In line with its earlier projection, Northeast Utilities (NYSE:NU) expects to spend about $640m this year on transmission capital expenditure (CapEx), and has spent $426m in its transmission business through Sept. 30, Leon Olivier, Northeast Utilities executive vice president and COO, said on Nov. 1.
Northeast Utilities continues to make progress on its $1.4bn Northern Pass project, Olivier said during the company’s 3Q13 earnings webcast, noting that the U.S. Department of Energy (DOE) has completed its public scoping meeting process, with the comment period open until Nov. 5.
The project has held 16 open houses in towns along the route. Olivier also noted that a draft environmental impact statement (EIS) from DOE is expected next summer and that would trigger a comment period on the draft EIS and Northeast Utilities’ filing with the New Hampshire Site Evaluation Committee.
The company continues to expect construction to begin in the summer of 2015, resulting in a mid-2017 completion.
If the 345-kV line is built, Northeast Utilities would sponsor a $7.5m jobs development program in northern New Hampshire, he said of the project’s benefits, which also include an annual reduction of up to five million tons of CO2 emissions in the region.
The Greater Springfield Reliability Project is approximately 98% complete and will be done by the end of this year, Olivier said, adding, “We expect the project to be completed at a cost of approximately 6% below its $718m estimate.”
The project involves 35 miles of 345-kV and four miles of 115-kV lines.
Hearings before the Massachusetts Energy Facility Siting Board on the 345-kV Interstate Reliability Project were completed in 2Q13 and post-hearing briefs are due early this month, he said.
The company has all of the state environmental permits, and continues to expect decisions from the siting board and the U.S. Army Corps of Engineers in 2Q14, he said, adding that line construction is set to begin mid-year and to be completed in late 2015.
Northeast Utilities and National Grid received project approval from siting regulators in Connecticut and Rhode Island early this year, Olivier said, noting that Northeast Utilities continues to estimate that its section of the project, the part located in Connecticut, will cost $218m.
There is no new information on the Greater Hartford/Central Connecticut set of projects, he said, adding that ISO New England is expected to confirm the set of needed projects in the first half of 2014.
Olivier also noted that the company has essentially completed its new 345-kV link to Cape Cod, Mass., with a small amount of remaining work to be completed this fall and next spring.
Also, in mid-August, Northeast Utilities’ Connecticut Light and Power (CL&P) started work on a $70m project in the Waterbury, Conn., area to improve reliability by replacing 21 miles of older steel lattice towers with new monopoles. That work should be completed in 2014.
In addition, the Connecticut Siting Council in September approved a $47m project to install new 115-kV underground cables in and around downtown Stamford, Conn., to help support the new development taking place in the city.
On TDI’s proposal
Olivier addressed a question involving TDI New England’s proposal for the 150-mile New England Clean Power Link, which, as TransmissionHub reported on Oct. 31, would run from Canada to Ludlow, Vt., delivering 1,000 MW of hydropower to the ISO New England market. The line would run underground and underwater and the project would be between 300-kV and 320-kV.
“Unlike our project, [TDI’s New England Clean Power Link] is a project that really is a merchant line,” Olivier said. “They don’t have a counterparty on the other end of it. We’ve got a counterparty on the other end of ours – they are willing to pay for our line, and we have significant – along with Hydro-Quebec – significant developmental experience in building these lines.”
The TDI project’s connection with the AC system would require extensive AC upgrades, all of which would be added to the project’s cost, Olivier said.
“[W]e would assess it as one more merchant project,” he said. “There’s a half-dozen or so in New England that have just quite frankly never got off the ground and show no signs of getting off the ground at this time.”
Among other things, he noted that the cost is significantly higher when placing projects underground or underwater, adding, “It’s the nature of that technology.”
Developments in region’s power supply
Since the previous earnings call, various developments regarding power supply in New England have occurred, Olivier said, including that Entergy’s (NYSE:ETR) Vermont Yankee nuclear power plant will shut down by the end of 2014.
Also, the new owner of the Brayton Point station in southeast Massachusetts announced plans to retire the Brayton units in 2017, he said.
Separately, more than 500 MW of demand response has been withdrawn from the next capacity auction, and altogether, those announcements affect about 2,700 MW, or 10%, of the summer peak load in the region.
In addition to those shutdowns, there have been winning bids announced for hundreds of megawatts of new wind facilities in northern New England, he said, adding, “We think that it’s likely there will be significant transmission investment needed to maintain reliability and improve access to these clean, intermittent power sources, but it is too early to estimate how much that additional investment will be and exactly when it will occur.”
