Skip to main content Skip to Footer

BLOG


December 17, 2015
What utilities need to win competitive capital projects
By: Steve Means

For US utilities, new transmission projects have always been available for the taking. But that is changing following the 2011 passage of FERC Order 1000. The Order includes four new rules. Three of those rules amount to “business as usual” for utilities that belong to a regional transmission planning organization. The fourth rule—removal of the federal right of first refusal for any projects that are part of a regional transmission plan—is reshaping the way these projects are built, owned, operated and maintained.

In short, FERC Order 1000 is a game changer. Incumbent utilities need to take note—whether viewing this change as a commercial opportunity or simply seeking to defend their territory in its wake.

Admittedly, many in the industry assumed that despite FERC Order 1000, US transmission projects would still find their way to incumbent utilities. Instead, at least two regional transmission planning organizations have demonstrated willingness to engage non-incumbents that commit to firm project timelines and budget caps. Such players include utility-based transmission development companies (“transcos”), private transmission developers and joint venture partnerships.

Here are some select capital projects that were awarded to non-incumbents:


As utilities compete for capital projects, we believe cost caps—both for construction and ongoing operations and maintenance—will continue to be crucial to winning work. Equally important will be a willingness and ability to be creative in how projects are developed, designed and ultimately executed. These factors are leading utilities to get serious about developing new capabilities and partnerships.

The good news? Even in the competitive environment, incumbent utilities or partnerships that include the incumbent have, to date, been more successful in winning projects. Local experience with construction and permitting, control of existing right-of-way easements, and existing operations and maintenance resources near proposed facilities are important advantages. But they aren’t enough. The enduring winners in this environment will be those willing to evaluate and adopt new organizational structures and partnerships, develop robust bid development capabilities, and consider innovative processes and tools for project execution—and translate those into a competitive edge in pursuit of competitive transmission projects.

Popular Tags

    More blogs on this topic

      Archive