By Rich Heidorn Jr.
KANSAS CITY — SPP members approved four over-budget transmission projects and sent three others back to the drawing board last week amid widespread criticism of the process used to estimate project costs.
Of 30 committed projects resulting from the 2015 near-term (ITPNT) and 10-year (ITP10) planning processes, 23 are facing cost estimate increases exceeding 30%, SPP officials told the Markets and Operations Policy Committee last week. Three projects are coming in more than 30% below estimates with only four within the 30% “bandwidth.”
Describing a 152% increase on the Hobart-Roosevelt Tap-Snyder rebuild in American Electric Power territory in Oklahoma, SPP Director of Planning Antoine Lucas said “it makes us question whether this was the right project.”
“I find this really appalling,” SPP Board Chairman Jim Eckelberger said. “We’ve taken a huge step backwards. We need a procedural adjustment.”
A third-party engineer estimated the project — rebuilds of a 10-mile, 69-kV line from Hobart to Roosevelt and an 18.7-mile, 69-kV line from Roosevelt to Snyder — would cost $14.3 million.
SPP now expects it to cost $36 million due to additional right-of-way acquisition; licenses and permits; additional substation work; and costs related to a crossing through Mountain Park Wildlife Management Area. SPP also cited AEP’s recommendation that the project be designed anticipating an eventual conversion to 138 kV.
Fire the Engineer
SPP should fire the third-party engineer “and never use him again,” Eckelberger said, drawing applause from many of the about 120 in attendance.
“I’ve seen this over and over again,” Director Julian Brix complained. “This is not a 69-kV project [as originally approved by SPP]. It’s a 138-kV project. This is not the first or second or third time we’ve seen this. This is why we get into trouble with the [Regional State Committee],” he said, referencing state regulators who must collect from ratepayers for transmission upgrades.
AEP officials said the use of 138-kV standards was responsible for only $400,000 of the additional costs. “A no-brainer,” AEP’s Richard Ross said. AEP’s Terri Gallup called complaints of “scope creep” unfair, saying the company had proposed the rebuild as a 138-kV project — that would initially be operated at 69 kV — to begin with.
Xcel Energy’s Bill Grant noted that incumbent transmission owners would become responsible for providing cost estimates for non-competitive projects under a plan approved by the MOPC earlier in the meeting. (See related story, “Initiative on Non-Competitive Studies Advances” in SPP Strategic Planning Committee Briefs.) “I think we have a solution,” Grant said.
Marguerite Wagner of ITC Holdings said transparency would improve the process, calling for release of cost estimates to stakeholders. “If a project is not competitive, how is releasing the cost estimate competitive information?” she asked.
Director Harry Skilton said the cost estimate increases represented a “lesson learned” as the RTO begins considering competitive projects. “We’re going to need a feedback loop” regarding costs, he said.
NTCs Withdrawn
SPP planners recommended that notifications to construct (NTCs) for seven projects with the largest overruns be suspended and the projects restudied, including the Hobart-Roosevelt project.
But Gallup said Hobart-Roosevelt and two other AEP reliability projects on the list had in-service dates that might not be met if they were delayed for more study.
The MOPC ultimately voted to retain the three projects and one in Westar territory, suspending NTCs for only three of the seven recommended by planners: South Shreveport-Wallace Lake 138-kV rebuild (AEP); Martin-Pantex North-Pantex South-Highland Park 115-kV reconductor (Southwest Public Service); and Iatan-Stranger Creek 345-kV voltage conversion (Westar/KCP&L Greater Missouri Operations).
