PPL: New transmission line could help new gas plants near shale areas

In addition to helping grid reliability, PPL (NYSE:PPL) said it’s just-announced transmission proposal should help the Northeast cope with coal retirements and benefit natural gas power plants being planned in shale production areas.

PPL announced July 31 that its Pennsylvania utility, PPL Electric Utilities, is proposing to build a major new regional transmission line. The transmission proposal dominated discussion during PPL’s quarterly earnings call.

PPL said the 500-kV, 725-mile project should “enable the development” of natural gas-fired power plants in the shale regions of northern Pennsylvania. Within the past couple of years, several combined-cycle gas power projects have been proposed in the Pennsylvania shale gas production basins.

PPL Electric Utilities submitted the application to PJM Interconnection as part of the competitive solicitation process under FERC Order 1000. As currently proposed, the 500-kV line would run about 725 miles from western Pennsylvania into New York and New Jersey, and also south into Maryland.

According to preliminary estimates, the cost of the project would be between $4bn and $6bn. These potential capital expenditures are not included in PPL’s most recent capital expenditure projections. PPL might enter into partnerships to develop the project, company officials said.

The preliminary timeline envisions completion of the project between 2023 and 2025, assuming all necessary approvals are received and construction begins in 2017.

PPL officials said the transmission line should also help the PJM region cope with an increasing number of coal plant retirements.

Coal, gas nuclear units see improved capacity

During the earnings call, PPL officials also cited improved availability of its baseload power plants during the second quarter of 2014 compared to a year earlier.

This improvement was widespread, including coal, gas and nuclear plants, and was largely related to fewer outage days during the most recent quarter.

Eastern coal units averaged at 64% capacity factor or about 9% better than last year. PPL’s gas-fueled combined cycle plants hit 98% capacity, which was “significantly” better than last year this time.

Finally, the dual-unit Susquehanna nuclear station saw its capacity factor increase by 17% as PPL started to get a handle on turbine blade problems. PPL replaced turbine blades at Unit 1 during its most recent refueling outage and plans to replace Unit 2 turbine blades in 2015, officials said.

PPL’s improvement in plant performance, however, was partially offset by lower baseload energy prices in the eastern United States and lower margins in western markets.

On other issues, PPL said regulatory much progress has been made toward the sale of certain hydroelectric assets from PPL Montana to NorthWestern Energy. Likewise, PPL is moving ahead on its deal with Riverstone Holdings to create new independent power producer Talen Energy.

PPL also recently filed a $450m project application for installing smart meters in Pennsylvania starting in 2017. The smart meter project will be done by 2019.

“Strong performance at each of our regulated utilities, combined with stronger margins from our competitive energy supply business, led to very solid results through the first half of the year,” said PPL CEO William Spence. “Earnings increases in all four of our business segments during the first half of the year drove a $115 million, or 15 percent, increase in earnings from ongoing operations compared with the same period in 2013.”

PPL reported second-quarter 2014 reported earnings of $229m, or 34 cents per share, a decrease from $405m, or 63 cents per share, a year ago. For the first six months of 2014, PPL’s reported earnings were $545m, or 83 cents per share, compared with $818m, or $1.28 per share, in the first six months of 2013.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.