Question-and-Answer Session
Operator
(Operator Instructions). Your first question will come from the line of Neel Mitra of Simmons & Company International.
Neel Mitra - Simmons & Company International
Good morning. Can you comment on the implications of the recent merchant wind transmission line FPL brought into South Texas? What are the shorter implications right now for off peak power prices in ERCOT South or Houston? Does this have any affect on how you view the CREZ build out in terms of difficulties, building transmission into the South versus the North since the construction lead time was around 10 months?
David Crane
To summarize, it's a two-part question. One is what's the direct impact of FPL's new transmission line on West to South and onto Houston, and second, what does this mean about how quickly CREZ will be built out, is that right?
Neel Mitra - Simmons & Company International
That's right.
David Crane
Mauricio, would you like to answer that question?
Mauricio Gutierrez
As you know, FPL announced they energized a few days ago 950 megawatt transmission line connecting four of their wind farms from the West zone into the South zone. Our analysis indicates that it's going to have a larger impact on the West heat rate than it will on the South and the Houston zones. Just the relative size of the line versus the markets between Houston and South, you are talking about 35 gigawatt market. So, the impact of 900 megawatts exporting from the West versus the impact on the South and Houston is significantly different.
Now, with respect to your second question about if this changes our view on CREZ, keep in mind that this is a merchant line. It's very difficult to compare a merchant line versus a rate-based project like CREZ. We don't have enough information to know if FPL had any lead time in terms of securing rights of way. It looks like there was 10 months of construction, but we don't know exactly what was the lead time to be able to get everything ready.
With respect to CREZ, there are significant challenges. First one is the financeability of the project and how are you going to distribute or socialize the transmission costs across the rate base, and two, it's a question of the cost. It has been said that the line is going to cost just shy of $5 billion. I think there have been some additional discussions whether or not that's close to $10 billion. So, there are still some hurdles around the CREZ project and we still believe that a 2013 timeline is aggressive.
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