New York regulators approve Champlain-Hudson Power Express project

The New York State Public Service Commission (PSC) on April 18 unanimously approved a certificate of environmental compatibility and public need (CECPN) for the New York portion of the Champlain-Hudson Power Express, a proposed 333-mile underground transmission line that would connect Québec and New York City (Docket 10-T-0139).

In granting the certificate, PSC officials said the project enjoyed a broad consensus of support.

“The certificate will adopt most of the terms and conditions presented to us in a joint proposal and in stipulations that have the full or partial support of a wide range of parties to this case,” Garry Brown, PSC chairman, said in a statement.

The project has received support from business and environmental groups, as well as some labor unions, which argued that the line will create jobs and bring low-cost clean energy to the New York City area, which has high electricity prices due to a lack of sufficient local generation.

The project used a procedure called a “confidential settlement,” which is an alternative to having the New York PSC conduct a formal, and lengthier, review of the project. Nearly 30 interested parties, including state and local agencies, municipalities, and environmental groups held discussions known as “settlement negotiations,” and developed a joint proposal over more than a year, beginning in early 2011 and concluding with the filing of the joint proposal in February 2012.

The $2bn, high voltage direct-current (HVDC) line will be capable of carrying up to 1,000 MW of energy from the Canadian border to Astoria, Queens. For the majority of its length, the line will run through Lake Champlain and the Hudson River. Some segments will be on land, and those segments will primarily be sited in railroad or state highway rights-of-way.

The PSC said a critical factor in its decision to approve the CECPN is the fact that, because the project is a merchant transmission project, the financial risk to ratepayers is minimized.

“All the risks associated with the financing, construction, and costs of this project will not be borne by ratepayers but by the applicants, and it’s up to us to find the customers and the financing, and manage the costs,” Donald Jessome, President and CEO of developer Transmission Developers, Inc., (TDI) told TransmissionHub April 18.

The project still needs additional state and federal permits, including a Presidential permit from the U.S. Department of Energy (DOE) because the project crosses an international boundary, and two permits from the U.S. Army Corps of Engineers. The developer has been working on obtaining those permits since 2010 and believes the permits could be issued by the end of the year.

Not everyone supported the project.

Four groups went on record opposing the project or facets of it, including Central Hudson Gas & Electric (CHG&E), the International Brotherhood of Electrical Workers Local 97 (IBEW), two Entergy (NYSE:ETR) companies, and the Independent Power Producers of New York (IPPNY).

CHG&E said the joint proposal unfairly discriminates in favor of property and ratepayers in New York City at the expense of other locations outside New York City, while the IBEW raised similar concerns. It said the line would only benefit a small segment of New Yorkers – energy users in New York City – at the expense of mid- and upstate electric generators as well as Local 97 and its membership.

The Entergy companies said the applicants “failed to carry their burden of proving that they have proposed (and can sustain) a pure merchant transmission project,” while the IPPNY called the project “grossly uneconomic even if one accepts at face value the arguably aggressive project costs and projected capacity factor that CHPE has identified.”

TDI estimates that the project will create approximately 300 direct construction jobs – primarily union positions – for the physical construction of the line and building of the converter station, and will create more than 2,000 direct, indirect, and induced jobs, many of which will last for years after the project is complete.

Work continues

There are additional tasks that still must be completed before construction can begin including the execution of an engineering, procurement and construction (EPC) contract. The developer expects to sign the EPC agreement this summer.

TDI also needs to execute transmission services agreements with HydroQuébec for 75% of the line’s capacity. The other 25% will be sold under the FERC-mandated open season process, which the developer expects to occur during the fall.

Financing must also be finalized, though the Blackstone Group will be providing approximately $500m equity for the project. The balance will be debt-financed, according to Jessome. The developer has engaged a financial advisor to assist, but has not publicly announced the advisor’s identity.

Finally, the developer must obtain all the necessary insurance policies.

Jessome expects all the moving parts to be in place by 1Q14, start construction later that year, and for the project to be in service by 2017.