Transmission Projects: At A Glance Prepared by: Edison Electric Institute MARCH 2012 © 2012 by the Edison Electric Institute (EEI). All rights reserved. Published 2012. Printed in the United States of America. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system or method, now known or hereinafter invented or adopted, without the express prior written permission of the Edison Electric Institute. Attribution Notice and Disclaimer This work was prepared by the Edison Electric Institute (EEI). When used as a reference, attribution to EEI is requested. 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Washington, D.C. 20004-2696 Phone: 202-508-5000 Web site: www.eei.org EXECUTIVE SUMMARY This sixth annual publication of EEI’s Transmission Projects: At A Glance report showcases a cross-section of transmission projects that EEI’s members completed, or expected to complete, in 2011, have planned for the next ten years, and highlights EEI members’ continuing focus on needed transmission investment. This report is not a comprehensive compilation of all projects that are being undertaken by EEI’s members, but the sampling of projects described captures a wide variety of project types currently under construction or planned. Investing in Needed Transmission In response to various needs, such as reliability and generator interconnection, investment in our nation’s transmission infrastructure has increased over the past several years. The increasing demands for new transmission and system upgrades will continue to drive transmission investment in the long-term. However, near-term planned transmission investment is impacted by current economic conditions indicated by lower rate of demand growth. Coupled with the recent completion and/or delay of major transmission projects, EEI currently projects a flattening or possible decrease in transmission investment through 2014, as compared to the projected 2012 level. Nevertheless, these projected 2011-2014 figures are significantly higher than the actual 2010 transmission investment level, and are a sign of a continuing increase in transmission investment by EEI’s members. As explained below, the ability of EEI members to make transmission investments that are beneficial to customers is supported by effective Federal Energy Regulatory Commission (“FERC”) policies. EEI member companies’ are also continuing their efforts to modernize the transmission system through individual funding and the use of Smart Grid Investment Grants (“SGIGs”) for certain projects selected by the United States Department of Energy (“DOE”), which augment existing EEI member grid modernization efforts. In addition, there are emerging factors that affect transmission investment, including recent United States Environmental Protection Agency (“EPA”) requirements on generation resources. EEI members’ investment in needed transmission is significant and reflects a commitment to reliability, preparation for future customer needs and public policy objectives. From 2001-2010, EEI members invested approximately $77 billion in transmission infrastructure enhancements to meet these needs.1 Over 100 transmission projects are highlighted in this report, totaling approximately $64 billion (nominal dollars) in expected future transmission system improvements from 2011 through 2022. This investment is only a portion of the total transmission investment anticipated through 2022 by EEI’s members. The Value of Transmission It is important to remember that transmission projects provide an array of benefits, including maintaining the high levels of reliable electricity service that customers expect; providing congestion relief, reducing system losses, integrating generation resources; and deploying advanced monitoring systems to enhance EDISON ELECTRIC INSTITUTE iii TRANSMISSION PROJECTS: AT A GLANCE — ExECUTIVE SUMMARY situational awareness, regardless of the initial development intention. At the same time, all transmission projects must be properly integrated with local systems to maintain the paramount objective of reliable operation of the national grid. In accordance with FERC’s 2009-2014 Strategic Plan, transmission projects are developed “through the use of open and transparent processes that include analysis and consideration on a comparable basis of proposed solutions involving any generation, transmission, and demand resource.”2 Policies Supporting Transmission Investment Investment in needed transmission is supported, in part, by several landmark developments in federal and state policies affecting transmission infrastructure. Among these are, notably, the Energy Policy Act of 2005 (“EPAct 2005”) and federal transmission pricing policies being implemented by FERC. In recognition of the benefits of a robust transmission network, the risks of transmission development, and the challenges of raising adequate capital to invest in transmission given other capital requirements, Congress required the adoption of a new transmission pricing policy in EPAct 2005. FERC implemented this mandate in 2006, issuing its transmission incentives rate final rule. Properly balancing the benefits of transmission with the cost to ratepayers, FERC executes its incentives policy with rigorous thresholds and requires detailed demonstrations by applicants as part of the prudency review. This pricing policy is working to assist in sustaining the needed levels of investment in transmission infrastructure improvements, and the deployment of advanced technologies, which, in addition to enhancing reliability and integrating diverse generation, removes barriers to electricity trading between and among regions and markets. The transmission grid is dynamic and ever expanding to better serve electricity customers. As showcased in this report, there is a continued need for transmission investment, which presents risks and challenges that have not diminished. As mentioned above, Congress recognized these risks and challenges. FERC’s balanced and effective incentives policy aids to address these risks and challenges, and regulatory certainty is critical to assure the timely development of needed transmission. There are also new federal developments that may assist in transmission siting, one of the major challenges to expanding, upgrading and modernizing our nation’s transmission network. The DOE and nine other federal agencies, are working together with the goal of improving the overall quality and timeliness of transmission permitting and review by federal agencies.3 These efforts could not come at a more opportune time. A robust transmission system can ensure the reliability of the grid and will assist in the industry’s efforts to comply with new EPA rules, as well as additional state environmental requirements.4 Report Scope In addition to the total transmission system investment included in this year’s report, several sub-categories are broken out and discussed in greater detail: Interstate Transmission Projects, Transmission Supporting the Integration of Renewable Resources, Transmission Projects Required for System Reliability, and Transmission Projects Developed by Multiple Project Partners. Large interstate transmission projects span multiple states and account for approximately 9,500 miles of transmission representing a $42.5 billion (nominal dollars) investment and face significant challenges for siting, permitting, cost allocation and cost recovery. iv EDISON ELECTRIC INSTITUTE TRANSMISSION PROJECTS: AT A GLANCE — ExECUTIVE SUMMARY Transmission projects needed to address the integration of renewable resources that will accommodate the expected off-peak production represent the transmission upgrades of approximately 12,000 miles with an accompanying investment of approximately $47.5 billion (nominal dollars).5 Finally, transmission projects where EEI’s members have partnered with other utilities, including non-EEI members, to leverage their expertise in building needed and beneficial transmission represent a cost of approximately $42 billion (nominal dollars). 1 The historic investment total of approximately $77 billion for the 2001 through 2010 period is in real 2010 dollars. Sources: EEI’s Annual Property & Plant Capital Investment Survey for actual transmission investment and EEI’s Electric Transmission Capital Budget & Forecast Survey for planned transmission investment. 2 Federal Energy Regulatory Commission, The Strategic Plan - FY 2009-2014 at 24 (Oct. 2009) available at http://www.ferc.gov/about/strat-docs/FY-09-14- strat-plan-pringt.pdf