MISO selects LS Power’s Republic Transmission to develop Duff-Coleman 345-kV project

The Midcontinent ISO (MISO) on Dec. 20 said that LS Power Associates L.P.’s wholly owned subsidiary, Republic Transmission LLC, which is headquartered in St. Louis, Mo., has been selected through MISO’s competitive developer selection process to develop the Duff-Coleman EHV 345-kV competitive transmission project in southern Indiana and western Kentucky.

Republic Transmission’s proposal includes one proposal participant, Big Rivers Electric Corporation, MISO said, adding that LS Power and Hoosier Energy have entered an agreement for Hoosier Energy to acquire a percentage of ownership in Republic Transmission and provide operations and maintenance for the segment of the project in Indiana.

“Republic Transmission’s project proposal exhibited the best balance of high-quality design and competitive cost, best-in-class project implementation, and top-tier plans for operations and maintenance,” Priti Patel, regional executive for the MISO north region and executive director of MISO’s Competitive Transmission Administration, said in the statement.

Patel added that Republic Transmission’s proposal provided the strongest combination of attributes, including “the highest degree of certainty and specificity, the lowest risk, and low cost. It comes down to providing the greatest value. That encompasses more than just cost.”

MISO said that the project is its first competitive transmission project under its FERC-approved Order 1000 competitive developer selection process. The project is part of the MISO Transmission Expansion Plan 2015 (MTEP15), and is expected to be in service by Jan. 1, 2021, MISO said.

Republic Transmission was selected from a group of 11 qualified developers, MISO said, adding that developer submissions included wide-ranging technical and financial proposals. MISO noted that it evaluated each proposal according to its competitive developer selection process outlined in the MISO tariff and applicable Business Practice Manuals. Four FERC-approved criteria were used in the evaluation process: cost and design, project implementation, operations and maintenance, and participation in the planning process, MISO said.

Republic Transmission will execute a binding developer agreement, incorporating the commitments made in the selected proposal and contained in the MISO tariff, MISO said, noting that part of the selected developer’s responsibilities will be to complete quarterly project status reports to MISO.

According to MISO’s selection report, MISO in January kicked off its competitive developer selection process. MISO issued a request for proposals (RFP) for the market efficiency project, a new line connecting the Duff substation in southern Indiana to the Coleman EHV substation in western Kentucky.

In response to that RFP, the report added, MISO received 11 comprehensive proposals: Ameren Transmission Company of Illinois and PPL TransLink Inc.; Duke-American Transmission Company; Edison Transmission; GridAmerica Holdings; ITC Midcontinent Development; Midcontinent MCN; NextEra Energy Transmission Midwest; Republic Transmission; Southern Indiana Gas and Electric Company d/b/a Vectren Energy Delivery of Indiana, Incorporated and Public Service Enterprise Group; Transource Energy; and Xcel Energy Transmission Development Company LLC.

The report noted that MISO’s review and analysis of the cost and design information submitted by each proposal revealed such information as:

  • The cost estimate developed by MISO for the project in the MTEP15 was $58.9m, and the range submitted in the 11 proposals was $34m to $55.7m
  • Various innovative and novel cost caps, concessions, and commitments were proposed, taking advantage of the freedom to develop new ways to compete on cost and annual transmission revenue requirement within MISO’s competitive developer selection process
  • Proposals with lower and more certain annual transmission revenue requirements, compared to other proposals, generally performed well across the spectrum of sensitivity studies conducted to test how resilient different proposals might be with changes to cost drivers
  • Most of the proposed pole structures were direct embedded and steel; only one RFP respondent proposed wood structures
  • Structure types reflected common industry practice (monopole, H-frame, or lattice)
  • All RFP respondents proposed crossing the Ohio River in the same general area
  • Various conductor sizes, configurations and types were proposed

The report said that Republic Transmission’s estimated 40-year annual transmission revenue requirement provided the best long-term certainty by offering:

  • Low anticipated operations and maintenance costs by leveraging local partners
  • Limited return on equity (ROE) for the life of the project (9.8%)
  • Limited equity in capital structure for the life of the project (45%)

The report noted that Republic Transmission submitted an implementation cost estimate of $49.8m (in 2016 dollars); the median implementation cost estimate for the 11 proposals was $48.8m. Republic Transmission, the report added, offered a $58.1m “firm rate base cap” ($47m in 2016 dollars), which was one of the strongest among all of the proposals, because it covered all relevant costs with the fewest exceptions. This reduced risk that ratepayers would end up bearing costs higher than the project implementation cost estimate, the report said.

Since Republic Transmission structured its cost cap as a “firm base rate cap,” it has assumed risks related to escalation and administrative and general cost increases, as well as allowance for funds used during construction (AFUDC), the report said. The proposal also provided specific discussion of the reasoning and risk mitigation provided by the design and implementation options that resulted in higher project implementation costs than the alternatives considered, the report said. Along with the strong construction cost cap with few exceptions, the proposal included firm pricing quotes from its contractors, the report said.

Republic Transmission submitted the second-lowest annual transmission revenue requirement (ATRR) estimate, at $45m, which was lower than the median of $56m, the report said. In addition to capping upfront project costs, Republic Transmission lowered its ATRR estimates by committing to cap other elements of ATRR costs as well – specifically, ROE at 9.8% and capital structure at no more than 45% equity for the life of the project, the report said.

Additionally, there were estimated savings for tax-exempt ownership and the lowest estimated operations and maintenance costs achieved by leveraging local business partners, the report said.

Among other things, the report noted that Republic Transmission’s project route would be 33 miles long, which is among the longest routes proposed. The project would use direct-embedded galvanized steel H-frame tangent structures, direct-embedded galvanized steel H-frame and three-pole running angle structures, and direct- embedded galvanized steel guyed three-pole dead-end structures, with one self-supporting galvanized steel three-pole dead-end structure on concrete drilled pier foundations (at a point where guying is not feasible), the report said.

The right of way (ROW) for most of the project would be 175 feet wide, the report said, adding that at the Ohio River crossing, it would be 210 feet wide. Those ROW values were higher than for any of the other proposals, and would provide design flexibility as well as accommodating future expansion, the report noted.

The Ohio River crossing in the proposed design would use structures heights of less than 200 feet, reducing the need to coordinate with the Federal Aviation Administration, the report said.