report involve building new transmission lines that have typically generated opposition from local officials and residents, such as Susquehanna-Roseland, which crosses three national park systems but has been approved and is expected to be operational in June 2015.

The transmission projects have come under particularly harsh criticism from environmental groups, who argue that they shift needed expenditures away from renewable energy and energy conservation programs that could reduce the need for such upgrades.

“We’ve never had to cope with generation retirements or fuel shifts on this scale,’’ said Steve Herling, PJM vice president of transmission planning. “The fact that we’re able to respond to these changes so efficiently shows the strength of the planning process and the skills of planners both in PJM and the 14 transmission centers within the regions."

According to PJM, about $174 million worth of major projects -- described as exceeding $5 million apiece -- are required in the Mid-Atlantic region to solve reliability problems caused by the retirement of generating units in Pennsylvania and New Jersey.

“The absence of these units has a quantifiable impact on baseline reliability in New Jersey,’’ according to the 1,000-page report on transmission planning released by PJM last week, noting that a significant number of plant retirements could occur in northern New Jersey. Those retirements could affect consumer bills in a region already suffering from high electric rates because of congestion on the power grid.

Between November 1, 2011 and December 31, 2012, PJM received retirement requests for 13,868 megawattts of generation -- about enough to supply Indiana’s needs for a year. Most of the retirement requests were in the western region of PJM, but several plants owned by PSEG Power, a subsidiary of Public Service Enterprise Group, also could be included. PSEG Power has not made public which of its older power plants it plans to retire; several would have to be upgraded to meet tougher state pollution requirements.

Three of the state’s four electric utilities all have transmission projects that may move ahead as a result of the PJM decision. For instance, Jersey Central Power & Light, the state’s second-largest utility, with more than 1 million customers, has a project in the queue to build a 6.4-mile extension of a high-voltage line from Whippany to Montville.

Public Service Electric & Gas has many projects in the transmission queue, although it is uncertain which will move ahead. During an investor’s conference at the beginning of the month, PSE&G executives said they expect to file with FERC about $1.5 billion in new transmission projects.

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