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Grid Operator Green-Lights PSE&G's Transmission Upgrade Project

Tom Johnson | December 12, 2013

New Jersey's largest utility wants to spend $1.2 billion, critics argue that new sources of distributed power eliminate need for upgrades

ralph izzo pseg
PSEG President, Chairman, and CEO Ralph Izzo

The regional operator of the nation’s largest power grid yesterday approved a $1.2 billion transmission project by Public Service Electric & Gas, the latest in a series of upgrades to its system sought by the state’s largest utility.

The project is one of many approved by PJM Interconnection that will require a $4.6 billion investment by utilities serving more than 61 million customers in 13 states. It continues a trend to upgrade the system used to deliver electricity from power plants to customers, a development that has led to $28.9 billion being invested in the power grid since 2000.

Those transmission projects have generated heated controversy, including some in New Jersey, primarily because residents oppose upgrades to the transmission lines in their neighborhoods. What's more, critics argue that the projects are not needed, with the state moving to more forms of distributed generation, such as solar power.

PJM argued otherwise.

“With more than 20,000 megawatts of generation retiring in the PJM region and new gas plants being built in various locations to replace them, it’s essential for the transmission system to keep pace,’’ said Terry Boston, president and chief executive officer of PJM. One megawatt is enough to supply power to about 1,000 homes.

Backers of the transmission upgrades say they will help lower utility bills by reducing congestion on the power grid, a problem that tends to spike energy costs.

Paul Patterson, an energy analyst for Glenrock Associates, said the projects are a key part of the system. ”Transmission is the backbone of the electric system,’’ he said. “It should enhance reliability.’’

More than $3 billion of the new transmission projects involve upgrades to connect to new generating facilities, according to PJM. None, however, include the three projects approved by PJM in New Jersey, two of which involve the state’s second-largest utility, Jersey Central Power & Light.

With prices for power produced by generating plants dropping, many utilities whose parent companies still own power plants are shifting capital investments to transmission projects.

PSE&G’s approved project involves transmission links between its existing Linden and Bergen power plants, including upgrading ties to Newark Airport, the Hudson power station, and connections to New York City, according to the utility.

“The new project continues to place PSE&G at the forefront of efforts to enhance and upgrade our nation’s transmission infrastructure,’’ said Ralph Izzo, chairman, president, and chief executive officer of PSEG, the utility’s parent company.

The utility certainly is not shy about investing in its infrastructure. By 2015, it has told analysts it expects to spend $3.4 billion improving its transmission system.

The latest $1.2 billion investment by the utility will negate the need for other planned transmission projects, according to PSE&G, although officials declined to say what those other upgrades may cost. Still, the utility said its planned capital spending will increase less than the original costs associated with the project,

About half of the project costs will be spread among all ratepayers in the PJM region, with the rest borne by customers in New Jersey, according to utility officials.

Besides PSE&G, PJM approved two more modest projects involving JCP&L. They involve an $8.5 million line connecting to a Martinsville substation and another $6 million project to build a new transformer in Chester.

The extent of the projects may be surprising to critics of PJM, who have often criticized it for approving new projects even when some estimates show demand for electricity is dropping. A draft 2014 PJM report echoes those arguments, noting demand is expected to increase by only 1 percent over the next 10 years and by 0.9 percent over the next 15 years. In 2014, PJM projects that load will drop by 0.8 percent.

Paula DuPont Kidd, a spokeswoman for PJM, however, defended the grid upgrades. “Not all of the transmission upgrades are directly related to load growth,’’ she said.

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