Capital Projects 2012 Year-End Review

December 2012

VELCO Main Office – Rutland, VT

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2012 Capital Projects Capital Program at a Glance

VELCO from 1956 to 2005:

• Built, operated and maintained 586 miles of transmission lines (mostly build before 1980’s): o 115 kV (420 miles) o 230 kV (32 miles) o 345 kV (79 miles) o 450 kV DC (53.5 miles)

• Built, operated and maintained 40 substations and switching stations

• Built, operated and maintained a HVDC Back to Back converter station

VELCO since 2005:

Based on the Transmission improvements required to maintain the reliability of the system, VELCO established a formal Capital Program to manage its projects including:

• Substation Reinforcements more than doubling its infrastructures

o Constructed 12 new substations and switching stations

o Rebuilt or expanded 14 substations or switching stations

• Transmission Lines construction

o Built 133 miles of new transmission lines (90 miles of 345 kV & 43 miles of 115 kV)

As part of this program of work VELCO managed more than $660M in capital investment since 2005.

The overwhelming majority of these projects were driven by regional reliability needs and were funded through the regional network service transmission rates as Pool Transmission Facilities (Network Facilities).

Note: 370 Line (345 kV from W. Rutland to New Haven)

Note: New Haven Substation

Note: Vernon Substation

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2012 Capital Projects Capital Program & Major Transmission Reinforcements since 2005

Northwest Vermont Reliability Project (2005-2008): • Permitting in 2003-2005 last component commissioned in 2008

• 8 substation upgrades, 5 new substations, 36 miles of 345 kV H-Frame transmission line, 26 miles of 115 kV single pole transmission line.

• Total Investment: $303 million

Lamoille County Project (2009): • Permitting from 2006 to 2008, project commissioned in 2009

• 2 substation upgrades,1 new substation, 9.4 miles of new 115 kV T-Line

• Total Investment: $43 million

Taft Corner, East Avenue, Lime Kiln, Lyndonville (2009-2010): • Project commissioned in 2009

• Taft Corner & East Avenue substation expansion

• Lime Kiln & Lyndonville substation addition

• 4.8 miles of new 115 kV T-Line (East Avenue to Essex).

• Total Investment: $34.5 million

Southern Loop Coolidge Connector (2010): • Received State permits in 2008

• 2 substation upgrades, 1 new substation

• 53 miles of new 345 kV T-Line construction

• Total Investment: $204 million

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2012 Capital Projects Capital Program Overview

Project Development Methodology and Continuous Improvement

• Planning Studies: Essentially driven by Long Range Plan (LRP) and ISO-NE Area Studies aims to identify deficiencies early

– Completed assessment of all options (T and NTA) to resolve deficiencies – Public meetings and comments provided input to LRP – Provided information for evaluation of Transmission alternatives by ISO-NE

• Public Outreach: Engaged affected stakeholders with detailed plans to obtain feedback for project design and mitigate project opposition

– Landowners – State and Federal Agencies (e.g. DPS, ANR, ACOE)

• §248 Filing: Detailed design including construction plans, assessment of impacts and accurate cost estimates

– Shortened regulatory review period - MOUs with DPS and ANR on all 248 application since NRP and Lamoille County Projects

– Excellent performance against budget

• Construction and Commissioning: – Project plan and oversight (e.g., effective project controls and contract

management) – Improved commissioning process reduced likelihood of system events

• Future Areas of Improvement – Safety: Jay accident highlights need to enhance safety culture and performance – Scheduling: Improve resource management and work scheduling incorporating

all of Velco’s work including operation and maintenance – “Hard Wire” improvements and ensure best practices across entire organization

• Nurture Learning Organization culture

2012 Active Project Development Capital Program Portfolio

Projects commissioning this year • New Jay and Georgia stations • Coolidge & Vernon reactors • Highgate Converter upgrade • Statewide radio project & Fiber project Projects under construction • Ascutney substation • Bennington substations • New Haven reactor Projects in permitting • K-41 Line upgrade • Grand Isle Terminal upgrade • K-35 Line repairs Projects in planning / development • Ascutney to Coolidge line upgrade • Substation Condition Assessment • Structure Condition Improvement

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2012 Capital Projects Commissioned Projects Financial & Schedule Review Project Schedule Performance Review

• 2012 had many projects under construction with critical commissioning targets in the third and fourth quarters.

