By Suzanne Herel

VALLEY FORGE, Pa. — The estimated cost for Public Service Electric & Gas’ portion of the Artificial Island stability fix has nearly doubled, from $137 million to $272 million, PJM told the Transmission Expansion Advisory Committee on Thursday.

“We certainly were surprised when we first saw the numbers,” Steve Herling, PJM vice president of planning, told RTO Insider. “In retrospect, we wish we’d had more foresight. We’re going to have to take a real hard look at what this tells us about our process going forward. We don’t like making an estimate that’s this far off.”

PJM stands by its selection of the project, which involves building a new 230-kV transmission line from the nuclear complex in New Jersey to Delaware.

“Based on what we have seen so far, we still believe we have the right project,” Herling said. “There are elements of the design that we continue to discuss, and we’re looking for opportunities to further optimize it and mitigate costs, but at this point we still believe we have the right project.”

LS Power was chosen to build the line, with PSE&G and Pepco Holdings Inc. assigned to construct the necessary connection facilities. LS Power won the deal in large part because it committed to limiting construction costs to $146 million. (See PJM Staff Picks LS Power for Artificial Island Stability Fix; Dominion Loses Out.)

“LS Power’s cost cap commitment has not changed, and LS Power continues to focus on successful development of its portion of the Artificial Island project,” company Vice President Sharon Segner said.

Paul McGlynn, PJM general manager of system planning, said the cost allocation of the project would remain the same, with the bulk of the price tag being designated to customers on the Delmarva Peninsula.

After Delaware and Maryland regulators and consumer advocates complained about the seemingly disproportionate cost assignment, FERC suspended PJM’s Tariff changes involving the project’s cost allocation pending additional review (EL15-95).

At a Jan. 12 technical conference ordered by the commission, stakeholders debated cost allocation based on the solution-based distribution factor (DFAX) method. (See related story, Commenters: DFAX Cost Allocation Inappropriate for Some Projects.)

So, how did PJM planners miss the mark so widely?

Herling said the Artificial Island project is unique and there was little to compare it to.

“This is the first time we’ve had to deal with so much work inside of a nuclear station,” he said. “We did our best to add substantial adders … but in some areas they weren’t big enough,” he said. “I don’t know how PJM could have done better with that other than doing more extensive detail design work,” which would be expensive and time-consuming, he said. “We will be talking about that, as far as how to do things differently moving forward.”

The Board of Managers, which approved the Artificial Island project, reviews cost increases but does not need to approve them unless the scope of the project is altered, Herling said.

“We review all significant changes with the board. They will ask us questions. They will ask us to get more information. They may suggest alternatives that we should be looking at. At the end of the day, we will do everything they ask us to do, and hopefully they will be satisfied with the information.” But, Herling said, “If the project continues in the [Regional Transmission Expansion Plan], the board does not have to approve revised costs.”

The board could decide to switch to another project, but that’s not likely, Herling said.

PSE&G’s portion of the project consists of three main elements: installing a static VAR compensator (SVC) at the New Freedom substation; putting in optical ground wire (OPGW) for high-speed relaying; and expanding the Salem substation. Herling noted that the SVC and OPGW work were common to all proposals and that any vendor likely would have run into the same cost issues.

The SVC work, which PJM estimated at $38 million, is expected to cost $43 million more, according to PSE&G, in part because of additional site work including wetland mitigation, storm water management and the relocation of a helicopter pad and several buildings. PSE&G also ran into higher vendor cost estimates, McGlynn said.

Additional site work for the OPGW installation increased PJM’s estimate of $25 million by $14 million.

The Salem expansion, estimated at $74 million, will cost an additional $78 million, in part because of the cost differential for security and access requirements needed to work in a nuclear facility.

“We understood that working in Salem would be more challenging than working at a 500-kV substation in the middle of a cornfield someplace,” McGlynn said. “What we’re trying to look at and consider and get a better understanding of is the difference in cost.”

A number of committee members were incredulous.

“Percentage-wise, this is a big miss as far as what we thought we were looking at,” said Dave Mabry, representing the PJM Industrial Customer Coalition, noting that there are no cost commitments involved in the PSE&G work, all of which is considered an upgrade as opposed to a greenfield project.

“We were at $250 million … now we’re up to $350 million,” Mabry said. “The concern here is, is there another shoe that’s going to drop?”