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Competitive transmission is here; Transource in the bidding

by on August 13, 2013

(Story by Kenneth J. Walker)

The much anticipated new era of competitive transmission projects under FERC Order 1000 has arrived and AEP Transmission’s Transource Energy is in the competition to build the first project in southern New Jersey.


The Situation

PJM Interconnection, the regional transmission organization, or RTO, covering parts of 13 eastern states and the District of Columbia, issued a request for proposals due to voltage issues in an area around the Hope Creek and Salem nuclear power plants known as Artificial Island.

PJM opened the window to solicit competitive transmission proposals under Order 1000 that eliminates, under certain circumstances, an incumbent utility’s right of first refusal (ROFR) to build new transmission projects. FERC’s goal was to create competition between incumbent utilities and independent transmission developers to build new transmission.

Transource qualified as a PJM “Designated Entity” in June, allowing it to bid on projects and qualify to own competitive projects in PJM.

“We have been preparing since our launch a year ago for this change in the marketplace and our proposed solutions represent a balanced approach between solving system issues, project constructability and costs,” said [Antonio Smyth], president, Transource Energy.

Proposals & Competitors

Transource’s four proposals are: 

  • A 74-mile, 500-kilovolt (kV) line between two existing stations, building a new station, and a 500-kV tie;
  • An eight-mile 230-kV line from the Salem Plant to an existing substation in Delaware – including 5.7 miles of line under Delaware Bay and two 500/230-kV transformers; 
  • A five-mile, 230-kV line and new substation – including 3.3 miles underwater and two 500/230-kV transformers; and
  • A 17-mile, 500-kV overhead line.

The eight companies bidding presented 26 proposed solutions ranging in cost from $116 million to $1.55 billion. In addition to Transource, the bidders were:

  • Public Service Electric and Gas Company
  • FirstEnergy
  • Dominion Resources
  • Atlantic Wind
  • Exelon and Pepco Holdings (joint proposal)
  • LS Power.

Details on each company’s proposal are available on the PJM website by typing “Artificial Island” into the search engine.

The Selection Process Begins

PJM is expected to select a short list of proposals in August, followed by a request for supplemental constructability information from the selected developers. A final selection to construct is expected in the fourth quarter of the year.

“AEP is the preeminent owner-operator of electric transmission infrastructure in the United States and our strategy with Transource is both offensive and defensive,” said [Lisa Barton], executive vice president, AEP Transmission. “We expect to maintain our leadership role in the transmission space both within and beyond our traditional transmission service territory as this new era of competition develops.”

“With the opening of the Artificial Island window, competition for transmission projects has begun in PJM, and we expect the respective competitive processes to begin in SPP and MISO within the next year,” Smyth said.

Competition is unfolding quickly in PJM, and the next request for competitive proposals is expected to go out the week of August 12.

Transource Background

Transource, launched April 4, 2012, is a joint venture between AEP and Great Plains Energy, a holding company based in Kansas City, Mo. AEP owns 86.5 percent of Transource and GPE owns 13.5 percent. Initially, Transource will target RTO-identified competitive projects in PJM, the Southwest Power Pool and Midwest Independent System Operator regions.

Regulatory approval to transfer two GPE, 345-kV line projects to Transource is expected later this year. The largest of the two projects is a 175-mile, $385 million project with an in-service date in 2017 and the other is a $60 million, 35-mile line with an in-service date in 2015. When in service, both lines are expected to generate about $20 million in annual earnings for AEP shareholders.

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