PPL: Estimated in-service date for first segment of Project Compass is in 2023

The estimated in-service date for the proposed first segment of PPL’s (NYSE:PPL) Project Compass is in 2023, according to a company presentation related to PPL’s 4Q16 earnings call, which was held on Feb. 1.

As noted on PPL Electric Utilitieswebsite, the first segment of the project is a 95-mile, 345-kV line between Blakely, Pa., and Ramapo, N.Y., that would “be an important link between the” regions of PJM Interconnection and the New York ISO (NYISO).

According to the presentation, the proposed first segment has an estimated cost of $400m to $500m.

PPL Electric Utilities in October 2015 filed an interconnection application with the NYISO, and additional approvals are needed from the Pennsylvania Public Utility Commission, the New York State Public Service Commission, PJM, and other agencies, the company said on its website.

PPL Electric Utilities also said that while the first segment can stand alone as a valuable grid component, it continues to refine the overall plan for the rest of Project Compass. As currently envisioned, the company said, the full project would run about 475 miles from western Pennsylvania into southeastern New York.

The company noted that it has not yet determined the exact route for the project.

Project Compass’ cost is estimated at $3bn to $4bn, the company said. According to FERC guidelines for cost allocation, those who benefit from a new power line should pay its costs, the company said, adding that the first segment would be paid for by electric customers in New York who would get the benefit of lower power prices. The costs would be paid over a period of many years on customers’ electric bills, the company said.

During the earnings call, PPL Chairman, President and CEO William Spence said: “In Pennsylvania, we remain focused on transmission and distribution system improvements, with an eye towards reliability and resiliency. We continued to make substantial progress in these areas in 2016.”

As a result of such investments, he said, PPL Electric Utilities has one of the most robust and advanced distribution automation systems in the country. That system, which was bolstered by the addition of more than 700 smart grid devices last year, avoided more than 100,000 customer interruptions throughout the year, he said.

“[A]s a result of investments we’ve made to modernize and expand our transmission system, sustained transmission outages have dropped by nearly 75% over the last five years,” Spence added. “PPL Electric Utilities’ reliability performance is among the nation’s best. We’re intent on keeping it that way as we execute our plans for 2017 and beyond.”

Discussing the company’s planned capital expenditures for 2017 through 2021, Vincent Sorgi, PPL senior vice president and CFO, said during the call that infrastructure investment over that period totals $16bn.

“We continue to invest about $1bn annually in each of our business lines, which includes our previously announced initiatives, as well as $1bn of incremental capital identified for ’17 through ’20, compared to the prior plan,” he said.

The company’s “investments focus on delivering a sustainable energy future by expanding and modernizing the grid, adding smart grid technology and automation, and strengthening physical and cyber security,” he said. “We are also connecting more renewable energy and expanding solar offerings to our customers.”

In Kentucky, the company is investing an additional $525m over the next four years, despite lower environmental spending of $345m due to updated scope and timing changes for ELGs and CCR projects, he said. That additional capital includes $320m to install advanced meters and $550m to improve the reliability of electric and gas infrastructure in Kentucky, he said.

“In Pennsylvania, we are investing an additional $310m in transmission, driven primarily by increased or accelerated project activity, such as line rebuilds, new substations and security,” he said. “Distribution spending levels in Pennsylvania remain relatively flat. We currently project our capital investment to decrease slightly in the outer years as our advanced metering projects are completed in both Pennsylvania and Kentucky and our environmental spend in Kentucky ramps down.”

Consistent with last year’s plan, PPL’s capital plan is based on identified projects only, across the portfolio. However, Sorgi added, the company continually finds new capital projects in support of reliability, safety and security.

Among other things, Spence noted that the company’s rate review continues to proceed as expected before the Kentucky Public Service Commission. Kentucky Utilities filed a request in late November 2016 to increase revenue by a combined $210m, including revenue increases of $103m and $93m, respectively, at Kentucky Utilities and Louisville Gas and Electric (LG&E) through adjustments to annual base electricity rates; it also includes a revenue increase of $14m for LG&E through an adjustment to annual gas base rates, Spence said.

“The requested increases are driven by additional capital investments to make the grid smarter, more reliable and more resilient,” he said, adding that if approved, the increases would take effect on July 1.

Earnings report

PPL on Feb. 1 announced 2016 reported earnings (GAAP) of $1.9bn, or $2.79 per share, compared with $682m, or $1.01 per share, in 2015.

The company said that its results for 2015 reflect the $921m loss from discontinued operations, or $1.36 per share, resulting primarily from the spinoff of its competitive supply business.

Adjusting for special items, earnings from ongoing operations were $1.67bn, or $2.45 per share, compared with earnings from ongoing operations of $1.49bn, or $2.21 per share in 2015, an increase of 11% on a per-share basis, the company said.

About Corina Rivera-Linares 3063 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.