Two losing bidders for the Artificial Island transmission project have issued harsh critiques of PJM’s handling of the solicitation, seeking to persuade the Board of Managers to reject planners’ recommendation that the project be awarded to Public Service Electric & Gas.

In letters to the board, Northeast Transmission Development, a unit of LS Power, and Atlantic Grid Development, whose backers include Google, allege the competition was tainted by favoritism and that the PSE&G project will have difficulty winning siting approval. The challengers also contend the technical design of the winning project is inferior to their own proposals.

Atlantic Grid’s proposal failed to make PJM’s list of finalists. LS Power’s project was the low-cost proposal among the 10 finalists until PJM planners revamped the PSE&G proposal and deemed it equal in cost to LS Power’s at $211 million to $257 million. The changes reduced PSE&G’s price tag by $832 million, a 78% reduction. The estimates do not include an additional $80 million for a static VAR compensator, which PJM added to all of the proposals. (See PSE&G Wins $300M Artificial Island Project.)

In his letter, Northeast Transmission President Paul Thessen said PJM’s cost estimate for his company’s project is too high. He said the company estimates its project at $149 million and will cap its recovery at $171 million, a savings of at least $40 million to $90 million over the PSE&G project.

The board is scheduled to consider the staff recommendation at a meeting July 22.

“After careful evaluation, PJM’s staff concluded that ours was the best proposal. We believe that is the correct choice,” PSE&G spokesman Mike Jennings said in a statement. “We have successfully completed transmission projects in environmentally sensitive areas and performed that work on time and on budget. We are committed to doing the same with this project.”

PJM spokesman Ray Dotter declined to comment on the critiques. “We can say in general that our approach, which was made clear all through the development of our Order 1000 filing and reiterated throughout the Artificial Island evaluation process, is that we would look for the most cost-effective transmission solution,” he said.

Unwarranted Preference

Atlantic Grid said PJM planners gave PSE&G an “unwarranted preference” based on its participation in the Lower Delaware Valley Transmission System Agreement (LDV), a 1977 compact that controls right of way along the recommended project path between the Hope Creek nuclear plant and Red Lion, Del. Other signatories are JCP&L, Delmarva Power & Light, Atlantic City Electric and PECO.

Crediting PSE&G for the LDV right of way ignores the fact that about half the route is over federal and state land, where it may be difficult to obtain siting approval, Atlantic Grid said. In addition, the LDV right of way, the route of an existing 500-kV circuit, will need to be widened by as much as 200 feet in some locations.

Atlantic Grid said the PSE&G project “has a high likelihood of being rejected” by state or federal permitting agencies because it crosses wildlife protection areas and about 59 water bodies and may adversely impact endangered or threatened species. As a result, the ultimate fix “will be substantially delayed because PJM has proceeded down a dead end,” wrote Atlantic Grid President Robert L. Mitchell.

The New Jersey Board of Public Utilities (NJBPU) submitted comments raising the same concerns before planners announced their recommendation last month.

Atlantic Grid said PJM and its engineering consultant, GAI Consultants Inc., failed to seek a pre-application review from the New Jersey Department of Environmental Protection, which could have provided an indication of the project’s chances of winning required permits. “If GAI had followed this process its report might well have raised stronger cautions,” Atlantic Grid said.

Reliability of Design

Atlantic Grid also said the planners’ choice does not provide black start support for Artificial Island and ignores Nuclear Regulatory Commission regulations requiring nuclear plant switchyards be served by two physically independent circuits to minimize the likelihood of simultaneous failure. The PSE&G project would add a 500-kV line paralleling LDV’s existing 500-kV circuit.

Home to the Hope Creek and Salem nuclear plants, New Jersey’s Artificial Island is one of the largest nuclear complexes in the country.

26 Proposals

PJM asked for solutions to a stability problem at the complex last year. Five utilities and three independent developers responded with 26 potential solutions ranging from $100 million to $1.5 billion.

