By Tom Kleckner
SANTA FE, N.M. — SPP awarded its first competitively bid transmission project under FERC Order 1000 on Tuesday, but it may not be built because of declining load forecasts.
The RTO’s Board of Directors and Members Committee both voted to accept an industry expert panel’s (IEP) recommendation to award the 22.6-mile, 115-kV line from Walkemeyer to North Liberal in southwest Kansas to Mid-Kansas Electric.
Oklahoma Gas & Electric was selected as the alternative “designated transmission owner” should Mid-Kansas be unable to construct the project. Mid-Kansas and OG&E received the panel’s two highest scores among the 11 competitive proposals submitted to SPP.
Mid-Kansas CEO Stuart Lowry accepted congratulations from fellow members and gathered his employees in a group hug after the vote, before telling RTO Insider the company had proposed the project be re-evaluated. He later told members the Mid-Kansas and Sunflower Electric Power system has seen a 27% reduction in load forecasts within the project’s region.
Mid-Kansas is owned by five electric cooperatives members and a not-for-profit company, and managed and operated by Sunflower, a wholesale generation and transmission provider.
Mid-Kansas said the area has seen a drop in forecasted loads from oil and gas exploration. It also loses the auxiliary load of a nearby gas-powered generating plant when SPP doesn’t dispatch the plant. The load forecast that drove the need for the Walkemeyer project was conducted almost three years ago as part of SPP’s Integrated Transmission Planning 10-year assessment.
“I try to put myself in [the stakeholders’] shoes,” Lowry said. “This project is a reliability project, so it’s totally driven by load forecasts. We’re seeing a reduction in the region, so we made a decision we need to report on this. If the information is correct, we want to do what is best.”
Lowry said Mid-Kansas has contracted with Burns & McDonnell to provide an “independent set of eyes” on the need for the new line.
Mid-Kansas asked SPP last month to re-evaluate notices-to-construct it has already received for the two noncompetitive portions of the project, which include terminal upgrades at the existing North Liberal and Walkemeyer substations. The board granted staff’s request for an expedited review of the need for both NTCs, which were awarded last summer.
SPP CEO Nick Brown also mentioned the load-forecast changes at a Gulf Coast Power Association conference two weeks ago. (See Grid Execs Talk Cybersecurity, Renewables, Order 1000.)
Paul Suskie, SPP’s executive vice president of regulatory policy and general counsel, said SPP members are free under the Tariff to request project re-evaluations at any time.
“The request to restudy this line is a part of our stakeholder process that occurs every year,” he said. “SPP will re-evaluate this line as we have others in the past.”
Mid-Kansas’ winning bid received an 892.85 score on a 1,000-point scale from the IEP, 13% higher than OG&E’s proposal, which scored a 785.67. The other nine bidders were not identified.
Mid-Kansas was one of only two bidders to win 100 incentive points for providing a “detailed project proposal,” but it would have won even without it, the IEP said.
The IEP’s scoring methodology graded each respondent on engineering design, experience in project management, construction and operations, a rate analysis (estimated total cost, including financing, FERC incentives and any cost certainty guarantees by the bidder) and finance (including financial viability and creditworthiness).
The panel said the Mid-Kansas proposal met all of its evaluation criteria, receiving 90% of the possible finance points and contained the second-lowest 40-year net present value.
“Our recommendation was built around what the entire panel felt would a successful project,” said the panel’s chair, Steve Strickland, who spent 35 years with Entergy Arkansas. “We defined that as a project that operated as intended, was on schedule and under budget.”
The Mid-Kansas and OG&E proposals were very close with their engineering and construction cost estimates ($8.33 million versus $8.44 million, respectively) and NPV estimates ($10.57 million versus $10.15 million).
“This represents a lot of hard work by our staff. A lot of the credit goes to them,” said Lowry, naming Mid-Kansas COO Kyle Nelson, CFO Davis Rooney and Al Tamimi, vice president of transmission planning and policy at Sunflower. “There was a lot of uncertainty over the process, how the proposals would be evaluated … everyone learned a great deal.”
Formed in 2005, Mid-Kansas serves a combined 200,000 members in western and central Kansas. Its assets include 843 MW of natural gas, coal and wind generation and about 1,140 miles of transmission. Sunflower adds another 655 MW of generation and 1,205 miles of transmission.
SPP stakeholders developed and FERC approved a transmission owner selection process to comply with Order 1000, which required the removal of federal rights of first refusal for certain transmission projects.
The process began in June 2014, when interested parties had 180 days to respond to the Walkemeyer project’s request for proposals. The IEP was established in November, and shortly thereafter it began its review and evaluation of the 11 responses.
[Editor’s Note: An earlier version of this article incorrectly stated the net present value of the Mid-Kansas and OGE proposals in billions rather than millions. It also incorrectly stated that the noncompetitive portion of the project included a switching station.]
