Cascade Crossing project delayed at least 3 years – PGE

Portland General Electric (NYSE:POR) announced that construction of the Cascade Crossing transmission project, which is being scaled back under a memorandum of understanding (MOU) signed Jan. 11 with the Bonneville Power Administration (BPA), will begin at least three years later than originally planned.

The utility made the announcement during its 4Q12 earnings call on Feb. 22.

“We have found a single-utility solution that really reduces impacts on the environment and, in that light, I think everybody is willing to take a little more time to get it done right,” Jim Piro, PGE president and CEO, said. Construction will take at least two years and could start as early as 2017, he added.

The line would be shortened from 215 miles to approximately 120 miles and would run from Boardman, Ore., to central Oregon, thus avoiding most of the previously anticipated impacts to two national forests, private forest and agricultural land, and the Warm Springs Indian Reservation, he said. Piro added that the proposed revisions have been received positively by President Obama’s rapid response team for transmission, as well as by other stakeholders.

Specific design changes are still being worked out, he said, adding that PGE and BPA are likely at least six months away from reaching a definitive agreement. The utility is still reworking the cost estimate for the project and cannot provide specific details until it reaches final agreement, but PGE expects the cost of the overall modified project to be more than $800m.

While that represents a modest reduction from the original estimate of $1bn, considering the elimination of nearly 100 miles of transmission, PGE officials explained that other improvements would be necessary to make up for the line miles that are being eliminated.

“We took out a piece of the line that we would build from the Pine Grove area to Salem, so that is a reduction in cost, but as part of the MOU, our anticipation is that we would invest in certain projects with Bonneville Power Administration to handle the additional [power] flow on the southern part of their system,” Piro said.

In addition, PGE would build at least two substations, install series capacitors to boost capacity of existing lines, and make other transmission investments in the Portland and Salem areas. It will also explore the possibility of asset exchanges with BPA and other potential transmission opportunities, Piro said.

PGE officials said PacifiCorp is still a potential partner in the project, with an interest in approximately 600 MW of the line’s 2,600 MW capacity, which it would use to serve load in the southern part of its service territory in Oregon. PacifiCorp would also invest in the line in proportion to the percentage of power it receives, Piro said.

Overall, the utility reported net income of $141m, or $1.87 per diluted share, for the year ended Dec. 31, 2012, compared with $147m, or $1.95 per diluted share, for 2011. Net income was $28m, or $0.38 per diluted share, for 4Q12 compared with $29m, or $0.38 per diluted share, for 4Q11.

The decreases in net income were largely due to decreased residential energy deliveries from warmer weather during the heating season, increased pension expense and higher income taxes, partially offset by a deferral of costs related to four capital projects, the utility said.

A net growth in energy efficiency affected the utility’s net load growth by about 0.5%, officials said. The utility saw load growth of 0.6% during 2012 and is anticipating load growth of between 0.5% and 1% during 2013 due to forecast load growth of about 2% in the industrial sector, including expansion plans by major regional customers Intel and Nike, as well as the addition of several high-tech data centers in its service area.

PGE is also anticipating increased residential load growth due to an improved housing market and in-migration into its service area that is the second highest in the nation.