American Electric Power (NYSE:AEP) and Great Plains Energy (NYSE:GXP) have joined forces to form a limited-liability company, Transource Energy (Transource), that will build and invest in transmission infrastructure.
“Obviously, for reasons of wind [and] renewables integration, congestion relief, reliability needs, there is a tremendous amount of transmission that’s being proposed and that we believe will be built,” Mike Deggendorf, Kansas City Power & Light’s (KCP&L) senior vice president for delivery, told TransmissionHub on April 4.
KCP&L is a regulated electric utility subsidiary of Great Plains Energy.
“The main benefit that we see [to a new company] is an ability to meet a growing market in a changing, competitive landscape,” Deggendorf said.
He said the parent companies have already received “notices to construct” two projects from SPP.
The Sibley-Nebraska City line is a 175-mile, 345-kV line linking a substation near Nebraska City, Neb., with a substation near Sibley, Mo. Transource would construct and own approximately 170 miles of the project. Omaha Public Power District would construct the remainder of the transmission line. The project, estimated to cost approximately $385m, has an anticipated in-service date of 2017.
The other project, the Iatan-Nashua line, is a 30-mile, 345-kV line from a substation near Weston, Mo., to a substation near Smithville, Mo. The Iatan — Nashua project, estimated to cost approximately $54m, has an anticipated in-service date of 2015.
Both transmission projects are required by SPP and are necessary to improve reliability, reduce congestion on the grid and provide future access to affordable power for electric utility customers throughout the region, according to SPP. Transource is going to be pursuing regulatory approvals with the Missouri Public Service Commission to complete the transfer of the two SPP projects to Transource, Deggendorf said.
The new company will also pursue competitive transmission projects in the Southwest Power Pool (SPP), Midwest ISO (MISO), and PJM Interconnection (PJM) regions, with the potential for expanding to other regions in the future.
“Just in the three target regions we’re looking at initially, there’s about $50bn worth of transmission that needs to be built out over the next 30 years,” Deggendorf said. The combined strength of the two parent companies will provide Transource with access to the “significant amounts of capital” that will be required to build the transmission necessary to bring “low-cost power to higher-cost markets,” he added.
FERC Order 1000 will also create a more competitive landscape for transmission, he said. “The removal of the right of first refusal, the markets being developed with a cost-allocation framework, all of those components, we believe, are introduced to encourage the development of the transmission system,” he said.
AEP owns 86.5% of the new company, while Great Plains Energy owns 13.5%.