Eversource 2008 Annual Report Download - page 24

Of its $586.3 million in transmission capital expenditures in 2008, CL&P invested
approximately $470 million to complete its $1.6 billion series of four major transmission
projects in southwest Connecticut. The first of those projects, the 21-mile 345 kilovolt
(KV)/115 KV overhead and underground transmission line between Bethel, Connecticut
and Norwalk, Connecticut, was placed in service in 2006. The remaining three projects
that entered service in 2008 are as follows:
• The 69-mile, 345 KV/115 KV transmission project from Middletown to Norwalk,
Connecticut (Middletown-Norwalk) that was constructed jointly with UI. CL&P’s
portion of this project cost approximately $950 million, $100 million lower than the
earlier estimate of $1.05 billion primarily due to a decrease in capitalized financing
costs because of the earlier-than-expected in service date. Of the $950 million,
approximately $334 million was capitalized in 2008. The 45-mile overhead section
of the project entered service on August 28, 2008. The 24-mile underground section
entered service on December 16, 2008.
• The two-cable, nine-mile, 115 KV underground transmission project between Norwalk
and Stamford, Connecticut (Glenbrook Cables), which entered service ahead of
schedule on November 11, 2008. This project cost approximately $239 million, which
is $16 million higher than the previous estimate due to increased construction costs
related to underground obstacles. Of the $239 million, approximately $102 million was
capitalized in 2008.
• The 138 KV, 11-mile undersea transmission project between Norwalk, Connecticut
and Northport-Long Island, New York (Long Island Replacement Cable), which was
completed in September 2008. CL&P’s 51 percent portion of the project with Long
Island Power Authority is estimated to be approximately $78 million, which represents
a $7 million increase over the previous estimate. Of the $78 million, approximately
$33 million was capitalized in 2008.
In 2008, in addition to the approximately $470 million invested in the three projects
noted above, CL&P, PSNH, WMECO and HWP invested approximately $244 million in
other transmission projects.
In October 2008, we commenced state regulatory filings for our next series of major
transmission projects, NEEWS. That series of projects involves our construction of new
overhead 345 KV lines in Massachusetts and Connecticut as well as associated substation
work and 115 KV rebuilds. One of the projects will connect to a new transmission line that
National Grid USA plans to build in Rhode Island and Massachusetts. On September 24,
2008, the ISO-NE issued its final technical approval of the NEEWS projects, which was a
precursor to the siting application process. We estimate that CL&P’s and WMECO’s total
capital expenditures for these projects will be $1.49 billion through 2013. In 2008, CL&P
and WMECO capitalized approximately $19.7 million and $23.2 million, respectively, in
costs associated with NEEWS.
The first of the NEEWS projects, the Greater Springfield Reliability Project, which involves
a 115 KV/345 KV line from Ludlow, Massachusetts to North Bloomfield, Connecticut, is the
largest and most complicated project within NEEWS. This project is expected to cost
approximately $714 million if built according to our preferred route and configuration.
CL&P filed its application to build the Connecticut portion of the Greater Springfield
Reliability Project with the Connecticut Siting Council (Siting Council) on October
20, 2008. WMECO filed its application to build its portion of the project with the
Massachusetts Energy Facilities Siting Board on October27, 2008. The Connecticut
Energy Advisory Board is currently reviewing Connecticut-based generation, demand
side management and other proposed alternatives to the Greater Springfield Reliability
Project, which must be submitted to the Siting Council by March 19, 2009. The Siting
Council has preliminarily set dates for hearings, public comments and site visits on the
Connecticut portion of the project in the second quarter of 2009. If the overall project
is approved in 2010 as expected, we currently expect to commence construction in late
2010 and place the project in service in 2013.
Our second major NEEWS project is the Interstate Reliability Project, which is being
designed and built in coordination with National Grid USA. CL&P’s share of this project
includes an approximately 40-mile, 345 KV line from Lebanon, Connecticut to the
Connecticut-Rhode Island border where it would connect with enhancements National
Grid USA is designing. We expect CL&P’s share of this project to cost approximately
$250 million. Municipal consultations concluded in November 2008, and CL&P plans
to file siting applications with Connecticut regulators by the third quarter of 2009 with
construction beginning as early as late 2010. We currently expect the project to be
placed in service as early as 2012.
The third part of NEEWS is the Central Connecticut Reliability Project, which involves
construction of a new line from Bloomfield, Connecticut to Watertown, Connecticut.
This line would provide another 345 KV connection to move power across the state of
Connecticut. The timing of this project would be six to twelve months behind the other
two projects, and CL&P currently expects to file the siting application in early 2010,
with construction beginning in 2011. The project is currently expected to be placed in
service in 2013 at a cost of approximately $315 million. Included as part of NEEWS are
approximately $210 million of associated reliability related expenditures, some of which
may be incurred in advance of the three major projects.
During the siting approval process, state regulators may require changes in configuration
to address local concerns that could increase construction costs. Our current design for
NEEWS does not contemplate any underground lines. Building any lines underground,
particularly 345 KV lines, would increase total costs, and our estimate could be increased
during the siting approval process.
On December 12, 2008, NU and NSTAR submitted a joint petition for a declaratory order
to the FERC. The petition requests a ruling by the FERC that would allow NU and NSTAR
to enter into a bilateral transmission services agreement with HQUS, a wholly-owned
subsidiary of Hydro-Québec. Under such an agreement, NU and NSTAR would sell 1,200
MW of firm electric transmission service over a newly constructed, participant-funded
transmission tie line connecting New England with the Hydro-Québec system in order
for HQUS to sell and deliver into New England this same amount of firm electric power
from Canadian low-carbon energy resources. If FERC issues the declaratory order as we
anticipate, NU and NSTAR would subsequently seek approval from FERC of the specific
terms and conditions of the transmission arrangement. NU, NSTAR and HQUS have
signed memoranda of understanding to develop this transmission project on an exclusive
basis. This project would provide a competitive source of low-carbon power that is
favorable in comparison to current alternatives and would also provide for an expansion
of New England’s transmission system without raising regional transmission rates. NU,
NSTAR and HQUS have also begun discussions on the specifics of a potential long-term
power purchase agreement that would ensure the line is utilized to bring low-carbon
power to benefit New England customers. A FERC order is expected in the first half
of 2009, and if the order approves the proposal, then NU and NSTAR plan to negotiate
a power purchase agreement with HQUS later in 2009. The terms of such agreement
would be subject to regulatory approvals in several states.
Assuming completion of an acceptable power purchase agreement and receipt of all
necessary state and federal regulatory approvals, we expect this project to be under
construction between 2011 and 2014. Our portion of the costs of this project is currently
estimated to be approximately $525 million. HQUS will reimburse NU and NSTAR for
the total costs of this project, including an investment return to these companies, over
the estimated 40-year operating life of the transmission line. NU and NSTAR’s intent is
to create an agreement that approximates a typical FERC approved cost-of-service rate
structure. The revenue recovery model will ultimately require FERC approval.
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