4 Finalists Allowed to ‘Supplement’ Proposals

Facing a barrage of criticism from environmentalists, New Jersey officials and spurned bidders, PJM’s Board of Managers has delayed action on planners’ recommendation that it select Public Service Electric & Gas to fix the Artificial Island stability problem.

Instead, the board will allow PSE&G and finalists Transource Energy and Dominion Resources to “supplement” their proposals in response to finalist LS Power’s offer to cap its project cost at $171 million — $40 million to $90 million less than the PSE&G project.

“The project costs included in any such supplemental proposals to PJM will be factors considered in the final selection for an Artificial Island solution. However, the Board has reiterated that cost is only one of several considerations that will drive a final decision,” Vice President for Planning Steve Herling said in a letter to the Transmission Expansion Advisory Committee yesterday.

Herling said PJM will respond to the criticism of its recommendation and its handling of the solicitation — the first under the Federal Energy Regulatory Commission’s Order 1000 — at the Aug. 7 TEAC meeting. Planners also will discuss “any issues that require further analysis,” Herling added.

PJM also will contact the Nuclear Regulatory Commission to discuss how some of the proposals might impact the switchyards for Artificial Island’s occupants, the Salem and Hope Creek nuclear plants.

The board made its decision in a closed meeting Tuesday and announced it yesterday in a liaison meeting with PJM members.

Comments Mostly Critical

The board received 10 comments from bidders and other stakeholders after PJM planners announced their decision to recommend PSE&G last month. Only PSE&G and the Delaware Public Advocate supported the recommendation. Delaware said it preferred the planners’ recommendation — a 500-kV line between the Hope Creek nuclear plant and Red Lion, Del. — because a 230-kV southern path to Delaware would allocate the entire project cost to Delaware ratepayers.

LS Power, Atlantic Grid Development, Dominion and Transource contended the proposal selected was technically inferior and/or more expensive than their own proposals. Exelon and Pepco, which made a joint proposal, said they would not challenge the recommendation but joined the others in criticizing the process as unfair and lacking transparency.

New Jersey’s Board of Public Utilities and Division of Rate Counsel criticized PJM’s recommendation as more expensive and presenting more of a permitting risk than the southern alternative because of its impact on sensitive environmental areas. The Sierra Club and the Delaware Riverkeeper Network said they shared the state’s concerns over the environmental impact of the northern path.

PJM’s choice “is very damaging environmentally, and not just to one important ecological resource, but to hundreds,” Delaware Riverkeeper Maya K. van Rossum said. The Riverkeeper Network is a non-profit organization formed to “advocate, educate and litigate” on behalf of the river. It promised it would “be active and committed” in its opposition to the 500-kV proposal.

Process Not Followed

Several of the bidders criticized PJM for failing to follow the procedures spelled out in PJM’s Order 1000 compliance filings, which revised Schedule 6 of the Operating Agreement.

PJM had said it would invite transmission developers to develop solutions to individual transmission needs and choose the best proposal from among the submissions. If none of the proposals were satisfactory, PJM could either revise its problem statement in a new solicitation window or develop its own solution and designate the incumbent transmission owner(s) to build it.

The bidders say that PJM changed the requirements by adding a unity-power-factor requirement — typically required for new generation interconnections — which none of the 26 proposals could meet.

Instead, the planners proposed adding a static var compensator (SVC) to all of the finalists’ proposals at an additional cost of $80 million.

PSE&G Proposal

PSE&G’s winning proposal was estimated at $1.066 billion before PJM planners eliminated two 500-kV lines from it. That reduced the project’s cost by more than three-quarters to a range of $211-$257 million, making it equal to an LS Power 230-kV proposal that was the cheapest among the finalists, PJM said.

“Although credited to [PSE&G], the selected Hope Creek to Red Lion 500-kV solution is nowhere close to the originally submitted proposal,” American Electric Power, co-owner of Transource, said in its July 18 letter to the board. “A modification that results in a more than 75% reduction in scope from what was originally proposed is a new project and should be treated as such.”

LS Power insisted its proposal would cost only $149 million and offered to cap its recovery at $171 million, a savings of at least $40 million to $90 million over the PSE&G project. (See Losing Bidders Blast Artificial Island Choice.)

Exelon and Pepco said that PJM had failed to provide the transparent selection process it promised FERC. “Following the filed process would likely have resulted in a significant reduction of more than a year’s worth of hard work performed by, and expenses incurred by, all participants,” they wrote.

In his letter to the TEAC yesterday, Herling said PJM was committed to improving its process to ensure fairness and transparency. “Order 1000 … has created entirely new processes, which are especially challenging when evaluating transmission solutions as complex as those required for the Artificial Island stability issues,” he said.