• The scope and complexity of some of these projects required rigorous outage coordination with risk mitigation measures.

• Full substation construction from CPG filing to commissioning in less than 24 months.

• Permitting timelines have improved significantly since the Northern Loop and the Northwest Reliability Projects, as a result of effective public outreach with detailed designs .

• New review process in place for all project commissioning activities which maintains balance between quality controls and schedule performance.

Highgate Converter 11/06/2012 E&D & Procurement

(Contract 3/19/11) Pre-

Const.

2011 -1st Quarter

2011 - 2nd Quarter

2011 - 3rd Quarter

2011 - 4th Quarter

2012 - 1st Quarter

2012 - 2nd Quarter

2012 - 3rd Quarter

2012 - 4th Quarter Projects In-Service

Date

Jay Substation 09/26/2012 Permitting

(7 Months) Construction (13 Months)

1/19 7/29 8/1 9/12 9/26

Georgia Station 10/18/2012 Permitting

(6 Months) Construction (11 Months)

4/7 10/18 10/21 10/5 10/18

1/16 11/6

Coolidge & Vernon Reactors

12/18/2012 Permitting (7 Months)

Construction (11 Months)

3/21 10/14 10/21 12/18 7/22

Construction 36 Sites (38 Months)

10/2009

12/16/2012 Radio Project

12/16

Fiber Deployment 770 Miles (26 Months)

10/2010

12/16/2012 Fiber Backbone Project

12/16

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2012 Capital Projects Commissioned Projects Financial & Schedule Review Project Financial Performance Review • This year, more than $100M of transmission assets will be placed in service improving the reliability of the

transmission network and enhancing Velco’s telecommunication infrastructure. This work was accomplished while maintaining a good financial performance.

• Scope and schedule management enabled the team to maintain a good cost performance index—a measure that compares the value of work completed to the actual cost, or in our case our forecasted cost at completion.

• Effective management of the project regulatory phase has enabled the team to maintain solid financial performance. Focus remains on maintaining good regulatory project execution.

• Estimation and project scope definition methodology remained key in avoiding scope changes, estimating errors, scope creep, and associated cost overruns.

• . Projects Project Overall

Budget Project

Forecast Actual vs.

Budget Cost Performance

Index (EV/AC)

Coolidge & Vernon Reactors $15.7M $14.0M (11%) 1.12

Jay Substation $16.8M $13.7M (18%) 1.22

Georgia Station $16.6M $14.6M (12%) 1.13

Highgate Converter $35.6M $29.5M (17%) 1.15

Radio Project $30.7M $26.9M (12%) 1.13

Fiber Backbone $53.2M $47.3M (7%) 0.97

Total $168.6M $146.0M (13%) 1.09

Note: A CPI greater than 1.0 indicates a cost underrun of performance to date

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2012 Capital Projects Jay Substation Project Highlights

Project Overview • Addressed reliability deficiencies on VELCO and VEC electric transmission

facilities in northern Vermont • Least cost alternative when evaluating transmission and non-transmission

alternatives

Note: Jay 115/46 kV Substation

Jay Substation Quick Facts

• 115/46 kV Station

• 115 kV Breaker Ring Bus

• (4) 115 kV Breakers

• (2) 46 kV Breakers

• (2) 115/46 kV Transformers

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Significant Accomplishments & Challenges • Project completed ahead of schedule and under budget. • Cut preliminary engineering & CPG permit application time in

half, expediting receipt of permits. • Supported new VEC reliability criteria for restoration within

seconds to minutes, not hours/days. • Significant space constraints due to small parcel size,

presence of existing infrastructure, wetlands, and wetland/streams.

• Continual assessment and sequencing of constrained engineering and testing/commissioning resources among other VELCO capital projects.

• Continual coordination with DUs on planning, construction, & operational needs as project augmented and replaced existing infrastructure.

• Minimized costs by avoiding construction during winter conditions, combining purchase of multiple transformers from a US-based equipment manufacturer, and negotiating favorable construction rates.

