Snapshot: Estimated cost of CREZ lines increasing

The cost of building out several competitive renewable energy zone (CREZ) lines in Texas is apparently going to be higher than originally estimated. How much higher varies widely.

A review of one year compliance filings by TransmissionHub revealed that current cost estimates contained in those filings are, in almost all cases, higher than the estimates contained in the Public Utility Commission of Texas (PUCT) orders approving the projects.

Of the projects reviewed for this article, the largest percentage increases were reported by Wind Energy Transmission Texas (WETT) for three of its CREZ projects. The original cost estimate for the 143-mile Long Draw to Sand Bluff, Sand Bluff to Divide, and Sand Bluff to Bearkat 345-kV lines increased nearly 20%, from $221.6m in the original order to $265.9m in the company’s compliance filing dated April 16.

The original cost estimate for the 74-mile Panhandle AD to Central B (Cottonwood to Dermott) 345-kV line increased more than 17%, from $145m in the original order to $169.8m in the company’s one year compliance filing dated Oct. 19, 2011.

The original cost estimate for the 156-mile Scurry County South – Long Draw – Grelton – Odessa 345-kV line increased more than 14%, from $259.7m in the original order to $296.9m in the company’s one year compliance filing dated Jan. 27.

Costs have increased over time since the original cost estimates were prepared, a spokseperson for WETT told TransmissionHub on April 23.

At the opposite end of the scale are projects being developed by Lone Star Transmission and South Texas Electric Cooperative (STEC).

The 311-mile Central A to Central C and Central C to Sam Switch and Sam Switch to Navarro 345-kV line being built by Lone Star Transmission, the longest and most expensive of the projects reviewed for this article, was originally estimated to cost $767.8m. The company’s compliance filing dated Jan. 27 included a revised estimate of $789.3m, slightly less than 3% more than the original estimate.

The Bakersfield to Big Hill 112-mile, 345-kV project being constructed by STEC reflected an even smaller increase in estimated cost. As approved by the PUCT, the project was estimated to cost $134m. The company’s compliance filing dated March 22 included a revised estimate of $137.3m, reflecting a 2.5% increase.

Because STEC has not yet completed any CREZ projects, the developer hasn’t been able to identify the specific reasons the cost estimates haven’t needed major modifications, a spokesperson for STEC told TransmissionHub on April 20.

Electric Transmission Texas’ (ETT) 66-mile Tesla to Riley 345-kV project costs are estimated to increase nearly 18% from the original estimate, according to the company’s Dec. 20, 2011 compliance filing. The original estimated cost of $111.8m was revised upward to $131.6m.

“On average, our cost increases are representative of what’s happening to all the providers in this [CREZ] process,” a spokesperson for ETT told TransmissionHub on April 20. “We always knew the initial estimate was artificially low [and that] it would have to be adjusted as we moved forward.”

In addition to higher-than-anticipated costs of acquiring the needed land, ERCOT required the addition of advanced smart grid transmission technologies that weren’t included in the original estimate, the spokesperson continued.

Finally, the spokesperson cited upward pressure on the cost and availability of labor and material that comes from the “concurrent construction of over 2,800 miles of [CREZ] lines.”

Estimated costs for the company’s Tesla to Edith Clark to Clear Crossing to West Shackelford 345-kV line could not be meaningfully compared because the final route of the line had not been determined when the PUCT issued its order approving the project.

Calls seeking comment from the other companies involved were not returned by press time.

Cross Texas Transmission also showed increases in the estimated cost for two projects.

The original estimate of $137.6m for the 85-mile Silverton to Tesla 345-kV project was revised to $153.3m in the company’s Jan. 18 compliance filing, an increase of approximately 11.4%, while the original estimate of $60.2m for the Gray to White Deer 345-kV project was revised to $70.6m in the company’s March 6 filing, an increase of approximately 17.3%.

A PUCT spokesperson told TransmissionHub April 20 there is no anticipation of an expected range of variation, though “you’d like to think the original estimates are good ones.”

“Any time there’s going to be something that’s out of the norm, it’s going to require a close look,” the spokesperson said, adding that the specific reasons for the increases may not be known until the transmission providers file their final requests for cost recovery with the PUCT after the projects are complete.

ETT is a joint venture between subsidiaries of American Electric Power (NYSE:AEP) and MidAmerican Energy Holdings Company (MidAmerican).