OG&E 2011 Annual Report Download - page 90

SPP Transmission/Substation Projects
The SPP is a regional transmission organization under the jurisdiction of
the FERC that was created to ensure reliable supplies of power, adequate
transmission infrastructure and competitive wholesale prices of electricity.
The SPP does not build transmission though the SPP’s tariff contains
rules that govern the transmission construction process. Transmission
owners complete the construction and then own, operate and maintain
transmission assets within the SPP region. When the SPP Board of
Directors approves a project, the transmission provider in the area where
the project is needed currently has the first obligation to build; however,
the process for deciding which entity constructs and owns a project
may change as a result of FERC Order. No. 1000 discussed above.
There are several studies currently under review at the SPP including a
20-year plan to address issues of regional and interregional importance.
The 20-year plan suggests overlaying the SPP footprint with a 345 kilovolt
transmission system and integrating it with neighboring regional entities.
In 2009, the SPP Board of Directors approved a new report that recom-
mended restructuring the SPP’s regional planning processes to focus on
the construction of a robust transmission system, large enough in both
scale and geography, to provide flexibility to meet the SPP’s future needs.
OG&E expects to actively participate in the ongoing study, development
and transmission growth that may result from the SPP’s plans.
In 2007, the SPP notified OG&E to construct 44 miles of a new 345
kilovolt transmission line which will originate at OG&E’s existing Sooner
345 kilovolt substation and proceed generally in a northerly direction to the
Oklahoma/Kansas Stateline (referred to as the Sooner-Rose Hill project).
At the Oklahoma/Kansas Stateline, the line will connect to the compan-
ion line being constructed in Kansas by Westar Energy. Construction of
the line began in early 2011 and the line is estimated to be in service
by mid-2012 at an estimated cost of $45 million for OG&E.
In January 2009, OG&E received notification from the SPP to begin
construction on 50 miles of a new 345 kilovolt transmission line and
substation upgrades at OG&E’s Sunnyside substation, among other
projects. In April 2009, Western Farmers Electric Cooperative assigned
to OG&E the construction of 50 miles of line designated by the SPP to
be built by Western Farmers Electric Cooperative. The new line will
extend from OG&E’s Sunnyside substation near Ardmore, Oklahoma,
123.5 miles to the Hugo substation owned by Western Farmers Electric
Cooperative near Hugo, Oklahoma. The project cost is estimated at
$155 million for OG&E. OG&E began preliminary line routing and acqui-
sition of rights-of-way in June 2009. Construction began in January
2011. When construction is completed, which is expected in mid-2012,
the SPP will allocate a portion of the annual revenue requirement to
OG&E customers according to the regional cost allocation mechanism
as provided in the SPP tariff for application to such improvements.
On April 28, 2009, the SPP approved the Balanced Portfolio 3E
projects. Balanced Portfolio 3E includes four projects to be built by
OG&E and includes: (i) construction of 135 miles of transmission line
from OG&E’s Seminole substation in a northeastern direction to OG&E’s
Muskogee substation at an estimated cost of $160 million for OG&E,
which is expected to be in service by late 2013, (ii) construction of
96 miles of transmission line from OG&E’s Woodward District Extra High
Voltage substation in a southwestern direction to the Oklahoma/Texas
Stateline to a companion transmission line to be built by Southwestern
Public Service to its Tuco substation at an estimated cost of $145 million
for OG&E, which is expected to be in service by mid-2014, (iii) construc-
tion of 39 miles of transmission line from OG&E’s Sooner substation in
an eastern direction to the Grand River Dam Authority Cleveland sub-
station at an estimated cost of $60 million for OG&E, which is expected
to be in service by late 2012 and (iv) construction of a new substation
near Anadarko which consisted of a 345/138 kilovolt transformer and
substation breakers and was built in OG&E’s portion of the Cimarron-
Lawton East Side 345 kilovolt line at an estimated cost of $15 million
for OG&E, which was placed in service in December 2011. On June 19,
2009, OG&E received a notice to construct the Balanced Portfolio 3E
projects from the SPP. On July 23, 2009, OG&E responded to the SPP
that OG&E will construct the Balanced Portfolio 3E projects discussed
above beginning in early 2011.
On April 27, 2010, the SPP approved, contingent upon approval by
the FERC of a regional cost allocation methodology filed with the FERC
by the SPP, a set of transmission projects titled "Priority Projects." The
Priority Projects consist of several transmission projects, two of which
have been assigned to OG&E. The 345 kilovolt projects include: (i)
construction of 99 miles of transmission line from OG&E’s Woodward
District Extra High Voltage substation to a companion transmission line
to be built by Southwestern Public Service to its Hitchland substation
in the Texas Panhandle at an estimated cost of $185 million for OG&E,
which is expected to be in service by mid-2014 and (ii) construction
of 77 miles of transmission line from OG&E’s Woodward District Extra
High Voltage substation to a companion transmission line at the Kansas
border to be built by either Mid-Kansas Electric Company or another
company assigned by Mid-Kansas Electric Company at an estimated
cost of $150 million to OG&E, which is expected to be in service by late
2014. On June 17, 2010, the FERC approved the cost allocation filed by
the SPP and notices to construct these Priority Projects were issued by
the SPP on June 30, 2010. On September 27, 2010, OG&E responded
to the SPP that OG&E will construct the Priority Projects discussed above
beginning in June 2012. The scope of the Woodward District Extra High
Voltage substation/Kansas border Priority Project was subsequently
revised and the SPP Board of Directors approved this revision in October
2010. The SPP issued a revised notice to construct for this Priority Project
on November 22, 2010. On February 4, 2011, OG&E responded to the
SPP that OG&E will construct the revised Priority Project.
The capital expenditures related to the Sooner-Rose Hill, Sunnyside-
Hugo, Balanced Portfolio 3E and Priority Projects are presented in the
summary of capital expenditures for known and committed projects in
"Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Liquidity and Capital Resources – Future
Capital Requirements and Financing Activities."
88 OGE Energy Corp.