The rules of electric utility transmission construction have changed over the past several years. A combination of economic and political factors has prompted many utilities to look outside their organizations for help in design, engineering, procurement and construction.

Primary drivers for increased project planning and implementation outsourcing include pressure on utilities to maintain or improve existing transmission grids while keeping construction costs and consumer electric rates low. Many utilities are also facing increased regulatory, environmental or legal oversight at the same time that they are reducing internal workforces to meet corporate cost-cutting goals. Recent electric industry crises, such as the 2001 California blackouts or the August 2003 northeastern U.S. blackout, are leading utilities to seek outside partners as a way to share financial and regulatory risk on construction projects.

Doing More With Less

Executives at both outside consulting firms and utilities themselves laud the benefits of these managed business relationships. Dean Oskvig, president of the power delivery division of Black & Veatch (Overland Park, Kansas, U.S.), says one reason utilities are increasing their use of outside contractors is the changing nature of electrical transmission project work.

For much of the past four or five years, Oskvig explains, many utilities have been focused on building connections to their grid for independent power producers (IPPs). IPP interconnection projects tend to be relatively discreet, usually concentrated on one or maybe a few substations, thus lending themselves well to the engineering and design talents and experience on a traditional utility's staff. Today, though, IPP interconnection work has slowed, Oskvig says, with utilities being asked to construct longer lines or working on projects with larger scale and scope.

“The IPP work was more substation focused,” Oskvig says. “Now we are seeing an increase in the construction of longer lines, and that can test a utility's ability to ‘do it all.’ Utilities may be less able to handle the larger projects by themselves.”

Utilities are also facing increasing pressure to keep costs low. “Regulators in particular are focused on costs,” Oskvig says. “They look at rates and protecting the rate payers wherever they can. They like to see anything that will bring the total cost to the utility down, and subcontracting can do that.”

John Lionberger, general manager of the Houston, Texas, U.S., office of Burns & McDonnell, says many utilities simply cannot handle the workload they are facing with their current staff.

“Everybody has had a number of cutbacks, they are downsizing for the third or fourth time, and yet they are behind in capital projects,” Lionberger notes. “What staff they still have on hand they need for operational issues, not to spend on new projects.”

“Utilities are starting to bring us in to help manage their workload,” concurs Jack Hand, president of Power Engineers Inc. (Hailey, Idaho, U.S.). “It might take them too long to staff up to handle the big projects, so it is more economical to use us. We can usually put 50 people on it right away.”

Staffing for some projects is a concern because of the specialized nature of many transmission projects. “Most transmission projects are major projects that come up, and it is a big project for this year and then maybe another one six months or a year later and nothing in between,” notes Austin Tingley, a senior consultant with Power Engineers. “To staff for that can be tough. It is a very heavy project load for a short while, and then if something else is not going on behind it, you don't have enough to do and have to lay guys off. That's why it's better to go out and get guys like us to get the project done.”

Hand says many utilities are also seeing spikes in workloads as deregulation works its way around the country. “A year or two before deregulation is to hit, they are spending all the money to make sure the infrastructure can handle it,” he says. “Or you have utilities like PG&E (San Francisco, California, U.S.), coming out of bankruptcy but with an aggressive plan to upgrade transmission facilities. They [PG&E] have a lot of work that needs to be done, but due to their financial problems, they have not been able to develop their system as they had hoped. We can step right in and help right away.”

Outside Strength and Speed

An advantage to the use of outside contractors is the breadth and depth of experience outsiders can bring to a project. “We do about 100 different substation projects per year for a variety of clients, and we see many different ways of doing things,” says Lionberger. “We take the best practices from each and combine them in how we execute the projects.”

“On the distribution side, utilities really are the experts,” adds Hand. “On the transmission systems side, they may need more help.” Hand says Power Engineers is working on at least 50 or 60 projects worldwide every day, and as such, provides a valuable resource for a utility that may experience design or construction challenges they have not anticipated.

“We work on systems as varied as substation design in West Texas to transmission and distribution for some islands in southeastern Alaska,” Hand says. “We've probably seen just about everything in terms of transmission construction.”

Utilities sometimes look to consultants for specific areas of expertise. Tingley says Power Engineers has established a strong reputation in underground transmission line construction. Lionberger says utilities are often drawn to Burns & McDonnell for the firm's strong environmental group, while Black & Veatch's Oskvig says utilities are interested in his company's focus on asset optimization, helping determine whether substations or lines need to be replaced, upgraded or completely overhauled.

