November 8, 2011
Alberta, Montana

Transmission-line project ‘essentially out of funds,’ energy watchdog says

By Jim Snyder, Bloomberg, 7 November 2011

The Energy Department didn’t have enough safeguards to ensure protection of the $161 million the U.S. government invested in a transmission line that’s now two years behind schedule, the agency’s watchdog said.

Inspector General Gregory Friedman criticized a lack of precautions taken by the Western Area Power Administration, a marketing authority within the Energy Department, before it helped finance a 214-mile (344-kilometer) line from Great Falls, Montana, to Lethbridge, Alberta. The Montana-Alberta Tie-Line would deliver electricity from wind farms in northern Montana.

“Because of a variety of problems, the project is estimated to be two years behind schedule and $70 million over budget; essentially out of funds,” the inspector general said in a report posted today on the agency’s website. “Western had not implemented the necessary safeguards to ensure its commitment of funding was optimally protected.”

The report adds to criticism of the Energy Department’s management of funds from the 2009 economic stimulus, which also financed the $535 million loan guarantee for Solyndra LLC. The Fremont, California, solar-panel maker filed for bankruptcy protection on Sept. 6, about two years after it won the award.

Energy Department officials said the transmission-line project was back on track after the original developer was acquired.

Pressure to Spend?

“Certain Western officials indicated that they encountered pressure from the department to spend Recovery Act funds expeditiously,” according to the report. The inspector general’s office said it couldn’t confirm those assertions.

Some of the issues Friedman identified weren’t within the Western power authority’s control, he said. He cited the project’s difficulty securing rights-of-way for the line.

U.S. regulators and federal agencies have attempted to speed development of high-voltage power-line projects, particularly as more renewable-energy resources, such as wind and solar power, connect to the nation’s electric grid.

The stimulus gave the Western power administration, which covers 15 states, $3.25 billion in borrowing authority to help build transmission projects, according to the report.

The Montana-Alberta Tie-Line was originally to be built by Tonbridge Power Inc., according to the report. The company was acquired by Enbridge Inc. (ENB) in October.

Enbridge plans to complete the project and put it in service by the middle of 2012, Larry Springer, a spokesman for the Calgary-based company, said in an interview today.

‘Honor the Commitment’

“We are going to honor the commitment under the loan,” he said.

The Western power administration “has stepped up oversight of this project and adopted new protections for taxpayers,” Damien LaVera, an Energy Department spokesman, said today in an e-mailed statement. “The project has received strong financial backing from Enbridge, which has already paid for cost overruns and intends to complete the line and repay the loan.”

LaVera said future projects will be required to set up a system to make federal monitoring easier and to set aside risk reserves for cost overruns.

The inspector general’s office said it issued the report because the Western power authority is considering projects that will dwarf the Montana-to-Alberta line.

“For example, Western could invest as much as $1.5 billion in a potential $3 billion transmission line project that would cross several states and hundreds of miles,” the inspector general’s office said.

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