Northeast Utilities (NYSE:NU) has revised the cost estimate for its proposed Northern Pass transmission line, from $1.1bn to $1.2bn, Leon Olivier, COO and executive vice president, said Feb. 20 during the company’s 4Q12 earnings call.
“The revised cost estimate is the result of having a more defined design and more certainty on the AC system upgrades required for this project to be connected to the ISO New England [(ISO-NE)] grid,” he said. “This estimate will, of course, be continually refined as we move through the siting process.”
The project will cover about 180 miles, with 140 miles on existing rights of way (ROWs) while the other 40 miles will be along a new ROW in northern New Hampshire.
“We expect to announce the new route in northern New Hampshire in the next several weeks,” he said, adding, “The new northern route has been developed in response to potential visual impacts and private property rights issues.”
Olivier noted the project’s benefits, including that the project’s 1,200 MW of hydroelectric power from Hydro Quebec will help address New England’s need to diversify its electric energy supply, which is more than 50% dependent on natural gas, and will reduce carbon dioxide emissions by about five million tons annually. It will also lower electric energy costs to consumers by an estimated $200m to $300m annually by displacing fossil fuel generation, create 1,200 jobs during construction and provide about $26m in new property taxes and fees annually for local communities.
“We believe it will be completed between the end of 2016 and mid-2017,” he added.
2012 transmission capital expenditures
Transmission capital expenditures in 2012 totaled about $680m, including $192m invested by NSTAR Electric in its transmission system, Olivier said.
The largest part of last year’s spending involved the Greater Springfield Reliability Project (GSRP), which represents more than half of the company’s expenditures on the New England East-West Solution (NEEWS) family of projects, he said.
According to TransmissionHub data, NEEWS is made up of four related transmission projects proposed by Northeast Utilities and National Grid plc subsidiary National Grid USA. Besides GSRP, NEEWS also includes the Interstate Reliability Project (IRP), the Rhode Island Reliability Project and the Central Connecticut Reliability Project.
GSRP is a $718m, 39-mile, 345-kV line that begins in New Bloomfield, Conn., and ends in Ludlow, Mass. The project involves 35 miles of 345-kV lines and four miles of 115-kV lines.
Olivier said the project was 93% complete at the end of 2012 and is 94% complete at this time.
“We placed about $298m of the project into service by the end of 2012 and we expect the entire project to be complete by the end of this year,” he said. “The last of the major line work will be done by the end of March. Final substation work, which must be closely coordinated with ISO New England, will continue throughout the remainder of this year.”
He also noted that the Connecticut Siting Council approved the Connecticut section of the IRP in January and the reviews are continuing in Rhode Island and Massachusetts, where National Grid is the project proponent.
According to TransmissionHub data, the IRP is a 75-mile, 345-kV line that begins in Millbury, Mass., and ends at Card Street, Conn. The Northeast Utilities project is a 38-mile, 345-kV line that begins in Killingly and ends in Card Street.
“We expect the project’s approval in those two states either late this year or early 2014,” Olivier said. “We expect to commence substation work in Connecticut in the first quarter of 2014 and line work in the spring of 2014, after receiving the project’s Army Corps of Engineers permit. We continue to expect the project will be complete by the end of 2015.”
Olivier also noted that ISO-NE continues to review Northeast Utilities subsidiary Connecticut Light and Power’s (CL&P) Greater Hartford Central Connecticut project. “[W]e had initially expected to spend about $300m on a new 345-kV line,” he said. “ISO New England planners continue to review the project in the context of the comprehensive review of transmission constraints in central Connecticut and the greater Hartford area.”
ISO-NE expects to make recommendations on solutions for those constraints during the second half of this year, he said.
“At this time, we expect the original, single, large 345-kV line project to evolve into a series of smaller projects,” he said. “For now, we are projecting a cost of about $300m to address those constraints. We will provide a further update to you in the second half of this year after ISO identifies its proposed solutions.”
The other major project underway is NSTAR Electric’s $106m project to add a 345-kV transmission link to Cape Cod, Mass. Work on that project, which is on schedule, on budget and about 35% complete, began in September 2012 and will be complete in the middle of 2013.
In addition to these large projects, Northeast Utilities’ transmission group continues to identify and complete scores of smaller projects each year that are needed to address reliability and aging infrastructure issues in our service territories. In 2012, the company placed more than $630m of transmission facilities in service.
“With the additional spending on Northern Pass, we now project a transmission capital budget of approximately $3.9bn over the next five-year period, including $636m we expect to invest in 2013,” he said.
Northeast Utilities President and CEO Thomas May said during the call that the company “has the best transmission organization in the country,” delivering “complex and critical projects to reinforce our energy highways. We’re doing it on time [and] on budget.”
He added, “We have the capabilities to, as the load shifts around, as generation shifts around, build the electric superhighways to get the goods most efficiently, and at the lowest cost to our consumers.”
Northeast Utilities on Feb. 19 reported full-year 2012 earnings of $525.9m, or $1.89 per share, compared with earnings of $394.7m in 2011. Excluding costs related to the April 2012 merger with NSTAR and related settlement costs, Northeast Utilities earned $633.5m in 2012, or $2.28 per share. The company also said that excluding merger-related costs and a storm fund reserve, it earned $423.9m in 2011. NSTAR’s earnings are included in Northeast Utilities’ results of operations, effective as of last April.
Northeast Utilities added that in 4Q12, it earned $174.7m, or 55 cents per share, compared with earnings of $113.3m in 4Q11. Results in 4Q12 include after-tax merger-related costs of $2.1m, or 1 cent per share. The company also said that results in 4Q11 include $19.1m of after-tax merger-related costs and a storm fund reserve.