The Midcontinent ISO (MISO) said that Republic Transmission on June 11 energized the 31-mile, 345-kV Duff to Coleman Project and became a new transmission-owning member of MISO.
The project, which spans between southern Indiana and western Kentucky, was the first project in the MISO footprint eligible for competition under FERC Order 1000, MISO said.
MISO noted that it selected Republic Transmission for the project in December 2016, after completing a competitive process that determined Republic Transmission provided the highest degree of certainty, the lowest risk and top tier operations and maintenance. MISO also said that Republic Transmission is the first entity to implement a project in MISO with binding cost containment provisions, which include a cost cap below MISO’s original estimate, as well as a return on equity cap, equity percentage cap, and a schedule guarantee.
The project was approved by MISO’s Board of Directors as part of the 2015 MISO Transmission Expansion Plan, which found that the project would strengthen the 345-kV backbone in the MISO Central Region and provide more than $1bn in estimated benefits, MISO said.
While the project was scheduled for completion in January 2021, Republic Transmission and MISO companies, Vectren and Big Rivers, were able to complete it ahead of schedule, MISO said.
MISO spokesperson Allison Bermudez on June 11 told TransmissionHub that based on the latest information available, the estimated project cost is $64.9m.
As TransmissionHub reported, MISO in December 2016 said that Republic Transmission’s proposal for the project includes one proposal participant, Big Rivers Electric Corporation. MISO also noted that LS Power, of which Republic Transmission is a wholly owned subsidiary, 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.
As noted in MISO’s selection report, 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.