• Safety incident in which a VEC worker was injured. Performed RCI, implemented corrective actions, and held safety “summit” with Vermont utilities to share findings and improve safety practices.

Note: Jay Site Work

Note: Jay Control Building Construction

2012 Capital Projects Jay Substation Project Highlights

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Project Description • Provides statewide communication network for VT Transco personnel, third

party contractors, and many distribution utilities for use during regular work, and emergency situations (e.g., power outages or emergency maintenance).

• The Statewide Radio Project involved the creation of a communications network consisting of wireless communications facilities ("RF Site") located throughout the State.

2012 Capital Projects Statewide Radio Project Highlights

Radio Project Quick Facts

• 32 Radio Sites

• 90% State Coverage

• Provides Automatic Vehicle Location (AVL) mapping

• 6 New sites own by VELCO

• 26 Leased sites

• 10 Substation backhaul sites

Note: Radio Site Antenna

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Note: Radio Site Preparation Note: Radio Tower Installation

2012 Capital Projects Statewide Radio Project Highlights

Significant Accomplishments & Challenges • Difficult landowner and site acquisition at Wells

site included condemnation proceedings. • Remote work locations--mostly on mountain tops. • Partnered with existing entities (e.g. tower

owners) to co-locate antennas. • Obtained FCC license/radio spectrum, which

covers the entirety of the State of Vermont.

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Project Description • Design, engineer, and build a fiber optic backbone network for VT Transco

system operation while providing a redundant communication path to critical transmission equipment and stations throughout the state.

• Communication infrastructure is also leveraged for data backhaul critical for Smartgrid initiatives across the state and the region. This project also provides a platform for CIP compliance and physical security at remote sites.

2012 Capital Projects Fiber Backbone Project Highlights

Fiber Backbone Project Quick Facts

• 770 Miles deployed by EOY

• 80 Miles deferred to 2013

• Provide communication Redundancy (Loop)

• Leverage existing transmission infrastructure

• Collaboration with DU’s and Telco’s to leverage existing networks

Note: Installing and splicing fiber over the existing transmission network

12 Note: Make ready work on DU’s Infrastructure Note: Fiber Pull Site on VELCO’s Transmission Line

Significant Accomplishments & Challenges • Easement and Fiber attachment agreement

negotiations. • Challenging terrain in remote location in the state. • Negotiation with telecommunication operators to

leverage existing infrastructure (Vtel and Sovernet.) • Effective Contract negotiation in Material purchase and

Construction services (Unit based contract). • Close collaboration with VT’s Distribution Utilities to

have an effective deployment.

2012 Capital Projects Fiber Backbone Project Highlights

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Project Description • The Shunt Reactor Project provides voltage control on 345 kV network when

electric demand is low and during equipment failure and/or system generator outages.

• Improves the system’s capability to meet present and forecasted electric demand during all conditions without the need to run expensive generation.

2012 Capital Projects Coolidge and Vernon Project Highlights

Note: 345kV Reactor On Site

Reactor Projects Quick Facts

• 345 kV Reactors

• 60 MVAR Variable Controller

• (2) Located at Coolidge

• (2) Located at New Haven

• Relocate (1) unit to Vernon

• 550kV Breakers to address TOV

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Significant Accomplishments & Challenges • Expedited regulatory review at all sites • Manufacturer was 9 months late delivering units and incurred liquidated damages • Difficult delivery of reactors to substation sites due to size and weight • Beneficial learning experience with Coolidge reactor installation: learning about parallel unit operational

controls • Coordination with Vermont Yankee for work at Vernon Substation • Coolidge unit #2 noise is greater than contractual limitations; contract payment in dispute

2012 Capital Projects Coolidge and Vernon Project Highlights

Note: 345kV Reactor Transportation

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Project Description • The Georgia substation project was needed to address system reliability

concerns, which included a lack of redundancy and reliability problems associated with the existing Georgia station bus design.

• Failure of one transmission element in the station would cause low voltage violations, voltage collapse or instability, or thermal overloads and would have resulted in extended outages in northwest Vermont.

