SPP selects Mid-Kansas co-op to build Walkemeyer project, lowers reserve margin

The Southwest Power Pool (SPP) said April 26 that its board has selected Mid-Kansas Electric Cooperative (Mid-Kansas) to build the North Liberal to Walkemeyer 115-kV transmission line in western Kansas, the first transmission project in SPP to go through a competitive bidding process.

Oklahoma Gas & Electric (OG&E), a subsidiary of OGE Energy (NYSE:OGE), was selected as an alternate if Mid-Kansas is unable to build the 22.6-mile project, SPP said.

The SPP board adopted a motion to re-evaluate the need for the Walkemeyer project in light of reduced load forecasts, an SPP spokesperson told TransmssionHub April 27. If the re-evaluation shows that the line is not needed, the plan to construct the project can be revoked, the SPP spokesperson said.

The SPP board also approved 86 transmission upgrades representing $363m in engineering and construction costs, with further evaluation of seven of the projects to assess their ability to meet regional needs, SPP said in an April 26 statement. The further evaluation called for by the board is expected to be completed in July, SPP said.

The package of approved projects was part of SPP’s 2016 Integrated Transmission Planning Near-Term assessment to address reliability needs on the SPP grid. Among the approved projects are a $145.7m plan to add new substations and 115-kV lines to address needs near the Bakken Shale formation in northwest North Dakota, a $30.5m project for a new substation and 138-kV line near Woodward, Okla., and a $20.5m project to address needs near Tulsa, Okla., SPP said.

For the Walkemeyer project, which SPP has said is needed for regional reliability, an SPP request for proposals (RFP) called for construction in the 2018-2019 timeframe involving a new 115-kV line from the existing North Liberal substation to the existing Walkemeyer substation in Seward County, Kan. The project is in the service territory of Mid-Kansas, a spokesperson for the cooperative told TransmissionHub April 27.

In an effort to balance costs to customers and ensure that the project is needed, Mid-Kansas asked SPP to take another look at the project to ensure it is needed in light of reduced load forecasts for SPP and the Mid-Kansas region, Stuart Lowry, president and CEO of Mid-Kansas, said in an April 27 statement provided to TransmissionHub.

“Mid-Kansas requested, and the SPP staff endorsed, a restudy of the project to confirm the project is needed for reliability purposes,” Lowry said.

SPP staff identified significant load forecast reductions across the SPP territory, including in the Mid-Kansas service territory, and those are confirmed by Mid-Kansas’ own analysis, Lowry said.

“We see this request as an important stewardship responsibility to the other SPP stakeholders,” Lowry added.

SPP will issue a Notice to Construct the project to Mid-Kansas as the designated transmission owner for the project, and that document typically will include project details such as cost and schedule, the SPP spokesperson said.

At the SPP board meeting, the board approved an “expedited” re-evaluation of the need for the project, the SPP spokesperson said.

The proposals from Mid-Kansas, which carried a 40-year net present value cost of $10.57m, and OG&E, with a 40-year net present value cost of $10.15m, were the top recommendations from an industry expert panel (IEP) that reviewed 11 proposals from various entities in the competitive bidding process.

As TransmissionHub reported, the IEP on April 12 filed a report with the SPP board listing its scoring of the various proposals without identifying the entities that made the proposals. The average cost figure among the 11 proposals was $15.9m, and neither Mid-Kansas nor OG&E included a cost guarantee in their proposals, according to the IEP presentation from the SPP board meeting.

The competitive bidding process complied with FERC’s requirement to remove federal rights of first refusal for certain transmission projects and balanced SPP values of collaboration, efficiency and transparency with expectations of confidentiality set by FERC Order 1000, SPP said.

“We will work with our stakeholders to identify lessons learned and continually refine this new, competitive process,” Paul Suskie, executive vice president of regulatory policy and general counsel at SPP, said in the April 26 statement.

Construction of the Walkemeyer project will follow SPP’s standard process, with SPP staff issuing Mid-Kansas a Notice to Construct the project, SPP said.

In its proposal, Mid-Kansas planned to use 138 steel pole structures for the line, with a construction completion date of May 1, 2019, according to the IEP presentation. OG&E proposed a construction completion date no later than Nov. 17, 2017, according to the IEP presentation.

Mid-Kansas can accelerate the construction timing for the project if needed, the Mid-Kansas spokesperson told TransmissionHub April 27, noting that the 2019 date in its proposal complied with what SPP listed in its RFP.

Besides the transmission projects addressed at the SPP board meeting, the board also voted to reduce SPP’s planning reserve margin from 13.6% to 12%, pointing to transmission enhancements and a large geographic footprint that has helped reduce the level of generation capacity needed, SPP said.

The reduction, which lowers capacity requirements by about 900 MW, is expected to save SPP members about $90m annually, or $1.4bn over the next 40 years, SPP said.

The primary factors that enabled a reduced reserve margin were a significant transmission buildout of nearly $6bn in the last 10 years, the success of SPP’s markets in integrating more generation resources into the capacity mix and the October 2015 expansion of the SPP territory to include all or part of 14 states, Lanny Nickell, vice president of engineering at SPP, said in the April 26 statement.

SPP staff and stakeholders “worked together diligently to assess and confirm the feasibility and benefits of lowering our reserve margin, and thanks to their consensus-building efforts, our entire region will now benefit from improved reliability and capacity savings,” Nickell said.