Regional Power-Grid Operator Unveils $1 Billion in Upgrades

Tom Johnson | December 6, 2012 | Energy & Environment
Nearly half of planned projects will improve transmission network, boost reliability in NJ

PJM Interconnection, the operator of the regional power grid, yesterday approved $1 billion worth of transmission upgrades, nearly half of which will be in New Jersey.

The upgrades address reliability problems identified by the PJM, but they also reflect the changing nature of the electricity sector, which is expected to see retirement of old, mostly coal-powered power plants.

The projects also continue a trend in which energy companies have been shifting capital spending from building new power plants – an investment made more risky by low prices for electricity – to transmission projects that guarantee a safe, if less profitable, rate of return.

The transmission projects will boost bills for ratepayers, if only modestly.

“The regional transmission expansion planning process keeps us on a steady course of focusing on long-term reliability even amid a sea of changes like those we’ve seen this past year,’’ said Terry Boston, PJM president and chief executive officer, in a press release issued by the organization late yesterday.

The projects, in part, also address a problem identified by utilities in the wake of Hurricane Sandy — a need to build to guard against failure of substations. During Sandy, 59 utility substations were flooded, resulting in widespread outages.

Beyond increased reliability, construction of new transmission lines has been touted by utilities and PJM as a way to reduce congestion on the power grid, a problem that spikes electric bills for consumers, particularly for those in New Jersey.

Given that PJM oversees the power grid serving more than 60 million people in 13 states, including the District of Columbia, it is noteworthy that half of the infrastructure investments are to be made in the Garden State.

The plans also come at a time when state legislators and regulators are debating how to improve the reliability of the power grid, which left 2.7 million customers without power after Hurricane Sandy and a nor’easter a week later.

The yet–to-be-answered question is where limited public dollars are going to be invested to improve the reliability of the power grid.

Four of the five transmission projects approved by PJM involve upgrades in the transmission zone of Public Service Electric & Gas, including a $250 million proposal to reconfigure four separate substations in northern New Jersey, as well as building a new transmission line to serve Liberty International Airport in Newark.

The need to build redundancy into the power grid was a recurrent theme at a utility conference sponsored by the New Jersey Alliance for Action on Tuesday.

Ralph LaRossa, PSE&G’s president and chief operating officer, hinted that the utility might embark on new transmission projects even as it moves forward on a number of big-ticket items, including the $800 million Susquehanna-Roseland project, which began construction in recent days.

“We continue to see additional projects that are out there,’’ LaRossa said, without identifying any specific potential projects. Hurricane Sandy has put a new focus on the need to improve the transmission system, but analysts said the move was inevitable, given growing power demand.

“With or without Sandy, there is a need for infrastructure improvements,’’ said Paul Patterson, an energy analyst with Glenrock Associates, based in New York.

The expansion of transmission projects will include improvements and changes to substations, transformers and existing transmission facilities. Since 2000, PJM has authorized $23 billion in transmission additions and upgrades.

PSE&G, the state’s largest utility with 2.2 million customers, is among the most aggressive companies within the PJM in building out its transmission lines, which send power from generating stations to substations. By 2014, transmission is expected to make up 41 percent of PSE&G’s rate base, nearly doubling the 21 percent it accounted for in 2011.

Besides the $250 million project involving four substations, PSE&G will undertake a $10 million project in South Jersey to upgrade a transmission line there; spend $47 million to upgrade transmission lines in Central Jersey; and allot $105 million to improve substations in Cedar Grove and northern New Jersey.

PJM also ordered Jersey Central Power & Light to install a new transmission line near a substation in Sayreville, according to Ron Morano, spokesman for the utility. The project is expected to cost nearly $11 million.