‘Strong reliability performance’ on electric distribution
Olivier noted that this marks the first time since 2010 that Northeast Utilities made it through October without enduring late season tropical storms or freak October snowstorms.
“In fact, we’ve had strong reliability performance across our electric distribution companies this year and CL&P’s on track to have its most reliable year ever,” he said, adding that Northeast Utilities has invested $490m on its electric distribution system through the first nine months of the year, and continues to expect to invest about $670m for the full year.
On the natural gas distribution side, Northeast Utilities invested about $126m for the first nine months of the year and expects to invest almost $180m for the full year.
There continues to be heavy demand for new natural gas services and Northeast Utilities expects to invest $55m of the nearly $180m to help new customers connect to its system. The company added 7,805 new heating customers between NSTAR Gas and Yankee Gas through Sept. 30 and is likely to surpass its initial estimate of 9,100 new heating customers this year, Olivier added. That growth continues to be driven by the wide differential between the cost of heating oil and the cost of natural gas.
In response to legislation signed by Connecticut Gov. Dannel Malloy encouraging businesses and homeowners to convert furnaces to natural gas, Northeast Utilities and United Illuminating, whose parent company is UIL Holdings (NYSE:UIL), jointly filed with state regulators their plan to implement the legislative objectives.
The state Public Utility Regulatory Authority (PURA) is due to issue a draft decision on the plan the week of Nov. 4 and a final decision just before Thanksgiving, Olivier said.
On solar, he noted that in September, Massachusetts state regulators approved Northeast Utilities’ Western Massachusetts Electric Company’s (WMECO) application to increase its solar investment from 6 MW to 8 MW. The company recently announced its plan to build 4 MW of solar generation in East Springfield, Mass., bringing the total solar investment in its plan to about $35m, including all megawatts the company built previously. “Like the other projects, the East Springfield project is a brownfield location, so it’s a win-win for Western Mass[achusetts] Electric, the host community and our customers,” Olivier added.
James Judge, executive vice president and CFO of Northeast Utilities, addressed the Aug. 6 initial decision by the presiding administrative law judge (ALJ) in the FERC proceeding involving the base return on equity (ROE) for New England transmission owners. The ALJ ruled that the current 11.14% ROE is unjust and unreasonable.
“Based on past precedent, we expect the prospective base ROE will be adjusted to reflect the movement in 10-year Treasury bond yields from the six months used for the trial last spring, as compared against the six months before the date of a final decision from FERC, which is not expected until mid-to-late 2014,” Judge said.
He also noted that in September, the New Hampshire Public Utilities Commission (PUC) issued a request for proposals to engage an expert to determine the value of Northeast Utilities’ Public Service of New Hampshire’s (PSNH) generation assets. A consultant is expected to be announced later this month, with a report expected to be issued within six months of the consultant’s hire date.
“We continue to believe that all generation investments are prudently incurred and should be fully recovered,” Judge added.
On storm cost proceedings, he noted that in Connecticut, the company filed for recovery of $454m of storm costs in March and hearings were completed in early September.
CL&P last year agreed to forgo recovery of $40m in storm costs as part of the merger settlement agreement and the company remains confident that it will recover the remaining $414m of those costs over a six-year period, beginning on Dec. 1, 2014.
In Massachusetts, NSTAR Electric filed earlier this year to recover about $35m of storm costs from 2011 and a decision is expected next month. “As per our merger settlement agreement, the recovery of the 2011 storm costs will commence over a five-year period beginning Jan. 1, 2014,” he said, adding that NSTAR Electric has not yet filed for recovery of 2012 or 2013 storm costs, which total $91m.
PSNH is already recovering its major storm costs and will complete that recovery in mid-2015, assuming no new major storms occur, while WMECO is reviewing its 2011 and 2012 storm costs with regulators.
Northeast Utilities on Oct. 31 reported earnings of $209.5m, or 66 cents per share in 3Q13, compared with earnings of $207.6m in the same time period last year.
The results included about $7m, or 3 cents per share, of after-tax integration charges related to the April 2012 merger between Northeast Utilities and NSTAR. Excluding those charges, Northeast Utilities earned $216.5m, or 69 cents per share, in 3Q13. Northeast Utilities also said that 3Q12 results included about $12.9m, or 4 cents per share, of after-tax charges related to the merger.
Among other things, the company said its transmission segment earned $58.6m in 3Q13 and $215.4m in the first nine months of 2013, compared with $71.1m in 3Q12 and $181.1m in the first nine months of 2012. Also, 3Q13 results reflect an after-tax reserve of $14.3m resulting from the FERC ALJ’s August recommendation involving the base ROE.