American Electric Power (AEP) and First Energy Corp. will withdraw applications for state regulatory approval of the $2 billion high-voltage Potomac-Appalachian Transmission Highline (PATH) project following an announcement by regional grid operator PJM Interconnection that the project has been shelved.

PJM on Monday announced that an outlook for a slower economic recovery had led its board to suspend the project, though it stressed it would continue to assess the need for the line, which would have stretched 275 miles, from West Virginia to Maryland.

PJM annually reviews its transmission expansion plans. Over the past two years, the “recession and the dramatic change in the economic outlook caused PJM to forecast lower growth in the use of electricity. Growth in the use of electricity correlates with economic growth. The forecasted slower growth rate likely will delay the need for the line,” the grid operator said.

PJM directed the construction of PATH in 2007 to resolve violations of national and local standards for reliable operation of the region’s transmission system. Since then, annual studies reaffirmed the need for PATH as the recommended solution for resolving these issues.

But on Monday, PJM said that “A preliminary analysis suggests that the need for the line has moved further into the future. Therefore, the PJM Board has decided to hold the PATH project in abeyance in the 2011 Regional Transmission Expansion Plan (RTEP).”

PATH is a joint venture between AEP and the former Greensburg, Pa-based Allegheny Energy—which closed its merger with FirstEnergy in February—to build the 765-kV line. Announced in April 2007, the companies have to date invested a total of $120 million in capital expenditures for activities related to siting, regulatory activity, engineering, design, procurement, and right of way acquisition, AEP spokesperson Melissa McHenry told POWERnews. “AEP’s share of the total is approximately $29 million.”

“While we are certainly disappointed by the suspension of PATH and the uncertainties created by the PJM planning process, we do support a thorough and detailed analysis of the need for the project. We remain convinced that the project will be needed and plan to move forward with it when PJM completes its review,” said Michael G. Morris, AEP chair and CEO.

AEP hoped that PJM’s evaluation allowed for a longer-term view for transmission expansion. “In the meantime, we’ll move forward with our other transmission investments including the ETT projects in Texas, our Transco projects within our service territory, and the Prairie Wind project in Kansas that recently received the go ahead from the Southwest Power Pool,” Morris said.

Sources: POWERnews, PJM, AEP