Kansas is one state where the people few and the land is plentiful. One would think the siting and building of transmission lines would not be that difficult in a low-population state, but this is not the case. And because the economy of the state of Kansas is healthy and growing, new transmission and upgrades are needed.
On the legislative side, Kansas Rep. Carl Holmes, chairman of the Kansas House Energy & Utilities Committee, is championing solutions. Holmes believes that a more robust transmission grid will aid in the growth of Kansas businesses, will further stimulate the Kansas economy in both the rural and urban areas of the state, and will foster the growth of the renewable energy industry in the state. This legislator from Liberal, Kansas, working in conjunction with Rep. Tom Sloan of Lawrence have led their peers in the Kansas Legislature to create an environment that encourages investment in transmission.
Holmes also serves as chairman of the Kansas Electric Transmission Authority (KETA), an entity created under Kansas House Bill 2263 and signed into law in 2005. The purpose of KETA is to further ensure reliable operation of the electric transmission system while seeking to diversify and expand the state's economy. KETA is also charged with facilitating the consumption of the Kansas energy by increasing the capacity of the state's electric transmission infrastructure. KETA is a tool that can be used to meet the renewable energy goals set forth recently by Gov. Kathleen Sebelius. In her “State of the State” speech, the governor said that new transmission lines are needed to move wind energy from western Kansas to other markets in an effort to produce 10% of the state's electricity from wind by 2010 and 20% from wind by 2020.
In an effort to spur transmission upgrades and new construction, the state has already put tax incentives in place for companies wishing to invest in transmission, even offering preapproval options for routing lines. Legislation has also been passed that allows electric utilities to separate their transmission rates out of rate base, which is regulated by the Kansas Corporation Commission. Under this structure, the transmission rates or tariffs are regulated and set by the Federal Energy Regulatory Commission (FERC).
The Southwest Power Pool (SPP) also recognizes the need for new transmission. The SPP oversees the operation and reliability of the transmission grid for 4.5 million customers in eight states and is in the process of implementing an energy imbalance services market. This market will allow participants to better utilize economic generation while maintaining system reliability. The SPP also identifies system limitations, develops transmission upgrade plans and tracks project progress to ensure timely completion of system reinforcements. In this vein, the SPP requests that additional transmission be built to meet the needs of the states it serves.
The SPP has identified approximately US$260 million of Kansas-based projects that are required for reliability purposes in the next 10 years including a major 345-kV project in western Kansas from Spearville to Mooreland (near Woodward, Oklahoma, U.S.).
Further, the SPP has identified approximately $175 million of projects from north-central Kansas to central Oklahoma that can provide significant economic dispatch benefits to Kansas and the SPP region. Beyond that, an additional $500 to $600 million of projects are in various stages of development or study that will likely be needed in the future to facilitate new generation including renewables in Kansas.
In a traditional regulated utility, the transmission business unit has to compete with generation and distribution business units for capital and maintenance dollars. Success in obtaining funding is never assured, but typically requires an ironclad business case combined with internal lobbying.
Carl Huslig has faced funding issues like these in his previous role as vice president of transmission operations at Aquila (Kansas City, Missouri, U.S.). But in a career move last year, Huslig left this large regulated utility to head ITC Great Plains, a recently formed subsidiary of ITC Holdings Corp.
For those unfamiliar with ITC, this is a publicly traded company that owns and operates 95% of the transmission assets in the state of Michigan. ITC had been looking to expand and, through discussion with the FERC and the U.S. Department of Energy, became aware of the need for transmission and the favorable political environment for transmission in Kansas. Huslig found that his vision for the future of transmission coincided with that of CEO Joe Welch at ITC Holdings. ITC Great Plains was established in July 2006. I decided to take a trip to visit Huslig and the rest of his team at the Topeka headquarters. I posed a few questions to Huslig:
- What is driving your interest in transmission in Kansas?
“Of course, the political environment is favorable for transmission in Kansas. Also, the need is there. The FERC has announced that some Kansas utilities don't pass the ‘Market Power Test,’ which in turn means that additional transmission would enable wholesale purchasers access to lower-cost generation.”
- What is on the drawing board for ITC Great Plains?
“We intend to build and operate the new transmission projects as specified by the SPP. Longer term, we will continue to build, own and operate portions of the transmission superhighway needed to meet the transmission needs of the state of Kansas and the Great Plains region.”
- What are your first steps?
“On Oct. 13, 2006, we filed our application to become a utility in the state with the Kansas Corporation Commission. We have also been approved for membership in the SPP. Furthermore, we continue to share our vision of what an independent transmission company can bring to the state and its rate payers.”
- How do you intend to build out your utility?
“Our parent company ITC Holdings already has partnership agreements with Black & Veatch, Asplundh, UtiliCon Solutions and InfraSource. We have vendor alliance partnerships in place with Prysmian, Mitsubishi, PennSummit Tubular, Falcon Steel, Maclean Power Systems and Southern States. We intend to work through our partners as we move forward.”
- Will you work with existing transmission-owning entities?
“Absolutely. The transmission grid is already integrated. In order for ITC Great Plains to upgrade or construct new projects, we will need to work closely with existing transmission owners. We are an innovative organization by design and are looking for creative partnership opportunities with existing transmission owners.”
- How much business are you chasing?
“Using SPP forecasts and models, we have identified $1 billion of transmission business in Kansas, whether the growth is reliability driven, economic-opportunity driven (resolving bottlenecks) or in connecting generation to the grid.”
Huslig has key members of his team in place. Alan Myers serves as vice president of technical services and Kimberly Gencur is vice president of government affairs and community relations. JoAnne Miller is executive assistant. Will the ITC Great Plains team succeed in building out this new transmission company? Yes, if hard work and an ultratalented team with a passion for what they do are the keys to success. I'll keep you posted on this team's progress as they strive to build out the first transmission-only company in the Great Plaines.