Along with cost savings and specific areas of expertise, utilities often look to outside consultants to help speed the design and implementation of a project. The Western Area Power Administration (Lakewood, Colorado, U.S.), for instance, is working with partners to speed up the upgrading of the Path 15 line in northern California. Don Roberts, Western's technical project manager for the Path 15 upgrade, notes that the organization has hired a design procurement subcontractor to start building new substations even as Western completes overall system design. “It has allowed us to get a whole lot of work done and pay contractors to review it and complete it,” Roberts says. “We can do the original tower siting, and once we have proof of concept, they can start ordering and building while we finish the other site inspections and design.”

Gene Wolf, principal engineer at Public Service of New Mexico (PNM; Albuquerque, New Mexico, U.S.), offers an example of how managed business arrangements helped PNM complete a recent project in record time.

The utility teamed up with General Electric Industrial Systems to build its Taiban Mesa Switching Station, connecting a new wind generation farm to the PNM power grid [see “Wind Power,” Transmission & Distribution World, November 2003]. GE not only offered specialization in wind generation systems that PNM could not supply on its own, but the involvement of an outside firm shortened the project's time frame from two years to six months. This was a critical achievement for PNM, which had to complete the project by the end of 2003 to qualify for federal wind energy grants that were expiring at year-end.

“We jump on outside stuff with a large project or with a project with a real aggressive schedule,” Wolf says. “If it is a normal substation that we have a year to build, we will likely do that internally. But with something like the wind farm project, we knew we needed help to get it done that fast.”

PNM enjoyed a great working relationship with GE, Wolf adds. “They had tremendous clout in the manufacturing world and that probably helped us get things done faster. We got it done much faster than I thought we ever could. It was like driving across town hitting all the green lights.”

Technology Experts

Hitting all the green lights on a transmission project often requires the use of top technology. Utilities can bring their own, or, in many cases, develop project-specific technology or use that of their outside contractor partners.

“We are using a lot of laser-based and helicopter-based surveys. We use LIDAR; it is a wonderful technology,” Lionberger says. “You can survey in so much less time than if you did it all on the ground. We are designing a line in Africa using a satellite system, and we don't even have to have anyone on the ground to do the entire survey.”

“The list of software we now use to design things is as long as your arm,” Tingley adds. “We do a fair amount of 3-D simulations. Four years ago, that was not commonly used, but today it is very important. When you have to go in front of a public meeting, we can render in 3-D exactly what a substation or transmission line will actually look like.”

Consultants are also embracing wireless voice and data systems, as well as Internet and e-mail technology, to speed project design and construction. “We use a lot of digital photos, sending them over the Internet,” says Roberts. “We used to send everything overnight, but now you just attach the photos or drawings to e-mails. Sometimes our construction trailers are so isolated that the only way to reach them is via satellite phones.”

“On our wind farm project, GE was in Jackson, Mississippi, our project manager was in New Hampshire, and I was here in New Mexico,” says PNM's Wolf. “We used an application service provider to give us all Web access to everything. We could look at drawings of the substation as it was being built, red-line our drawings on the computer and make comments back and forth. It was a real time-saver, and it also cut down on travel, which would have stretched the project out even longer.”

PNM also has created its own software programs, including one Wolf calls “engineer in a box” to help designers automate substation design. The program supplies dialogue boxes asking standard questions about substation design, and when filled in, produces drawings and specifications that cover about 95% of typical substation design. It links to Microsoft Project Manager software so the utility or any outside consultant can track design, engineering, procurement and construction end-to-end.

Knowledge Retention

Perhaps the only concern voiced about the increased use of outside firms to help utilities with design, engineering and construction is that increased outsourcing may result in a vacuum of system design knowledge and experience once the consultants leave.

“At my company, 50% of the people working here right now can retire within the next five years,” Wolf says. “I have been doing this job for 30 years, and I know exactly how to get from point A to point Z, but the young guys don't always know that as well.”

“More of the standard substation design is going to be automated,” observes Hand. “Some utilities may be hurt by not developing enough engineering talent in-house, but when they start slowing down again they should be able to concentrate on that. There is some concern about who runs the system once the contractor is gone, but there are enough young guys out there and hopefully utilities will find a way to keep them interested.”

That said, Hand and others say the economic benefits to working with outside contractors are too great to be ignored. “We can bring clients more quickly to good or optimum solutions,” Oskvig claims. “Given enough time, they could come to it on their own, but we can help them get there faster and with greater efficiency.”

“There is just too much work that needs to be done too fast, and it needs to be controlled and you still want to do it cost-effectively,” says Hand. “It is more economical to use us. Plus, if we don't do the job right, they can fire us on a minute's notice. That is a huge advantage to the utilities.”

James R. Dukart is a freelance writer based in Minneapolis, Minnesota.