Great Plains Energy (NYSE: GXP) and American Electric Power (NYSE: AEP) today announced they have formed a company to build and invest in transmission infrastructure. The new company, Transource EnergySM LLC (Transource), will pursue competitive transmission projects initially in the Southwest Power Pool (SPP), Midwest Independent Transmission System Operator (MISO) and PJM Interconnection (PJM) regions, with the potential for expanding to other regions in the future. Great Plains Energy owns 13.5 percent of Transource. AEP owns 86.5 percent.
In 2011, the Federal Energy Regulatory Commission (FERC) issued a new rule (Order 1000) that facilitates competition in the transmission sector of the utility industry. By partnering with AEP, a recognized leader in the transmission business, Great Plains Energy will be well positioned to compete in the emerging competitive transmission market.
“Our nation’s bulk electric system requires significant investment in transmission infrastructure to improve reliability, reduce congestion, increase access to renewable energy resources and allow for a smarter and more efficient grid,” stated Mike Chesser, Chairman and CEO of Great Plains Energy. “FERC’s recent order fundamentally changes the way in which transmission will be developed, owned and operated in the United States. As a result, future transmission infrastructure will be built by companies that can successfully compete and provide the most cost-effective solutions for the benefit of the company, our customers, our shareholders and the region.”
Regional transmission infrastructure projects are typically large scale projects requiring significant capital resources to fund and build. Through Great Plains Energy’s partnership with AEP, Transource will be well positioned to build and own large scale projects in the competitive environment by leveraging the combined companies’ scale, scope and expertise. This partnership allows Great Plains Energy the financial flexibility to free up capital to focus on other infrastructure investments which will enhance reliability for KCP&L and GMO’s customers.
Both of Great Plains Energy’s regulated electric utility subsidiaries, Kansas City Power & Light Company (KCP&L) and KCP&L Greater Missouri Operations Company (GMO), will continue to own and maintain their existing transmission infrastructure, which includes more than 3,600 miles of high-voltage transmission lines they own and operate in Kansas and Missouri. The utilities will continue to invest in new transmission projects that are identified to serve customers in their franchised service territories.
The first two projects Transource intends to build are within the Southwest Power Pool (SPP) region. KCP&L and GMO will seek regulatory approval to transfer their two SPP-approved regional transmission projects, located in Missouri, to Transource. The Sibley-Nebraska City line is a 175-mile, 345-kilovolt line linking the Nebraska City substation (owned by Omaha Public Power District) near Nebraska City, Nebraska, with the Sibley substation near Sibley, Missouri. Transource would construct and own approximately 170 miles of the project. Omaha Public Power District would construct the remainder of the transmission line. The project, estimated to cost approximately $380 million, has an anticipated in-service date of 2017.
The other project, the Iatan-Nashua line, is a 30-mile, 345-kilovolt line from the Iatan substation near Weston, Missouri to the Nashua substation near Smithville, Missouri. The Iatan – Nashua project, estimated to cost approximately $54 million, has an anticipated in-service date of 2015.
Both transmission projects are required by the SPP and are necessary to improve reliability, reduce congestion on the grid and provide future access to affordable power for KCP&L customers, GMO customers and other electric utility customers throughout the region. The lines will expand the regional high-voltage transmission grid and support the development of renewable energy. Because both projects provide regional benefits, the cost will be recovered among the regional utilities.
This summer, KCP&L and GMO will file for regulatory approvals with the Missouri Public Service Commission (MPSC) to complete the transfer of the two SPP projects to Transource. Transource will file an application with the MPSC for line certificates which will grant Transource the authority to construct, own and operate the two SPP regional projects. It also intends to apply for a FERC formula rate for the two Missouri projects later this year.
“The partnership with AEP positions Great Plains Energy well for the future and will allow us to pursue larger-scale regional transmission grid expansion around the country,” said Terry Bassham, President and Chief Operating Officer of Great Plains Energy. “We are excited about the growth potential that exists for our company and believe this partnership will result in cost-effective grid expansion for the benefit of customers in regions where projects are built.”
Great Plains Energy is a holding company headquartered in Kansas City, Mo. Great Plains Energy owns the Kansas City Power & Light Company and KCP&L Greater Missouri Operations Company. Great Plains Energy’s electric utilities serve more than 800,000 customers in 47 counties in Missouri and Kansas with a combined diverse generation platform of approximately 6,600 megawatts.
American Electric Power is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 39,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP’s headquarters are in Columbus, Ohio.
About Great Plains Energy:
Headquartered in Kansas City, Mo., Great Plains Energy Incorporated (NYSE: GXP) is the holding company of Kansas City Power & Light Company and KCP&L Greater Missouri Operations Company, two of the leading regulated providers of electricity in the Midwest. Kansas City Power & Light Company and KCP&L Greater Missouri Operations Company use KCP&L as a brand name. More information about the companies is available on the Internet at: www.greatplainsenergy.com or www.kcpl.com.
Statements made in this release that are not based on historical facts are forward-looking, may involve risks and uncertainties, and are intended to be as of the date when made. Forward-looking statements include, but are not limited to, the outcome of regulatory proceedings, cost estimates of capital projects and other matters affecting future operations. In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Great Plains Energy and KCP&L are providing a number of important factors that could cause actual results to differ materially from the provided forward-looking information. These important factors include: future economic conditions in regional, national and international markets and their effects on sales, prices and costs, including but not limited to possible further deterioration in economic conditions and the timing and extent of economic recovery, prices and availability, of electricity in regional and national wholesale markets; market perception of the energy industry, Great Plains Energy and KCP&L changes in business strategy, operations or development plans; effects of current or proposed state and federal legislative and regulatory actions or developments, including, but not limited to, deregulation, re-regulation and restructuring of the electric utility industry; decisions of regulators regarding rates the Companies can charge for electricity; adverse changes in applicable laws, regulations, rules, principles or practices governing tax, accounting and environmental matters including, but not limited to, air and water quality; financial market conditions and performance including, but not limited to, changes in interest rates and credit spreads and in availability and cost of capital and the effects on nuclear decommissioning trust and pension plan assets and costs; impairments of long-lived assets or goodwill; credit ratings; inflation rates; effectiveness of risk management policies and procedures and the ability of counterparties to satisfy their contractual commitments; impact of terrorist acts, including but not limited to cyber terrorism; ability to carry out marketing and sales plans; weather conditions including, but not limited to, weather-related damage and their effects on sales, prices and costs; cost, availability, quality and deliverability of fuel; the inherent uncertainties in estimating the effects of weather, economic conditions and other factors on customer consumption and financial results; ability to achieve generation goals and the occurrence and duration of planned and unplanned generation outages; delays in the anticipated in-service dates and cost increases of generation, transmission, distribution or other projects; the inherent risks associated with the ownership and operation of a nuclear facility including, but not limited to, environmental, health, safety, regulatory and financial risks; workforce risks, including, but not limited to, increased costs of retirement, health care and other benefits; and other risks and uncertainties.
This list of factors is not all-inclusive because it is not possible to predict all factors. Other risk factors are detailed from time to time in Great Plains Energy’s and KCP&L’s quarterly reports on Form 10-Q and annual report on Form 10-K filed with the Securities and Exchange Commission. Each forward-looking statement speaks only as of the date of the particular statement. Great Plains Energy and KCP&L undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.