Industrial customers say they’re increasingly unhappy with how the province’s electrical provider is calculating costs.
Newfoundland and Labrador Hydro filed its proposed 2014 capital budget with the Public Utilities Board (PUB) on Aug. 5. After documented back and forth before the PUB, Hydro is now awaiting a decision from the board.
The PUB will decide whether or not to approve $98.7 million in spending on the proposed construction work, maintenance and equipment purchases.
The spending is not part of the cost for the multibillion-dollar Muskrat Falls hydroelectric development.
While not reaching the heights of Lower Churchill spending, Hydro’s total yearly capital budget has been met with growing criticism year to year from industrial customers, the Consumer Advocate and, as of last year, the PUB.
This year, Vale Newfoundland and Labrador has added its voice to the review process, given its Long Harbour processing plant will be consuming five per cent of power on the island’s isolated electrical system once the facility is running full tilt, according to a filing with the PUB by the company.
“Vale has significant concerns about the proposed 2014 capital budget and the overall growth in the capital expenditures of Hydro, both in the historical data and the forecast capital expenditures over the next five years,” the company’s submission states, later referring to Hydro’s outlook as a “shocking increase in rates.”
As reported, Hydro’s proposed 2014 budget represents a more than $30-million jump in requested spending year-to-year.
From 2008-12, average yearly capital spending was $59.3 million. Looking ahead at 2014-18 collectively, the utility is expecting an average annual spend of $162 million for maintenance and upgrades.
When challenged on proposed projects by the PUB, Hydro retreated from some of what would otherwise appear to be statements of fact.
In relation to a proposed upgrade to data collection equipment at Hydro’s isolated, diesel power plants, for example, the utility stated, “the increasing presence of electric heat in Hydro’s isolated systems is changing the historical typical load shape.”
However, after a question from the PUB referencing the statement, Hydro filed a correction.
“Hydro should have stated that an increasing presence of electric heat in Hydro’s isolated systems has the potential to change the historical typical load shape,” it stated.
“Hydro has not undertaken any recent study which specifically analyzes the impact of electric heat in businesses and public buildings on current and forecast load growth in rural areas, nor has Hydro undertaken any recent study which analyzes the impact of electric heat on load shapes for rural areas.”
A statement in another section of the utility’s more than 2,000-page filing was acknowledged as false.
“The statement that seven starts per year is higher than the industrial normal should read ‘the number of starts per year is lower than the industrial normal,’” the utility submitted, in response to a question from Vale.
All the facts
Hydro has cautioned against jumping to conclusions based on any one proposed project, response or numerical figure.
For example, in the case of a costed package of work to remove safety hazards at various Hydro sites, an overrun on approved spending in 2012 needs to be taken into consideration with spending from years prior.
“In the first year (2010) Hydro spent 82 per cent of the budgeted amount; in 2011, Hydro spent 95 per cent of the amount budgeted. It is true that in 2012 the budget was under spent by 43 per cent but, in Hydro’s view, it would be unwise to overreact to that variance — this is not a large budgetary item, the amount of under-spending constitutes a fairly modest amount of a $107,700,” the utility notes.
Overall, the utility’s leadership labeled its proposed spending on safety-related improvements in the work package “acceptable and appropriate.”
Response to criticisms
After its replies to requests for further information — and after being provided comment on its budgeting from Vale, other industrial customers and the Consumer Advocate — Hydro filed a final statement with the Board on Oct. 15.
The utility re-iterated its desire to see all planned spending approved by the regulator — leaving everything on the table.
“Choosing least cost options and managing and operating power facilities in the most efficient manner will result in the delivery of power at rates that, over the longer term, are as low as they can reasonably be,” Hydro stated.
The PUB has yet to issue its decision.
Hydro also has a separate case, a general rate application, before the board.