National Grid responds to cost overrun

Fri, 04/21/2017 - 10:45am

The following was sent to The Block Island Times in response to a series of questions sent to National Grid regarding the increased cost estimates for the new substation and the sea2shore transmission cable:

National Grid appreciates the concern expressed by Block Island residents and customers of the Block Island Power Company relative to BIPCo’s recent rate filing. There are several factors that went into the revised cost figure that National Grid provided BIPCo. A range of transmission rates and surcharges was shared with the Block Island Power Company and the New Shoreham Rates Working Group before National Grid took ownership of the sea2shore project in 2014. No design work had been performed at the time, so an illustrative figure associated with the interconnection facilities was provided.

BIPCo completed their interconnection design in September 2016, which prevented National Grid from completing final design (including final structure locations and foundation designs) until December 2016. Construction associated with the interconnection between the National Grid Substation and BIPCo started in February and was largely completed in March. Drivers for the figure included the foundation, structures and specialized substation equipment which had to meet transmission design standards to interconnect BIPCo. 

National Grid is not a party to BIPCo’s rate filing and was not made aware of the company’s April 14, 2017 retail rate hearing until Tuesday, April 11. The $1.8 million figure is a good faith approximation which will be reconciled to actual cost before invoices for the work are sent to BIPCo. The actual costs of the interconnection facilities are recovered through a charge, paid on a monthly basis for the life of the interconnection facilities. The charge compensates National Grid for cost of capital, ongoing operation and maintenance, applicable taxes, etc. Based on the $1.8M good faith approximation of the interconnection costs this equates to a payment of approximately $28,182 per month.

Separate from the interconnection facilities, the sea2shore project interconnects Block Island to the mainland electric system via the undersea transmission cable. On February 16, 2017 an updated estimate for the sea2shore project was shared with the Rhode Island Public Utilities Commission in Docket 4691.

As explained in the subsequent data response on March 31 (see: estimates were produced at various stages of the project and were refined during construction due to unanticipated engineering, permitting, and construction activities. The latest estimate shared with the Division is $125 million, which will be reconciled upon project close out. Based upon 2016 load figures, Block Island Power Company would pay less than one percent of the Block Island Transmission System Surcharge, or approximately $5,205 per month.