How will tar sands pipeline affect electric companies? Example from Montana

[The Straight Story]

(Link to PDF below)

2. Transmission and substation investment risk
The second type of risk that could be imposed upon existing electric customers is associated with
the need to construct varying amounts of new transmission lines and new substations to serve the
pump stations. Table 2 summarizes the investment needed to serve each of the pump stations in
Montana. The wide variation is due to the location of each substation in relation to the nearest
location it can be reasonably served from on the existing transmission grid. Table 4 summarizes
the new investment required for each of the electrical suppliers. For comparison purposes the
current plant in service for each supplier is shown. As can be seen from Table 4, the required
investment is significant, and would be a very large investment for Big Flat and NorVal, given
the current size of the coops. To serve Pump Station 9, Big Flat must build 62 miles of new 115
kV line, plus a substation facility, at an estimated cost of $20.6 million. By comparison, the
value of Big Flat Electric Coop's current plant in service is approximately $18 million. The new
facilities will cost 114 percent of Big Flat's total current investment in plant. Similarly, PS10
will require a significant investment by NorVal. (PS 11, also to be served by NorVal, is located
adjacent to a point on the grid where it can be served from and will require only substation
equipment — transformation and switching.) PS10 will require the construction of 50 miles of
new 115 kV transmission line, plus substation equipment, at a cost of $17.3 million. Total
investment required for NorVal for the two pump stations it will serve is estimated at $21.8
million. By comparison, the current plant in service for NorVal is $29.2 million. Service to the
two pump stations requires an investment of about 75 percent of NorVal's total current plant.


b. NorVal
Like Big Flat, NorVal intends to finance the investments in transmission and substation facilities
required to serve PS 10 and PS 11 through CoBank of Colorado, and to recover the costs through
monthly charges that cover the loan repayments. Security arrangements with TransCanada will
ensure the loan is repaid without risk to other NorVal members, in the form of a Letter of Credit,
with a provision for a balloon payment in the event of a premature shutdown of the pipelinels.

d. Tongue River
Tongue River will finance the transmission and substation investments required to serve PS 13
by borrowing from either the Cooperative Finance Corporation or CoBank. They will bill
Keystone with a flat monthly capital recovery charge sufficient to pay off the loan over a term
yet to be determined in the range of 8 to 15 years. Keystone will also provide an irrevocable
letter of credit or letter of guarantee, from a bank with a credit rating acceptable to the coop's
bankers, to ensure against any risk from premature shut down of the pipeline before the loan is
paid off2°.

.......................................

An increase in load growth does advance the date at which new plants are needed, and the
Keystone pump station loads, like all growth, will likely have that effect. While pricing
arrangements like those used by the coops can protect against dilution of the benefits they
receive from the Pick Sloan project, they cannot protect against an increase in the costs of Basin
Electric Coop's portfolio if Basin has to add new plants that drive up power costs. MDU
customers are in a similar position. Basin and MDU will do the best they can, within the
relevant framework of environmental and RPS regulations, to ensure they pick the best resources
as they expand.


deq.mt.gov/MFS/KeystoneXL/RateImpactStudy.PDF

[NYC_SKP]

1. They will need more power for pumping, new power plants, hey, let's make ratepayers foot the bill!

People need to turn out to the public hearings and protest this project.

K/R

[The Straight Story]

2. And in the end - we will foot the bill (nt)