Public Service Enterprise Group’s (NYSE:PEG) partnership with Vectren Energy Delivery of Indiana (Vectren) for competitive transmission in the Midcontinent ISO (MISO) “is an approach that we are eager to pursue,” PSEG Chairman, President and CEO Ralph Izzo said on April 29.
Responding to a question during PSEG’s 1Q16 earnings call on whether the company sees any other opportunities with other local utilities for a similar type of partnership, Izzo noted that he cannot disclose anything that the company has not made public.
He said, “I think that there’s a lot of value to be had by combining forces with someone who understands the local transmission grid and system with our expertise” on transmission construction, for instance.
Izzo added, “[W]e don’t know the system everywhere in the country so to the extent that we can combine our project management skills and our construction management know-how with [others’] system knowledge, that’s a win-win for everyone.”
Vectren in March announced intentions to jointly bid to build a 30-mile, 345-kV transmission line in southwestern Indiana and western Kentucky. MISO’s annual Transmission Expansion Planning process identified the need for the estimated nearly $70m dollar electric transmission project last December and issued a request for proposal, Vectren said.
The Duff–Coleman project calls for a new 345-kV, single-circuit line from Vectren’s Duff substation in Dubois County, Ind., to Big Rivers Electric Corporation’s Coleman substation in Hancock County in Kentucky. Vectren added that the new line will improve electric system efficiency and enhance system reliability by alleviating current congestion on existing facilities.
The line would be installed in a new right of way, largely through farmland and sparsely populated areas. Vectren added that the proposed interstate route traverses two counties in Indiana – Dubois and Spencer – and Kentucky’s Hancock County. Vectren said that while the Ohio River will be crossed at the border between Indiana and Kentucky, most of the project resides within Indiana – 25 miles of the 30-mile project.
Bids are due to MISO in July and the winner will be announced in December, Vectren said, adding that the construction completion date required by MISO is Jan. 1, 2021.
Vectren noted that when FERC issued its Order 1000, it transitioned to a competitive bid process as opposed to being automatically awarded to the incumbent utility as in years past. As such, Vectren said that it and its project partner, PSEG, the parent company of Public Service Electric and Gas (PSE&G), will be among several bidders.
PSE&G to invest $3bn in 2016
Izzo said during the earnings call that PSE&G’s execution on its expanded capital investment program continues to provide a growing source of earnings. PSE&G is expected to invest $3bn in 2016 as part of its five-year $12bn capital program, Izzo said, adding that transmission is the largest part of PSE&G’s effort.
“PSE&G’s investment program and a continued focus on controlling costs will help drive our forecast for double-digit growth in PSE&G’s 2016 operating earnings,” he said. “PSE&G’s execution of our capital program is expected to yield best-in-class growth rate in rate base of 8% per year for the five-year period ending 2020. PSE&G continues to develop a pipeline of investment opportunities that also meet New Jersey’s policy objectives and has customer support.”
PSEG Power, Izzo said, has been focused on operating in an environment of low natural gas prices for years. The availability and low price of gas, as well as the need to meet more stringent reliability requirements has added new urgency to the company’s efforts to improve its cost structure and efficiency, he said.
“Power’s capital program also represents an important response to today’s market,” Izzo said. “Power’s $2bn of investment in three new combined cycle gas turbines will add approximately 1,800 MW of clean, reliable and efficient capacity to its fleet.”
The Keys Energy Center in Maryland and the Sewaren unit in New Jersey are on schedule to meet their 2018 operating dates, while the Bridgeport Harbor generation station in Connecticut is expected to be available for a 2019 commercial operation date, he said.
Separately from operations, Izzo said that PSEG is pleased with some recent actions, including the “U.S. Supreme Court’s unanimous decision affirming the Fourth Circuit’s decision in Hughes vs. Maryland.”
As PennWell’s GenerationHub reported, the Supreme Court ruled April 19 that a power generation program in Maryland, which is a deregulated state, is preempted because it disregards the interstate wholesale rate required by FERC. The ruling affirms an earlier one by the United States Court of Appeals for the Fourth Circuit. The case had been argued in front of the Supreme Court on Feb. 24.
Izzo noted that a recent action at FERC is also constructive, referring to the orders that the commission recently issued granting the complaints filed by the Electric Power Supply Association (EPSA) “and others, which called into the question some approvals granted by the Public Utility Commission of Ohio,” (PUCO).
As GenerationHub reported, EPSA on April 7 said that recent PUCO contract approvals for affiliates of American Electric Power (NYSE:AEP) and FirstEnergy (NYSE:FE) will harm the PJM Interconnection (PJM) wholesale market. PUCO issued the much-debated orders on March 31. The orders tend to benefit affiliates of the Ohio-based power companies that operate fossil and nuclear plants. PUCO said in news releases that the orders do include various cost controls and grid modernization provisions.
During the call, Izzo said: “We believe that a competitive market is the best approach for ensuring that there is a supply of electric capacity to meet customer demand at the lowest cost. Our company-wide efforts are focused on building an infrastructure that improves system reliability, reduces emissions and supports the needs of customers.”
PSEG on April 29 reported net income for 1Q16 of $471m, or 93 cents per share, as compared to net income of $586m, or $1.15 per share, in 1Q15. Operating earnings for 1Q16 were $463m, or 91 cents per share, compared to operating earnings for 1Q15 of $529m, or $1.04 per share, the company said.