January 2012 Capital Investment - National Grid

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Exhibit ___ (EIOP-19)Page 147 of 684VI. Opportunities and ChallengesNational Grid has determined that the projects described in this Plan are necessary andappropriate to ensure safe and adequate service to customers at reasonable cost overthe Plan period. However, the Company continually evaluates the appropriateness ofinvestments in light of prevailing circumstances, and adjusts its investment plans asnecessary. The Company is also working on improvements to its planning processes toinclude greater opportunities through system efficiency, customer actions, and otherinitiatives. Nevertheless, the Company still faces several challenges to implementationof the Plan. This chapter discusses some of the specific opportunities and challengesassociated with the Company’s Capital Investment Plan.Billing ImpactThe Company is always mindful that its investment decisions have revenue requirementeffects that directly impact customers. Therefore, in making investment decisions, theCompany attempts to reduce overall costs while maintaining the safety and adequacy ofthe service it provides. In preparing this Plan, the Company prepared a simplifiedanalysis to estimate the revenue requirement effects in fiscal years 2014, 2015 and 2016associated with the proposed capital investment levels included here, as well as anestimate of the associated per kWh impact of the resulting revenue requirement on aresidential SC1 customer. For a typical residential SC1 customer, the allocated per kWhcost resulting from the investment levels included in the Plan would be $0.00236/kWh inFY2014; $0.00429/kWh in 2015; and $0.00635/kWh in 2016. Details of the simplifiedanalysis are included in Exhibit 4 of this filing.Renewable Portfolio StandardsThe growth in renewable energy sources, including wind, solar, and biofuels may requireadditional upgrade and reinforcement of the delivery system to support geographicallydiverse generation. Among the strategic initiatives of the Cuomo Administration are thepromotion of renewable energy projects and an expedited siting process.Implementation of such initiatives may provide opportunities to improve overall systemperformance and risk management; however, new proposals for renewable generationcould affect system planning and change the investment plan moving forward asfacilities must be built or upgraded to connect these sources.Research, Development and DemonstrationNational Grid invests in Research, Development and Demonstration (“RD&D”) initiativesto support strategic objectives to better meet customer needs as identified in the Fifteen-Year Plan. RD&D efforts currently underway include investigating methods for providingEMS functionality with less capital investment. In addition, National Grid is participatingin several projects to enhance the safety of the work force and the public in the areas ofarc flash and stray voltage protection. Further, National Grid submitted two proposals toNYSERDA PON 1913 and won awards on each. These were for the assessment of aVI-11148
Exhibit ___ (EIOP-19)Page 148 of 684microgrid powered by renewables and the analysis of challenges related to incorporationof IEC61850 standardized networked communications into the distribution system.Smart Grid Investment GrantThe Company is participating in the New York State Capacitor and Phasor MeasurementProject which originated through a NYISO funding application to the US DOE's SmartGrid Investment Grant ("SGIG") program. The SGIG program is supported by theAmerican Recovery and Reinvestment Act of 2009 ("ARRA") which has a stated goal ofimproving the economy by investing funds as soon as possible (by end of 2012) inworthwhile Smart Grid research projects or pilots. With DOE approval of the NYISOapplication for funding, the New York Transmission Owners, including National Grid,signed agreements becoming official sub-awardees in April 2010. The sub-awardeeagreements anticipate a TO scope or work period of Q4 2010 to early Q1 2013 (calendaryears) in line with ARRA requirements. NYISO's official start date was July 1, 2010.The current scope of the capacitor project is to install 286MVAr of reactive support ineastern New York as close as possible to study-based locations identified by the NYISOto minimize transmission line losses associated with cross state transfers. National Gridwill work within an overall budget of $17 million. Conceptual engineering has beencompleted, identifying 328 capacitor locations, including 280 distribution line, 43 subtransmissionline, and 5 substation capacitor banks. During 2011, design engineeringand procurement were scheduled to be completed. Installation of the capacitor bankswill primarily take place throughout 2012.National Grid has also applied, in collaboration with NYISO and the other TransmissionOwners in the state, for federal funding to cover up to 50 percent of the cost ofdeployments for up to Twelve Phasor Measurement Units (PMU) that can provide avisualization of transmission system stability. These units will be installed with new RTUinstallations.Demand Side Management (DSM)In addition to its on-going DSM programs and the recently approved customer usageinformation pilot program, the Company is undertaking other initiatives to evaluateoptions for meeting customer needs while reducing traditional transmission anddistribution investments. Developing and implementing cost-effective energy efficiencymeasures is sound public policy that should be aggressively pursued. National Grid’senergy efficiency program efforts assist customers in managing their energy costs, helpaddress the State’s climate change mitigation goals, and contribute to effectivemaintenance and management of the transmission and distribution system.As part of its most recent rate case proceeding, the Company committed to workcollaboratively with the Pace Energy and Climate Center (Pace) and the NaturalResources Defense Council (NRDC) to evaluate the potential for using non-wiresalternatives (e.g., DSM and distributed resources) to reduce or defer the need forVI-22149
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