Xcel: Grid project is key to new Colorado wind, gas capacity

Public Service Co. of Colorado told the Colorado Public Utilities Commission that a new transmission project is designed to solve the “chicken and egg” problem of building grid infrastructure to encourage new power plant development, and not waiting until power projects are proposed to build the needed transmission.

“The Company has proposed this line on a proactive basis, consistent with the requirements and underlying policy of Senate Bill (‘SB’) 07-100, which was intended to promote the expansion of the transmission grid in Colorado in advance of need,” the Xcel Energy (NYSE: XEL) subsidiary said in Sept. 19 testimony that responds to criticism of the project. “While the line will have immediate reliability benefits by alleviating current constraints on the Public Service transmission system (that exist in large part due to the increase in wind generation on the system), its primary benefit will be to allow the future interconnection of additional generation resources – primarily gas and wind – to be added from northeast and eastern Colorado – Energy Resource Zones (‘ERZs’) 1 and 2 – for delivery to loads in the Denver metro area. The Project will thereby promote the development of future ‘beneficial energy resources’ within the meaning of SB07-100.”

The company filed its application in this proceeding on March 28. The specific facilities for which the company is seeking a certificate of public convenience and necessity (CPCN) are:

  • Section 1: Pawnee–Missile Site. This 51-mile section has already been fully constructed as part of the Pawnee–Smoky Hill 345 kV Transmission Project. This section was built as a new double-circuit transmission line with 345 kV capability, and the conductors have been installed for both circuits. Presently, one circuit is used for the Pawne-Smoky Hill 345 kV line. The second circuit will become the first section of the Pawnee–Daniels 345 kV project. This circuit is presently being operated at 230 kV but after completion of the project will be operated at 345 kV.
  • Section 2: Missile Site–Byers Transition. In this 13-mile section, the Pawnee–Smoky Hill 345-kV project transmission was constructed similarly to section 1 by using new double-circuit transmission towers. However, at present, only one of the circuits has been installed for the Pawnee–Smoky Hill project. For the Pawnee–Daniels Park project, the second circuit will be installed by modifying the towers and adding conductors.
  • Section 3: Byers Transition–Smoky Hill. This section is about 29 miles long. In this section, an existing 230kV wood-pole transmission line will be rebuilt to double-circuit, 345-kV-capable steel-pole transmission. In this section, there will then be two double-circuit 345-kV-capable transmission lines. Two circuits will be operated at 230 kV and include sections of the two 230-kV circuits that run between Pawnee and Smoky Hill and between Pawnee and Daniels Park. The remaining two circuits will be operated at 345 kV. One of the circuits is a section of the Pawnee–Smoky Hill 345-kV line. The other will be the third section of the Pawnee–Daniels Park 345-kV project.
  • Section 4: Smoky Hill–Daniels Park. In this approximately 21-mile section, new double-circuit 345-kV transmission will be built. One of the circuits will be the final section of the Pawnee–Daniels Park Project. The other circuit creates a new Smoky Hill–Daniels Park 345-kV line.
  • Harvest Mile: The Harvest Mile Substation is an expansion of the existing Smoky Hill Substation. The Smoky Hill Substation has been expanded to the point where there is not enough space to accommodate additional equipment. Harvest Mile Substation will be initially constructed to include a 345/230 kV autotransformer and some line termination equipment. It has been designed to allow for future 345-kV line terminations and other equipment as necessary.

Northeast Colorado a prime area for new gas and wind capacity

“The General Assembly passed Senate Bill 07-100 in 2007,” Public Service noted. “It is commonly accepted that the legislation was designed to solve the ‘chicken and egg’ problem that occurs in transmission planning – namely, that frequently in the past utilities would only plan and build transmission based on known generation projects, but in a competitive generation environment, generation would not be planned unless there was available transmission or could not be constructed because it would be years before the transmission could be put in service.”

The company said that natural gas-fired generation resources are expected to best fill its projected need for additional generation capacity and the best area of the state (from a gas supply availability perspective) to develop gas-fired generation is the area of northeast Colorado where the Pawnee-Daniels Park Project will provide access. In addition, the area of northeast Colorado is an excellent area for wind generation development and to the extent the company elects to pursue additional wind generation in the future, the Pawnee-Daniels project would allow the company to deliver the electrical output from that generation to customers.

If approval is granted, the project is expected to be in-service in the 2019 timeframe. In contrast, gas-fired generation construction can typically take between 18-48 months following commission approval depending on whether it is combustion turbines in a simple cycle configuration or a combined cycle configuration. The same holds true for wind generation which can typically be developed within a few years of being approved. Additionally, in a competitive solicitation for generation resources developers are typically not able or willing to offer firm pricing for generation projects that will go in-service more than about 2 to 4 years out.