Atlantic Grid’s proposal, which would have buried an HVDC transmission circuit in public road rights of way between Artificial Island and Cardiff, N.J., appears to have been rejected early in the process. PJM cited its $1.01 billion cost and said it failed stability performance tests.

PSE&G, whose sister company PSEG Nuclear LLC operates the Salem and Hope Creek nuclear plants, submitted 14 alternative solutions, more than any other competitor.

One PSE&G proposal, 7K, envisioned a new New Freedom-Deans 500-kV line and a new Salem-Hope Creek-Red Lion 500-kV line at a cost of $1.066 billion.

The 7K project PJM planners recommended last month included several major changes that PJM says reduced the price by more than three-quarters.

Atlantic Grid criticized planners for modifying proposals that initially failed the technical review to allow them to qualify. “Some proposals were modified more than others, and others were not modified at all, raising significant questions about why PJM discriminated in this manner and the fairness of the process,” Atlantic Grid said.

“It appears that PJM took the proposals and then re-engineered a solution it liked best by mixing and matching pieces from different project proposals. The result is that PJM’s recommended 7K Project looks almost nothing like the original 7K proposal submitted by PSE&G.”

PJM Review

PJM planners began reviewing the proposals in July. In October, planners told the Transmission Expansion Advisory Committee they had narrowed their focus to the lowest-cost projects, which proposed interconnecting with facilities in Delaware. They also said they intended to add static VAR compensators to all proposals to provide reactive support.

By February, the focus had narrowed to proposals using two routes to connect to Delaware: a northern path that would add a 17-mile 500-kV line that parallels the existing 500-kV line from Red Lion to Hope Creek, and a southern crossing using a 230-kV circuit. The northern crossings included PSE&G’s 7K proposal; among the southern crossings was LS Power’s proposal, 5A.

By the March TEAC meeting, PJM planners apparently had decided to eliminate the New Freedom-Deans 500-kV line from the PSE&G proposal, showing its cost as proposed reduced to $297 million.

At a special TEAC meeting in May, planners said they also had eliminated a second tie line between the two nuclear plants from proposals by PSE&G and Dominion Virginia Power.

That reduced the estimated cost of the PSE&G proposal by about $43 million, giving it the same range ($211 million to $257 million) planners had assigned to the LS Power proposal, which had previously had been listed as the lowest cost option.

The elimination of the tie line also improved the performance of the PSE&G proposal in the planners’ rankings of the proposals.

PJM presented a chart summarizing its analyses of the proposals, assigning color codes for each of 25 attributes: green (positive or limited impact); yellow (some impact) and salmon (negative impact). RTO Insider summarized the findings by assigning a score of 1 to green, zero to yellow and -1 to salmon.

PSE&G’s 7K proposal scored a 1 out of a possible 25 in its original form but received a 9 when the second tie line was removed — the best of all 12 proposals analyzed. LS Power’s proposal scored a 7, ranking it third. (See Dominion, PSE&G Proposals Gain in Artificial Island Race.)

LS Power contends PJM planners underestimated the cost of the PSE&G proposal. The company said GAI Consultants estimated the cost of the 500-kV line at $5 million/mile while staff estimated only $3.6 million/mile. The consultants included an adder of $1 million/mile to account for construction in wetlands, which LS Power said PJM staff apparently did not consider.

LS Power also complains that PJM gave its proposal no credit for factors favoring its proposal, including rightofway, route diversity, black start, market efficiency, feasibility and system outage requirements.

Order 1000 Precedent

While LS Power wants PJM to accept its cost-capped proposal, Atlantic Grid asked the board to delay a decision until it evaluates the likelihood of the proposals to receive necessary siting approvals.

The challengers said the selection of PSE&G would set a bad precedent for future solicitations under the Federal Energy Regulatory Commission’s Order 1000, which was intended to open transmission development to competition.

“Unfortunately, if this RFP sets the pattern for the future, PJM will discourage participants from spending time, money and engineering resources to develop innovative, well-engineered RFP responses,” Atlantic Grid said.