2012 Capital Projects Georgia Station Project Highlights

Note: Georgia Switching Station

Georgia Switching Station Quick Facts

• 115kV Switching Station

• 115kV Breaker-and-a-half Bus Design

• (4) Critical 115kV Lines

• (7) 115kV Breakers

• (1) Capacitor Bank

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Significant Accomplishments & Challenges • Completed difficult negotiations with landowner to

secure the site at a reasonable cost. • Expedited permit application development and

subsequent receipt of permits, including CPG. • Complex cutover and commissioning plan

transferring 4 critical 115 kV transmission lines to the new station. Worked closely with local utilities to coordinated outage work which took place during low load periods (weekends & nights).

• Coordination with Highgate converter upgrade to minimize impact to the transmission network in Northwest Vermont. Implemented risk mitigation measures to minimize possible impacts to IBM associated with K-21 cutover to the new station.

• Compressed schedule: 18 months from CPG filing to full commissioning of the station to coordinate with other system upgrades and minimize impact.

2012 Capital Projects Georgia Station Project Highlights

Note: Georgia Station Bus Work

Note: Georgia Station Cable Trench

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Project Description • Major upgrade of Highgate HVDC Back-to-Back converter station to extend its useful life for

an additional 25 to 30 years. • Highgate HVDC converter station is a critical transmission reliability resource for northwest

Vermont. The aging of some equipment, including the controls, has driven the need for this refurbishment project.

• The Scope of Work included the replacement of the existing HVDC Controls and Protection system, upgrades to the existing thyristor valves to ensure reliability, upgrade to the valve cooling system, addition of transformer monitoring upgrades, the replacement of the smoothing reactor, as well as the replacement of the existing 480V Station Service Breakers.

2012 Capital Projects Highgate Converter Project Highlights

Highgate Converter Quick Facts

• Built in 1985

• 1st HVDC Intertie between HQ TransEnergie and ISO-NE

• 225MW Back-to-Back

• 432 Thyristor Positions

• 30 Days Outage for cutover

• 18 Months from E&D to Commissioning

Note: Highgate Converter Station

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Significant Accomplishments & Challenges • Extensive interactions with the Highgate Joint Owners

(HJO), Hydro-Québec TransEnergie, ISO New England and Department of Energy.

• Extremely short outage to decommission existing facilities, install new equipment and perform commissioning and testing activities. Outage request was put in place 18 months in advance and lasted from 10/7/12 to 11/6/12.

• Complicated project with a short duration outage involving highly technical and complex commissioning work; 75 workers on site on double shift with 24/7 work activities.

• Over 16,000 man-hours during the 30 days outage including conducting the 7-day test plan scheduled by the hour.

• Testing and commissioning outage required power transaction schedules to be put in place for all testing activities; close coordination with ISO-NE, HJO and Velco Power Accounting group.

2012 Capital Projects Highgate Converter Project Highlights

Note: Cooling Control Interface & Fan Controls

Note: Work Location Highlighted

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2012 Capital Projects Highgate Converter Project Highlights

Note: New Cooling System Interior Equipment Note: New Cooling Tower’s Fans

Note: New Operator Control Main Displays

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2012 Capital Projects Highgate Converter Project Highlights

Note: Valve Group

Note: DC Smoothing Reactor

Note: Cap PT’s Note: Main Transformer

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2012 Capital Projects Capital Program Summary

Capital Program over the last 5 years: • Addressed regional reliability needs driven by Transmission Standards as established and enforced

by FERC, NERC and NPCC and implemented by ISO-NE across the New England. • Addressed transmission deficiency to serve local load areas, such as Lyndonville, Jay or Newfane. • Developed its telecommunication infrastructure required for the operation of its network while

collaborating closely with Distribution Utilities.

Capital Program over the next 5 years: • Develop, design, and build identified transmission reliability project as identified in the 2012 Long

Range System Plan. • Address local load-serving area needs such as Rutland county, Georgia and St Albans counties. • Asset replacement and refurbishment projects will increase in significance for the next 5 year

period (e.g., Highgate converter controls upgrade). Similarly, on the transmission lines, concerns about aging structures and potential impacts (.e.g., pole fire on the K-24 affecting IBM) have raised the importance of establishing the structure condition improvement program.

• Next year specifically, like 2011, will be a transition year with emphasis on project planning, permitting and engineering efforts.