Big Hydro expense could get a hurried review

PUB states it’s pressed for time on extra generator at Holyrood

Published on April 30, 2014
Newfoundland and Labrador Hydro‘s thermal generation station in Holyrood. — File photo by Joe Gibbons/The Telegram

The Board of Commissioners of Public Utilities (PUB) is looking to abandon its standard review process for a recently proposed, significant expenditure by Newfoundland and Labrador Hydro — for the purchase of a 100 MW combustion turbine to be placed beside the Holyrood power plant.
Hydro wants to buy the turbine, have it in place, tested and ready to go for backup power before next winter.

It is expected to cost as much as $119 million. In comparison, Hydro’s entire, existing capital budget for 2014 is $98 million.

Hydro laid out its request for approval of spending on the turbine in a detailed, 511-page application to the PUB that can be read here.

Hydro’s capital spending directly impacts power rates. Aside from considering the need for additional power and what might best serve that need, the PUB must also consider the 2.3 per cent increase to power rates expected to result from the purchase of the new generator as proposed.

Hydro’s application was submitted on April 11, as an after-the-fact supplement to its proposed, and already reviewed, annual capital spending for the year.

The problem at this point is time, according to a letter from the PUB to concerned parties on Tuesday.

“Hydro stated a required award date (for the purchase) of April 30, 2014, but has advised the board that the date for approval could be extended until early in the week of May 5, 2014,” it states.

“The normal regulatory process for reviewing such applications would include requests for information, evidence, submissions and possibly a public hearing. In the context of the timeframe set out by Hydro, it appears that the only option may be to grant approval for Hydro to proceed with the project as proposed and subsequently establish a separate process to allow the parties the full opportunity to review the issues of cost and cost recovery.

“The board notes that this is an extraordinary process made necessary by the late filing of the application.”

The PUB has asked for comments in response to the idea of an immediate approval for the spend by May 2.

The consumer advocate, Newfoundland Power, Vale and, collectively, the “island industrial customers” — including North Atlantic Refining, Teck Resources, Corner Brook Pulp and Paper — had all filed an intention to act as interveners in the PUB’s consideration of the proposed turbine purchase.

While not typically an intervener in PUB matters, Sierra Club Atlantic has similarly stated its interest in being able to bring forward relevant experts, cross-examine witnesses and question Hydro’s conclusions in reaching its decision to buy the new generator.

Each intervener has different considerations and concerns, normally dealt with through the review process. In this case, for example, in a letter signed by the Sierra Club’s Fred Winsor, the environmental impacts of the proposed addition to the power system is a concern.

“It is our understanding that the proposed combustion turbine will be fuelled by low-grade oil,” it states, noting the combustion turbines already at the Holyrood power plant have been marked for their production of carbon dioxide and other byproducts of fuel burning.

“This (added turbine) proposal, it would appear, runs contrary to stated greenhouse gas reduction policies and goals of the government of Newfoundland and Labrador to reduce greenhouse gas emissions in the province,” the Sierra Club states.

The letter, received by the PUB on Monday, goes on to recommend that a package of energy conservation initiatives be considered instead of a new turbine, including: introduction of off-peak rates, expanded energy efficiency programs, energy audits and retrofits, and the use of more renewable energy generation.

“I believe that Hydro has the necessary generation to meet peak demand this winter through its own assets, power purchase arrangements and NL Power assets. It must be noted that rolling blackouts (in January 2014) were caused by the loss of 100 MW of generation from Unit 3 at Holyrood and this would have been restored if a spare motor was in the province as recommended for several years,” writes former MHA Danny Dumaresque in his own letter to the regulator, objecting to the purchase.

“It is clear that if proper maintenance and testing of all assets is completed over the coming weeks, (it will ensure) effective operation of all respective generation assets by Dec. 1, 2014.”

Dumaresque, who is an intervener in the PUB’s separate and ongoing review of the provincial power system, goes on to question whether or not the unit identified for purchase by Hydro will work as promised and meet the island’s power needs when called upon at times of peak power demand.

“There is no iron clad guarantee that this unit will be in place for Dec. 1, 2014,” he writes.

“Apart from the issues noted above, the approval of $120 million or more is too much money to grant just because Hydro failed to get this application to the PUB in an appropriate time frame.”

In a recent interview with The Telegram, Hydro president and CEO Ed Martin said the purchase of a combustion turbine has long been in the works and publicly noted as part of planning around the Muskrat Falls hydroelectric project. While originally expected to be a 60 MW generator, brought into operation in 2015, he said the request for the purchase or the need to spend to get it into place should not come as a surprise.

Documentation related to the PUB’s consideration of the proposed 100 MW combustion turbine purchase will be posted on the PUB website.

Meanwhile, the utilities regulator is expected to issue a landmark report, dictating the state of the provincial power system and any immediate needs, May 15.