“For these reasons, it is generally desirable to have transmission capacity available in advance of a resource acquisition,” the utility added. “Public Service’s next solicitation for gas and wind generation resources is expected to be in early 2017. Therefore, delaying the issuance of a CPCN for this project is not in the public interest. From a transmission and generation planning perspective, it is appropriate to proceed with the Project at this time.”

Public Service estimates that the Pawnee-Daniels Park Project will cost about $178m, plus-or-minus 30%. The Pawnee–Daniels Park 345 kV Project will result in the construction of approximately 115 miles of new 345-kV transmission, originating at the Pawnee Station, near Brush, Colorado, and terminating at the Daniels Park Substation, north of Castle Pines, Colorado.

State Consumer Counsel says there are better alternatives

The Colorado Office of Consumer Counsel in a Sept. 19 brief advised against approval of this project, saying the utility failed to offer enough proof of its need.

“In seeking to justify the Project as necessary and in the public interest, the Company asserts that it will require between 500 and 1400 MW of additional generation capacity to reliably serve customer load by 2024,” the counsel said. “The Company claims that, after the 2013 All-Source Request for Proposals (‘2013 RFP’), the present system is capable of receipt of only 334-384 MW. In support of this claimed capacity value, the Company identifies 10 locations and specifies their post-2013 RFP injection capability. However, the Company admits that it did not identify these, or any other, sites for evaluation of injection capacity with the intention to serve as alternatives to the Project. Indeed, in pre-filed testimony, as well as in testimony presented during the hearing before the Commission, Company witness [James] Hill concedes that none of the ten locations discussed by the Company in the Application were identified by the Public Service Transmission Group. Rather, these locations were solely evaluated at the request of third party utilities and/or independent power producers as locations potentially available for connection of generation projects by these third parties.

“While these third party interests have not provided evidence in this proceeding, OCC contends it is fair to say that their business interests are not in alignment with the Project purposes, as stated by the Company, to warrant unconditional reliance on these expressions of interest to drive analysis of alternatives to a project with potential costs of $250 Million.”

The OCC said that it demonstrated that there is sufficient injection capability and that a new transmission line is not needed. If, however, a new transmission line from northeast Colorado is needed, then upgrading the Pawnee-Ft. Lupton transmission line must be evaluated as an alternative to the Pawnee-Daniels Park line, it added.

In addition to the Pawnee-Ft. Lupton alternative, the OCC provided another alternative to facilitate the addition of 380 MW of generation capacity into Public Service’s system. Specifically, the OCC said it demonstrated that through investment of $4.5m, the company could enable injection of 380 MW of new generation by way of the Ft. St. Vrain facility.

“Notwithstanding the OCC’s specific discussion of the potential to invest 2.5% of the Project’s initial proposed costs (or a mere 1.9% of the potential costs at the top of the Company’s projected range), Company witnesses are silent in response to OCC’s Ft. St. Vrain upgrade alternative,” the OCC wrote. “Comparing the best case scenario of demand forecast and the declared expected Project costs, a 2.5% investment provides for 76% of the anticipated 500 MW to 600 MW capacity need. Likewise, assuming for purposes of discussion, the Company’s updated demand forecast of 1400 MW, and a budget of 130% of the target value, an investment of 1.9% of the costs returns more than 27% of the projected capacity need.”

The OCC also identified another injection site where the retirement of an existing coal facility, Valmont, could allow new generation. Valmont represents approximately 184 MW of existing generation. “The Company should clearly be aware of the injection capability at Valmont but did not include it in its analysis,” the OCC said.

Out of the various alternatives offered by the OCC, it said the company only directly contested the injection capacity potential proposed at the Arapahoe location. “Public Service asserted that ‘[c]omplications and changed circumstances’ in the time since it filed and then withdrew an application for a CPCN for gas-fired combined cycle generation facility of ~500 MW at the Arapahoe location make the capacity proposed by the OCC from this location ‘considerably less feasible.’ The Company did not state whether the Arapahoe site is completely unavailable or whether there is still some possibility that it can be used. The Company, for example, did not address whether combustion turbines of less capacity (190 MW or 380 MW) remain feasible alternatives at Arapahoe when it stated the OCC proposal was considerably less feasible.”

The Colorado Energy Consumers (CEC) organization also filed a Sept. 19 brief opposing approval of the project, at least at this time. “At this early stage, there are more questions than available answers, and as a result, more risks than benefits to ratepayers in approving the Project along with its preliminary cost estimate,” it wrote. “Given the lack of urgency in constructing the Project, CEC urges the Commission to reject the Company’s application and deny the CPCN until such time as the Company can present a reliable cost estimate. In the alternative, CEC requests that if the Project is approved at this time, that such approval be conditioned so as to appropriately balance and protect ratepayer interests.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.