By Rory D. Sweeney

VALLEY FORGE, Pa. — And the winner is … LS Power, again.

Warren Beatty wasn’t on hand, but PJM still received plenty of criticism Friday after planners reaffirmed — with some scoping changes — their previous selection of LS Power’s proposal for the contentious and long-awaited reliability upgrades on Artificial Island.

The island on the southwestern edge of New Jersey is home to three nuclear reactors owned by Public Service Enterprise Group, which have been forced to operate for years below capacity and in accordance with a complex operating guide.

Last August, PJM’s Board of Managers suspended the project for additional review after PSEG raised a series of engineering concerns and increased the cost estimate for its portion of the upgrades by at least $135 million. (See PJM Board Halts Artificial Island Project, Orders Staff Analysis.)

Scope, Costs Reduced

At Friday’s special session of the Transmission Expansion Advisory Committee, PJM officials said their review confirmed that LS Power’s proposal for a 230-kV line from Artificial Island to a new Silver Run substation in Delaware was the best solution but that the interconnection point should be changed from the Salem plant to Hope Creek. The analysis also determined that a static VAR compensator (SVC) at the New Freedom substation and optical groundwire upgrades provided little benefit and were unnecessary.

The planners’ recommendations will be forwarded to the board for final approval.

In addition to eliminating those upgrades from the scope of work, planners recommended implementing a voltage schedule at the plants and revising the in-service date to June 1, 2020.

Much of the discussion on Friday focused on the project’s costs compared to those of the other finalist, a project proposed by PSEG subsidiary Public Service Electric and Gas that would follow an existing transmission route north through New Jersey.

PJM’s analysis found that LS Power’s project would cost $265 million, $11 million more than PSE&G’s. But planners said LS Power’s proposal, which contained hard cost caps, provided “greater cost certainty.” PJM’s Paul McGlynn, who oversees the project’s development, said PSE&G’s project also raised permitting concerns because it would run through the Supawna Meadows National Wildlife Refuge.

As approved in July 2015, the project was expected to cost $270 million to $283 million. The February 2016 update that prompted the suspension pushed the cost to $418 million with the Salem interconnection more than doubling to $152 million from a maximum of $74 million.

Replacing the Salem connection with one at Hope Creek will save $20 million, and eliminating the optical ground wire and SVC trimmed an additional $120 million. That brings the projected cost to $265 million, with a cost cap of  $278 million — within the bounds of the original project cost estimates.

PJM also pointed out that LS Power has already spent about $6.5 million on preliminary work, so switching projects would mean writing off that expense as a sunk cost. The RTO acknowledged that PSEG has also spent money on developing work estimates for PJM regarding its project but “didn’t think” to quantify it, said Vice President of Planning Steve Herling.

Stakeholders from PSEG and Dominion were among those criticizing PJM’s new recommendation.

More ‘Granular Review’

PJM said the suspension allowed time to conduct a “more granular review and re-evaluation” of the project, including additional site visits and marine and terrestrial surveying, a review of permits, property rights and scheduling issues and preliminary engineering.

Planners determined the optical groundwire and related line relay changes would not impact the site’s operating guide or improve stability margins because of the timing of the most critical bus fault’s clearing. They said if a need is identified for the upgrades later they would be pursued as a separate project.

The SVC was replaced with a recommend voltage schedule for Salem and Hope Creek requiring operation at a minimum of 527.5 kV, a level PJM said was “maintained in nearly all conditions since 2012.”

PSE&G insisted its proposal was “more robust” than LS Power’s, providing larger stability and system reliability margins and — because it would employ a 500-kV line — more than three times more capacity than its competitor’s 230-kV line.

PSEG’s nuclear division sent the PJM board a letter March 2 warning that it has an option to build another reactor at the Hope Creek station and that the connection at Hope Creek might have to be moved if it moves forward with another reactor. Herling said PJM has no control over that and that future work at the site would need to be reviewed on a “case-by-case” basis.

LS Power’s Sharon Segner said it’s not an “apple-to-apples” comparison because PSEG’s proposal excludes any overruns for environmental permitting and securing real estate rights, while her company’s includes risks for both. In addition, LS Power has already contracted for material portions of its project, so the revised, lower cost estimate of $133 million for its portion reflects some actual contractual numbers.

PSEG’s Jodi Moskowitz said that most of the costs in her company’s proposal are capped.

Old Dominion Electric Cooperative’s Mark Ringhausen said it was “deceiving” to use $265 million for LS Power’s project when that is only the company’s current estimate. The proposal is actually capped at $278 million. LS Power’s estimate assumes PSEG’s work at Hope Creek costs no more than $132 million. However, this portion of the project has no cost cap.

First Order 1000 Project

PJM made the Artificial Island upgrades its first competitive solicitation under the FERC Order 1000 in 2013. In 2014, PJM planners recommended PSE&G for the job, but the board reopened the bidding following an outcry from losing bidders, environmentalists and New Jersey officials. LS Power’s project was recommended in April 2015, with PSE&G and Pepco Holdings Inc. chosen for necessary connection facilities. (See PJM Staff Picks LS Power for Artificial Island Stability Fix; Dominion Loses Out.)

That wasn’t the end of the controversy, however. Delaware and Maryland officials have complained that most of the cost of the project would be allocated to ratepayers on the Delmarva peninsula despite the region receiving little benefit from the upgrade.

Last April, FERC approved the cost allocation for the project, but in June it said it would consider rehearing requests over whether PJM’s use of the solution-based distribution factor (DFAX) cost allocation method is appropriate for the project (EL15-95, ER15-2563). (See FERC Taking Second Look at Cost Allocation for 2 PJM Projects.)

The commission cannot resolve the dispute until new members are appointed to restore its quorum.

Next Steps

Herling said the board will be educated about all of the cost estimates through comprehensive documentation, and “I guarantee they’ll read all of it.”

The next board meeting is scheduled for April 6, so PJM asked that all stakeholder comments on the recommendation be filed by March 31. Stakeholders expressed concerns that PJM won’t have published its comprehensive whitepaper on the topic by then, so all comments will have to be based on existing documents.