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Transmission Expansion Cost Drivers

NARUCPortland, Oregon

David Mead

Vice President, Engineering

Southern California Edison

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SCE has one of the nation’s largest and oldest electrical systems.

• Operating for 121 years*

• Covering 50,000 square miles of central, coastal and Southern California

• Serving a population of more than 13 million via 4.8 million customer accounts in 428 cities

• Added 386,000 new meters over the last five years (77.2k/year)

• $17.6 Billion – T & D Assets (2006)

*First Predecessor Company to SCE Established in 1886; Consolidated Edison (NY) was founded in 1823.

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What Is Driving The Need For Transmission • Replacement of aging infrastructure presents a growing

challenge

• New records are continuing to be set for peak demand throughout the state

• In addition to load growth, we are obligated to comply with increasing regulatory requirements on renewable energy

– California Renewable Portfolio Standard 20% by 2010

Possibly 33% by 2020 (statute under consideration)

– California Greenhouse Gas (GHG) regulation

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What Are The Cost Escalators To New Transmission • State Regulatory processes are lengthy, costly and require

significant resources

– Duplicative environmental reviews

• Federal agencies are difficult to navigate and slow to approve

– BLM

– US Fish and Wildlife

– US Forest Service

• Interstate projects must have sufficient “benefits” to avoid state opposition as “intrusive”

• Public more engaged and mobilize opposition quickly

• Land availability and changes to California Eminent Domain laws

• Escalating project construction costs

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Permits And System Constraints Complicate The Issue• Permitting and licensing decisions from

regulatory/jurisdictional agencies contain significant changes impacting project scope and schedule

– Multiple and significant mitigation measures

– Limits construction methods and hours

– Routes permitted are often different than proposed New routes outside of existing right-of-way

• Fully utilized electrical systems make construction outages even more challenging

Outage availability due to peak demand

Construction window narrow

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Execution Has Its Own Set of Challenges

• Competition for resources

– Materials International trade/demand

Extraordinary inflation

– Equipment Long lead times and price increases

– Labor Numerous large expansion projects

Replacement of aging utility infrastructure

– Fuel

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Public Opposition

• The public is more engaged and opposition mobilizes quickly

• Creating an “unassailable need statement” is critical to managing public opposition

• Regulatory/permitting jurisdictions view undergrounding as the answer to public concerns on visual impacts

– Costly and only benefits a small percentage of ratepayers

– Communities benefiting should carry the cost

• Changes to Eminent Domain is example

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Public Opposition Acronyms – A Quiz!

• NIMBY –

• NOPE –

• BANANA –

• NIMET –

• CAVE –

• NIABY –

• LULU –

• NEIUROW –

• BNMHYMWBS –

Not In My Back Yard

Not On Planet Earth

Build Absolutely Nothing Anywhere Near Anyone

Not In My Elected Term

Citizens Against Virtually Everything

Not In Anyone’s Back Yard

Locally Unwanted Land Use

Not Even In Utility Right-Of-Way

Build Near My House Your Mama Will Be Sorry

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Transmission Planned and Under Construction for Renewable Generation Delivery

• SCE pursuing numerous renewable transmission projects

– Tehachapi Renewable Transmission Project delivers 4500 MW of primarily wind generation.

– Acceleration of SCE’s construction of the California phase of Devers-Palo Verde #2 500 kV project to deliver renewable generation from Colorado River area to Southern California.

– Eldorado – Ivanpah 230 kV project to deliver 1400 MW of primarily solar generation.

– Developing comprehensive transmission plans for solar and wind generation integration in several other areas of San Bernardino and Riverside counties.

• Above projects in various stages of project development with the capability of delivering over 7,000 MW of renewable generation.

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Tehachapi Renewable Transmission Project

• Delivers 4500 MW of renewable generation

• $2.7 Billion

Tehachapi WindResource Area

CA

Legend:

Segments 1-3 Under Construction

Segments 4-11 In Permitting

Legend:

Segments 1-3 Under Construction

Segments 4-11 In Permitting

NOT TO SCALE

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Tehachapi Renewable Transmission Project Segment 1• The Certificate of Public Convenience and Necessity issued

by California Public Utilities Commission

– Contained 179 mitigations measures, the predominant issues

46 are visual

33 are biology

22 are cultural

– Contained two major route changes

• US Forest Service

– Record of Decision Requires helicopter construction

Requires narrow window on construction

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Tehachapi Renewable Transmission Project• Segments 4-11 – Certificate of Public Convenience and

Necessity currently in Regulatory review

– Segment 8 regulatory evaluation is currently reviewing the proposed route and 4 alternative routes plus an undergrounding option

Any of 4 alternates or undergrounding the preferred route will add significant costs to the project

– Segment 6 and 11 – Double circuit proposal for Angeles National Forest

Elevation and icing issues

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If We Build it They Will Come

• The market will produce the Generators

• The utilities will provide the Transmission access

• Will it be done in the current proposed timetables?

• Without more creative solutions, it will be difficult

• If we are able to meet the current schedule demands…

– Costs are rising and may be higher than necessary

– Grid quality and reliability is at risk if we don’t pay attention

– The process can end up more contentious than it should be

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Conclusions

• Transmission investment opportunities are exciting and unprecedented

– Southern California Edison – $5.5 billion in 5 years

• Investments needed to access renewable energy, serve growing loads, and replace aging infrastructure

• Obtaining project approvals is a daunting challenge – we’ve learned much over the last few years

• Managing the escalating costs will be key for utilities and our customers