Ensuring transmission grid stability as the power generation mix changes

Top Players Will Continue to Spend Heavily on Transmission

Projects in Progress Editor Kent Knutson shares insights on the top six companies in transmission.

The top 20 U.S. investor-owned utilities accounted for more than 84% of total holding company spend on transmission infrastructure. This according to annual plant-in-service statistics gathered from my research at FERC last year.  The 2016 summary information is being compiled now, and I expect the trend to continue when tabulated. Data compiled from recent earnings reports and shareholder presentations support continued investment in the grid. Here are some of the highlights from the top six companies.

In 2016, PSEG brought into service transmission projects valued at $1.7bn. PSEG has been the leading investor in transmission over the period from 2013-16. During the period plant in service investment for transmission infrastructure totaled $6.4bn.  Over the five-year period from 2017-21, PSEG’s capital plan is forecast at $12.3bn. This does not include an additional $1.6bn for extensions for energy efficiency, solar, distribution hardening and modernization work. Of that total, investment in high voltage transmission from FERC formula rates are expected to account for 44% of the spend. Note that 75% of the overall growth in capital spend across all sectors is focused on growth -- during the five-year period, spend on transmission infrastructure is estimated at $6.1bn.

Source: PSEG Investor Conference NYC, March 6, 2017

According to Edison International’s SCE business update back in mid-February, overall investment across all sectors is expected to range from $4.2bn to $5.1bn per year.  Transmission roughly accounts for 20% of the forecast spend.  Remaining investment for the five largest SCE projects is estimated at $2.46b alone.  Meeting California’s 50% renewable’s mandate in 2030 and reliability support are the primary drivers behind transmission expansion.  During the next five year’s SCE has several projects approved by CAISO in planning and/or under construction – the largest projects are expected online between 2020-21.

Source: Edison International’s Business Update, February 22, 2017

Xcel Energy plans to spend approximately $18.4bn over the next five years on capital projects. This according to their May 1-2, 2017, The Path Forward presentation to New York and Boston Investors.  Overall capital expenditures are forecast to grow at a 5.5% CAGR during the period.  Overall investment in transmission projects is expected at $3.9bn with their west Texas and eastern New Mexico subsidiary Southwestern Public Service s accounting for most of that investment –  topping $1.4bn.  Northern State’s Power – Minnesota is expected to spend $980M, Public Service Company of Colorado $850M and Northern State’s Power – Wisconsin $630M during the period.

Capital Expenditures by Function, Xcel Energy

Source: Xcel Energy’s The Path Forward presentation for NYC/Boston Investors May 1-2

American Electric Power, to support earnings growth, plans to invest approximately $17.3bn over the three-year period from 2017-2019.  According to an early 2016 news release, AEP chairman Nicholas Akins stated, “In our transmission business alone, we have at least a 10-year runway of low-risk investment opportunities that include projects to refurbish and replace existing, aging infrastructure supplemented by new transmission investments that support resiliency, lower energy costs and facilitate renewable generation development.”  AEP plans to invest approximately $9bn in its transmission business over the next three years, more than half of the company’s total capital investment forecast.  By 2019, AEP’s Transmission Holding Co. is expected to become one of their largest subsidiary companies – contributing approximately 90 cents per share to their total regulated earnings.  To put this in perspective, AEP’s annual planned transmission investment constitutes about 14% of the total annual forecasted transmission investment among all investor-owned utilities in the U.S.

Source: AEP’s presentation at the Barclays Power & Utility Conference, Feb 28, 2017

According to their February 1, 2017 earnings presentation, Dominion Resources expects to spend $2.5bn over the next three years. Back in February during their earnings call, dominion CEO Thomas Farrell II said that $784M in projects were completed in 2016.  That included the completion of the 500-kV Loudoun to Goose Creek project in northern Virginia as well as several reliability projects. 

Source Dominion Resources, February 2017.

Last fall during the annual EEI Financial Conference, FirstEnergy announced plans to invest $4.2bn to $5.8bn in transmission over the next five years.  Over the next three years alone, FirstEnergy plans to spend approximately 38% of their $7.9bn capital budget on transmission. Growth in the regulated transmission rate base is expected to grow at 9% CAGR with most investment by their American Transmission System subsidiary. 

 

 

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