Pennsylvania Utility Plans Sharp Increase in 2012 Capital Spending

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--PPL Electric Utilities (Allentown, Pennsylvania), a subsidiary of PPL Corporation (NYSE:PPL) (Allentown), plans to spend $664 million on improving its electric transmission and distribution infrastructure this year. This year's capital investment program is part of PPL EU's long-term, multibillion-dollar effort to strengthen and improve its transmission and distribution network. This is a 45% increase over the utility's 2011 capital spending and a 130% increase over its capital spending from 2009.

For more on PPL EU's long-term capital program, see November 30, 2011 article - Pennsylvania Utility to Spend Billions of Dollars Improving its Power Delivery System.

This year, PPL EU's capital investment program funds more than 100 projects to build new substations, upgrade existing facilities, improve distribution circuits, upgrade technology, and replace older transmission lines and poles in its central and eastern Pennsylvania service area. The utility is replacing aging equipment, much of which was built in the 1960s and 1970s, and making other improvements to provide more reliable service to customers in all areas of its 10,000-square-mile service territory.

One of the PPL EU's signature projects is the Susquehanna-Roseland Transmission Line, a 145-mile, $1 billion, grassroot high-voltage transmission project running from Berwick, Pennsylvania, to Roseland, New Jersey. PPL EU's share of that project is about $500 million. The independent regional power grid operator, PJM Interconnection, ordered the new line to prevent violations of national standards for the operation of the nation's electric power grid. PL EU's partner in that project is Public Service Electric and Gas Company (Newark, New Jersey), a unit of Public Service Enterprise Group Incorporated (NYSE:PEG) (Newark). That line, originally expected to be in-service by mid-2012, has been delayed by siting issues. PPL EU currently projects the line will be in serve by mid-2015.

The utilities received a bit of good news last month when the National Park Service (NPS) (Washington, D.C.) approved the route for the Susquehanna-Roseland line that the utilities favored and that state utility regulators in Pennsylvania and New Jersey already had approved. The NPS was reviewing the line's route as part of the environmental impact statement required, because the line was passing through federal lands. The utilities declared the ruling a major step forward.

Separately, in late March, PPL EU filed a request with Pennsylvania utility regulators to increase rates by about $105 million to start recovering the estimated $1 billion the utility will invest between 2010 and the end of 2012 to upgrade its local distribution network, among other things. The utility serves about 1.4 million customers across 29 counties in Pennsylvania.

"We have worked hard to control costs and invest prudently," said Gregory N. Dudkin, PPL EU's president, in a March 30 statement. "But we are making major investments, and our operating costs, such as labor, fuel and materials, also keep rising." The rate increase is necessary for PPL EU to recover its recent capital investments as well as "continue much-needed investments in our electric infrastructure that will renew, strengthen and modernize our system," Dudkin said.

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