Regulators Approve Electric Power Line
By GEORGE HOHMANN
The Federal Energy Regulatory Commission has approved the construction of a $1.8 billion, 290-mile transmission line from American Electric Power’s John Amos plant near St. Albans to a substation southeast of Frederick, Md.
The Potomac-Appalachian Transmission Highline, known as PATH, is a joint venture of American Electric Power and Allegheny Energy.
American Electric Power’s share of the project is approximately $600 million.
The Federal Energy Regulatory Commission is allowing the joint venture to charge rates that will earn a 14.3 percent return on equity.
Dow Jones Newswires called the return "extremely high for a regulated utility project," and said, "the generous incentives provided reflect the government’s desire to encourage new transmission lines to bring excess power from Appalachia and the Midwest to constrained areas in Maryland, Delaware and New Jersey."
Dow Jones Newswires reported that Deutsche Bank analyst John Khiani estimates the return on equity should translate into earnings of $1.30 a share for American Electric Power.
Michael Morris, American Electric Power’s chairman, president and chief executive officer, said in a prepared statement, "FERC’s approval of incentives for PATH clearly recognizes the need for transmission investment in this region and the benefits PATH will provide.
"PATH addresses significant reliability concerns, including overloads that will occur on more than 13 existing transmission lines in Maryland, West Virginia, Virginia and Pennsylvania as soon as 2012 if the line is not built," Morris said.
"Incentives for transmission projects recognize the diligence required to bring new transmission on line and the advanced technology necessary to enhance reliability," Morris said.
"We need transmission investment, and incentives to encourage that investment, if our country is going to eliminate the weakest reliability areas, fully utilize existing generation and support development of renewable generation."
PJM Interconnection, the regional transmission grid operator for a 13-state area that includes West Virginia, approved construction of the line last June.
American Electric Power said it and Allegheny Energy have begun work on routing studies and environmental assessments for the line.
"The companies anticipate seeking regulatory approvals for the project from the utility commissions in both West Virginia and Maryland in the fourth quarter of 2008, following the completion of the routing studies," American Electric Power said.
Last October the Bush administration designated swaths of the eastern United States, including 41 of West Virginia’s 55 counties, as critical to the nation’s energy grid – a move that allows new high-transmission lines to be built despite state or local opposition.
American Electric Power said Tuesday that it and Allegheny Energy "are committed to working with landowners, neighboring residents, business owners, affected communities and regulators to minimize the environmental and land-use impacts" of the PATH project.
American Electric Power serves more than 5 million customers in 11 states. The company’s Appalachian Power subsidiary serves most of the southern half of West Virginia.
Allegheny Energy, which serves customers across the northern half of West Virginia, has also proposed construction of a transmission line that would extend from a point south of Pittsburgh to Middletown, Va. About 114 miles of that line would extend across West Virginia, passing to the west of Morgantown in Monongalia County and crossing Preston, Tucker, Grant, Hardy and Hampshire counties.
That proposed line is further along in the siting process than the PATH line. Allegheny has met stiff resistance from some landowners and community groups in Monongalia and Tucker counties.
Last October business and labor representatives created West Virginians for Reliable Power, a group organized to push for improved electric transmission infrastructure.
Contact writer George Hohmann at business@dailymail.com or 348- 4836.
Originally published by DAILY MAIL BUSINESS EDITOR.
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