Estimated cost of Texas CREZ projects declines

The most recent cost estimate for Texas’ competitive renewable energy zone (CREZ) transmission projects dropped almost $21m during the first quarter of 2012.

Data published in quarterly CREZ reports prepared by the Public Utility Commission of Texas (PUCT) shows that, as of the end of April, the total “current estimate” for projects being built by 10 developers was $6.93bn, a reduction from the $6.95bn estimate at the end of January, and approximately 2% below the companies’ baseline estimates for the projects.

Baseline estimates, which serve as reference points to track changes to a project, are updated at project start, submittal of the application for the certificate of convenience and necessity (CCN), CCN approval, and six months after CCN approval, according to the PUCT.

The current and baseline estimates differ from the original cost estimate of $4.9bn used when the PUCT ordered the CREZ projects in 2008. The $4.9bn figure resulted from the CREZ transmission optimization (CTO) study, “a planning exercise to develop multiple transmission plan scenarios from which to select the most cost effective and optimal scenario for execution,” according to the CREZ quarterly report.

The CTO estimate “included very preliminary cost estimates and designated the general locations of substations and transmission routes from a planning-level perspective,” the CREZ report said. Planners noted that the actual cost figure could be expected to range from 20% below the CTO estimate to 40% above the estimate, and that the $4.9bn figure was expected to rise.

A spokesperson for developer Oncor, which is responsible for nearly $2bn of CREZ projects, told TransmissionHub on July 12 that Oncor’s original cost estimate assumed the shortest possible route for each of its projects. However, the spokesperson said, not one of its preferred routes was ultimately chosen. Every route selected by the PUCT was longer than originally anticipated, and had higher costs as a result.

Each CREZ developer provides the PUCT with monthly updates of their current estimates, revised to more accurately reflect current costs and conditions, the spokesperson said. Those monthly updates are aggregated by the PUCT and published every three months.

Current estimates have steadily been revised upward since the first revised figure of $6.56bn was published in the April 2011 CREZ report. The estimated total rose to $6.79bn in July 2011, to $6.87bn in October 2011, and to $6.95bn in January 2012.

The decline to $6.93bn in the April 2012 CREZ report marks the first decline.

Oncor’s spokesperson cautioned against reading too much into those figures. Costs vary from month to month and may be higher or lower than estimated depending on factors ranging from weather to acquisition costs for rights-of-way and materials to the wildfires of 2011, the spokesperson continued.

“It would be misleading to draw any conclusions on how that’s going to affect the bottom line of the projects” at this time, the spokesperson said. “We aren’t going to know the true cost of the lines until they’re all in service.”