PPL does not anticipate its portion of Susquehanna-Roseland cost to change from current $630m

PPL (NYSE:PPL) does not expect its share of the cost of the Susquehanna-Roseland project to change from the current estimated $630m, according to Paul Farr, executive vice president and CFO of PPL.

“The project is, for the most part, a fully bid project where we’re using third-party design and construction support,” he said on Sept. 11 at the Barclay’s Capital CEO Energy-Power Conference. “[For] PPL, like many companies in the mid-Atlantic and the Northeast – it’s been quite a long time since we’ve done major transmission projects, basically going all the way back to the time frame in the 1970s and ‘80s, when the big baseload stations were built, so we needed some help on that.”

As the company did contracts around the project, it saw some cost escalation in labor and material, Farr said, adding: “[O]ver the last few quarters, we’ve announced an increase from what was about a $560[m], $570m project to now $630[m]. We do think that’s where the project’s going to come in at this point in time.”

He said PPL’s strong transmission rate base growth story is driven in the short term by a couple of very large singular transmission projects, including the Susquehanna-Roseland line, which the company is building along with Public Service Enterprise Group’s (NYSE:PEG) Public Service Electric and Gas (PSE&G).

The reliability initiative and incentives were a great factor in the timeliness with which PPL was able to evolve the project, he said, noting that while these types of projects can historically take 20 to 30 years from conception to full fruition and construction, the Susquehanna-Roseland project is a “10- to 12-year type project.”

It is “a very major, multi-state project going through National Park land, so we’re very excited about the opportunity to continue to grow that business,” Farr said.

The project is heavily incentivized, he said, noting, “We do get [construction work in progress (CWIP)], we would get abandonment should the project ever need to be abandoned, which we don’t at all see, obviously, at this point in time, but most importantly, because of the complex, multi-state nature of the project, such high-voltage, we do get an incentive ROE of 12.93% on that project.”

Some key milestones include receiving an official record of decision in October 2012 and beginning construction earlier this year, including, as of the week of Sept. 2, within the National Park Service-administered property.

Most of the line uses existing right-of-way that PPL had on other high voltage lines, beginning in the Susquehanna area and making its way to the New Jersey border, Farr added.

“So, from the PPL standpoint, which is a little bit different than PSEG’s situation, this was relatively easer to get permitted,” he said. “Our biggest probably single issue that we faced was that small, couple-of-miles area that we’re going through in the Park Service, but again, our existing 230-kV line goes through that territory as well.”

PPL expects the line to be fully energized in June 2015 to meet reliability requirements that PJM Interconnection has for the project and for the region, Farr said.

On Aug. 30, a federal judge dismissed a lawsuit challenging federal permits for the line that was filed by several environmental groups, including the New Jersey Sierra Club.

Among other things, Farr noted that PPL has a “fantastic competitive generation portfolio” that has a diverse fuel mix made up of hydro, nuclear, gas and super critical coal-fired generation assets.

On the coal assets, he said, most of the environmental cap-ex has been fully spent. On the nuclear fleet, Farr said PPL has uprated both of the units at the Susquehanna plant to maximum generator capacity and those units’ lives have been extended to 2043 and 2045.

He also noted that at the end of 2012, PPL was awarded revenue increases in general rate case proceedings in Kentucky and Pennsylvania.

About 70% of PPL’s rate regulated cap-ex over the five-year period of 2013 to 2017 comes with automatic rate recovery for the most part.

On Kentucky, he said it is “a very attractive service territory” and “a very constructive regulatory environment,” adding: “[W]e’re spending around $2.5bn of cap-ex on projects on the environmental front to retrofit legacy coal plants with more modern technology to be able to meet new EPA regulations. We get, basically, real-time recovery of those costs.”

Among other things, Farr said PPL continues to evaluate the market offers in response to a request for proposal issued earlier this year in relation to the construction of another combined cycle gas plant.

About Corina Rivera-Linares 3286 Articles
Corina Rivera-Linares was TransmissionHub’s chief editor until August 2021, as well as part of the team that established TransmissionHub in 2011. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial from 2005 to 2011. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines.