Permit Delays Could Put Regional Grid at Risk

Insiders worry that without timely construction of transmission line through Highlands, power reliability will be a major issue by 2012

For several years now, energy experts have been warning of potential power outages in northern New Jersey because of congested high-voltage transmission lines and problems with wheeling electricity into the region from the west.

By the summer of 2012, it may become known whether their warnings were accurate.

With Public Service Electric & Gas saying delays in obtaining necessary environmental permits will prevent it from completing construction of controversial transmission lines through the heart of New Jersey Highlands for at least three years, industry insiders are wondering what it means for the reliability of the regional power grid.

The issue arose repeatedly during the earnings call for PSE&G’s parent, Public Service Enterprise Group, last Friday. Dan Eggers, an analyst with Credit Suisse, asked Ralph Izzo, the CEO and president of PSEG, whether it would affect the system reliability of PJM Interconnection, the independent operator of the power grid serving more than 50 million people, and of other capacity options in the region.

“Well, yes and yes,” replied Izzo. “I mean, we weren’t building this line because we thought had spare time on our hands. PJM does a fairly rigorous engineering analysis and there are reliability concerns. Now that doesn’t mean that on June 12 of 2012, there will be blackouts. I mean this is all risk-based analysis, and clearly the longer you allow uncorrected constraints to persist, the more the risk is of a significant event.

“It will have increased risk of reliability,” he added, “but I think I am repeating myself too many times that the lights will definitely go out.”

Impacts of Delay

Steve Goldenberg, a lawyer representing the Large Energy Users Coalition and frequent critic of PSEG, said he agreed with Izzo’s forecast.

“I think he’s right. It’s my understanding that PJM’s projections reliability problems could begin as early as 2012,” Goldenberg said. “Therefore, the state should be concerned about the reliability of the system being at risk if it delays construction of these lines.”

PJM sidestepped the question. “Obviously, we are aware of the delays,” said Paula DuPont Kidd, a spokeswoman for the agency. “We are in the midst of studying the impact of the delays.”

Beyond increased reliability problems, the delay also could mean higher electric bills for consumers, who already have been hit with price increases because of congestion on the power grid in parts of New Jersey.

Izzo agreed the delay could put upward pressure on capacity prices, which have added billions of dollars to what consumers pay on their electric bills because of changes PJM has made to encourage new power plants to be built.

Hot Summer, Record Demand

This summer, the power grid has experienced some of its highest demand ever as the region has struggled through record-breaking heat waves in June and parts of July. PJM’s preliminary peak demand for electricity was 136,398 megawatts at 5 p.m. on July 6, higher than the peak demand forecast for this summer by the grid operator, and the third-highest level ever.

In May, PSEG announced it was withdrawing permits it needed to build a 45-mile section of the line through the Highlands, primarily because the National Parks Service said it would not finish a review of the permits until 2012. The $750 million project, which stretches from eastern Pennsylvania to Roseland in Essex County, has generated fierce opposition from the 16 towns it runs through and most of the state’s environmental organizations. Earlier this year, the project won approval from the New Jersey Board of Public Utilities, which said the lines were needed to maintain reliability of the power grid.

Jeff Tittel, executive director of the New Jersey Sierra Club, said the delay undermines the notion that reliability problems will occur if it is not built by the summer of 2012. He argued the project should be put on hold; otherwise, it would jeopardize New Jersey’s efforts to adopt cleaner and renewable forms of energy.