FirstEnergy to spend up to $900m on transmission upgrades to improve reliability

FirstEnergy (NYSE:FE) CEO Anthony Alexander said May 1 that the company has identified nearly three dozen transmission projects that are expected to enhance reliability for its operating utilities within American Transmission Systems Inc.’s (ATSI) footprint.

“Our transmission group, working with PJM [Interconnection], has identified a number of transmission projects that can be implemented over the next several years and are expected to also improve reliability in the ATSI zone,” Alexander said during the company’s first quarter earnings call. Utilities in the ATSI zone withdrew from the Midwest ISO and integrated into PJM in June 2011.

The transmission projects will include transmission lines, substation upgrades, and voltage enhancements, a FirstEnergy spokesperson told TransmissionHub on May 2.

“While we do not have final estimates for the costs of these transmission projects, we are currently projecting a capital spend of between $700m and $900m over the next four to five years,” Alexander said. “We expect to earn a return on these transmission investments from the time we begin construction.”

In addition to upgrading transmission, Alexander said that five generating units that had been targeted for closure by Sept. 1 because of the EPA’s air quality regulations will remain in operation for approximately three more years. Seven other units slated for retirement will shut down as planned, and two others will be converted to synchronous condensers.

The company decided to deactivate the units rather than spend the funds necessary to retrofit them to comply with the EPA’s mercury and air toxics standards (MATS) and other air quality regulations. Those regulations will take effect in 2014, or as late as 2015 if EPA approves an extension.

However, PJM determined that shutting the units down would cause major reliability concerns for the regional grid, so FirstEnergy will keep its Ashtabula unit 5, Lakeshore unit 18, and Eastlake units 1 – 3 in operation through early 2015. Together, those units produce 885 MW, which Alexander said would help ensure reliable electric service for the Cleveland region.

The units will remain available under “reliability must-run” (RMR) arrangements with PJM, and will only operate when PJM determines they are needed.

“We anticipate that the RMR arrangements will be structured so that PJM will compensate us to keep the units available for operation through early 2015,” Alexander said. “At that time we plan to go forward with retiring those units.”

In addition, FirstEnergy announced it had filed an application in March to add approximately 800 MW of new combustion turbine peaking generation at its existing Eastlake plant and intends to offer the generation into PJM’s upcoming capacity auction.

“If [the units] clear the auction, we would begin construction efforts to meet a targeted in-service date of spring 2015,” Alexander said.