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SPP execs cannot explain why power line costs were not rigorously studied

While being grilled by Missouri regulators on the rising costs of planned transmission lines, Southwest Power Pool Inc.'s CEO and a senior vice president said Nov. 23 that they "don't know" why the initial cost estimates were not more rigorously examined for accuracy.

While being grilled by Missouri regulators on the rising costs of planned transmission lines, Southwest Power Pool Inc.'s CEO and a senior vice president said Nov. 23 that they "don't know" why the initial cost estimates were not more rigorously examined for accuracy.

When analyzing the costs of its "balanced portfolio," SPP developed a set of standards and held each project to those standards before approval, Missouri Public Service Commissioner Jeff Davis noted during a PSC meeting. However, when it came time to study its "priority projects," Davis said, SPP relied heavily on cost estimates provided by transmission developers.

Why did SPP stray from its method and not put the priority projects, now estimated to cost $1.4 billion, through the same rigor?

"I can't answer that. I don't know why we didn't do that," SPP's senior vice president of engineering and regulatory policy, Les Dillahunty, said in response to the question. "We put those estimates out there, but we didn't go through the rigor. Why we didn't ... I don't know."

Dillahunty then referred the question to SPP President and CEO Nick Brown, who answered, "I don't know, either."

The increasing costs of both... more [truncated due to possible copyright]  

While being grilled by Missouri regulators on the rising costs of planned transmission lines, Southwest Power Pool Inc.'s CEO and a senior vice president said Nov. 23 that they "don't know" why the initial cost estimates were not more rigorously examined for accuracy.

When analyzing the costs of its "balanced portfolio," SPP developed a set of standards and held each project to those standards before approval, Missouri Public Service Commissioner Jeff Davis noted during a PSC meeting. However, when it came time to study its "priority projects," Davis said, SPP relied heavily on cost estimates provided by transmission developers.

Why did SPP stray from its method and not put the priority projects, now estimated to cost $1.4 billion, through the same rigor?

"I can't answer that. I don't know why we didn't do that," SPP's senior vice president of engineering and regulatory policy, Les Dillahunty, said in response to the question. "We put those estimates out there, but we didn't go through the rigor. Why we didn't ... I don't know."

Dillahunty then referred the question to SPP President and CEO Nick Brown, who answered, "I don't know, either."

The increasing costs of both SPP's balanced portfolio and priority projects, which have risen 24% since being approved in April, have state regulators and utilities across the SPP region up in arms. The Public Utility Commission of Texas ordered its staff to investigate the projects, and the Missouri PSC followed suit Nov. 23 by voting unanimously in favor of conducting an investigation.

Kansas energy attorney Jim Zakoura has launched his own, more specific investigation into the projects on behalf of energy developer Chermac Energy Corp.

Dillahunty, who traveled to Missouri to attend the PSC's meeting, acknowledged that the grid operator's study process could use improvement. "As we go forward, we're going to insert the rigor into the process," he told PSC members. "There's going to be more structure."

Dillahunty explained that SPP's strategic planning committee is now looking into the project cost estimates and is expected to present recommendations to the grid operator's board of directors in the coming months.

Officials also explained that SPP is a "member-driven" organization that relies on its participants to bring issues and concerns to the forefront. In the case of the priority projects, Dillahunty said, scrutinizing cost estimates more closely "just didn't come up" in member discussions.

"Quite frankly, these issues keep coming up," Davis said to Dillahunty. "Do you recall me coming to you about [ITC Holdings Corp.]'s estimates? They basically gave one set of estimates to SPP and gave another set to the Wall Street guys. Do you recall that conversation, Les? If anything, to me, what has happened since then is proof positive that that number should have been adjusted all along."

Davis noted that several members of SPP's members committee, which gives its board a feel for participants' stances on issues, work for the transmission developers assigned to build the priority projects. "That's like letting us sit around and poke for our own pay raise," Davis said.

Brown noted that the board of directors, which ultimately decides on the projects, as "totally unaffiliated with any of our members or customers." He added, "To say there's a conflict, in my view, would be a stretch."

Davis also stressed the importance of a PSC-driven investigation into the cost increases and SPP's oversight, saying that state regulators are going to come up against several transmission owners who "are going to try to water these things down."

"Nick talks about being a member-driven organization," Davis said. "Well, I've got a problem with some of the members not being honest." (EO-2011-0134)


Source: http://www.snl.com/Interact...

NOV 23 2010
http://www.windaction.org/posts/29014-spp-execs-cannot-explain-why-power-line-costs-were-not-rigorously-studied
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