Lower-Priced PSEG Transmission Project Still Raises Cost Concerns

Tom Johnson | March 6, 2017 | Energy & Environment
First PJM grid upgrade to be competitively bid out still too rich for Delaware’s blood

The regional operator of the power grid is reviving a controversial transmission project involving the complex of nuclear plants operated by PSEG Power in South Jersey.

The staff of PJM Interconnection is recommending a slimmed-down version of the project, which has generated heated debate because costs have increased significantly since it was initially announced back in 2015. That led to the project being put on hold and a new review undertaken this past August.

Most of the dispute has revolved around allocation of costs among ratepayers in the region, a particular concern in Delaware — and one apparently not allayed by changes detailed by the staff on Friday. The project is viewed as upgrading the reliability of the power grid by PJM.

In a statement issued late Friday, Delaware Gov. John Carney said the project, as currently financed, would place an unjust burden on residential and industrial ratepayers in the state. “Delaware businesses and families would see higher monthly electric bills and receive next to nothing in return in the way of direct benefit,’’ the governor said.

The proposal is being closely watched by the industry and energy analysts because it is the first transmission project to be bid out competitively, instead of being awarded automatically to the incumbent utility (in this case, Atlantic City Electric).

The latest recommendation, which goes to the full PJM board, trims the total project cost that had escalated to $418 million to a cap of $278 million. The staff recommended a new transmission line from the nuclear power plant be built by LS Power, instead of one proposed by Public Service Electric & Gas, which, like PSEG Power, is a subsidiary of Newark- based Public Service Enterprise Group.

In the latest version, the interconnection point would change from the Salem unit to Hope Creek plant. It also determined that previously suggested upgrades were unnecessary, and an alternative transmission route proposed by PSE&G would provide less cost certainty than the one proposed by LS Power.

The abandonment of the PSE&G route also eliminates the line going through the Supawna Meadows National Wildlife Refuge in South Jersey, a route that raised concerns among regulators at the New Jersey Board of Public Utilities. PSE&G had sought to address those concerns by altering its original route on a new right-of-way outside of Supawna.

In its comments, PSE&G insisted its route provided more stability for the power grid and greater reliability than the proposal submitted by LS Power.

Transmission work is increasingly lucrative for electric utilities. In this instance, if the recommendation is adopted, PSE&G’s project slice would be $132 million. The utility now gets 44 percent of its rate base from transmission, according to a disclosure during its earnings call last week.

The recommendations are scheduled to be taken up by the PJM Board at a meeting on April 6. The issue of cost allocations remains to be determined by the Federal Energy Regulatory Commission, which currently lacks a quorum.

The PJM staff recommendation revised the project in-service date to June 1, 2020.