Power system operator wants to cancel electricity transmission project

A drop in oilsands development has prompted the Alberta Electric System Operator (AESO) to recommend cancelling plans for a major power transmission project northwest of Fort McMurray.

The project, approved in 2012, included building two power substations and 130 km of 240-kilovolt power lines to serve an area without transmission facilities that was expected to have significant electricity requirements because of oilsands growth.

The work was originally expected to cost about $370 million, an estimate Atco Electric Ltd. later boosted to $450 million, and be completed in two stages by mid2015. But only one substation at Birchwood Creek was constructed, and in December, the AESO told the Alberta Utilities Commission power demand in the area was lower than expected and asked to cancel the rest of the project.

AESO spokeswoman Tara de Weerd said Thursday the change was made after all six proposed oilsands projects — three featuring cogeneration equipment that would have sent electricity back to the grid — didn’t go ahead.

The developments would have required a total of 500 megawatts of power, which would have boosted consumption in Fort McMurray and surrounding oilsands plants by seven to 10 per cent, she said.

“At the time when the AESO deemed this was needed, oil was significantly higher … At this point, the oil (price) is so much further down and the six projects were cancelled,” she said.

“That’s not to say the AESO will never look at this again. The resource is still there.”

This is the fourth time in the last five years the organization, which runs the provincial power grid, has cancelled such a project.

Atco spent approximately $30 million building the substation and another $10 million for leases, engineering, stakeholder consultations and other preparatory work, expenses all ratepayers will cover, de Weerd said.

But the cancellation avoids putting hundreds of million of dollars more on to power bills potentially years before the extra transmission capacity is needed, she said.

“I think this demonstrates that the AESO does have Albertans’ best interests truly at heart when we’re planning the system,” she said.

“The AESO needs to be nimble and watch the economy and make sure we’re planning things for the long term, but also for the short term.”

The utilities commission has not yet ruled on the application.

Amberly Dooley, manager of oilsands for the Canadian Association of Petroleum Producers, didn’t know the details of the proposed developments, but said it’s not unusual for companies to reallocate resources.

While the drop in oil prices has been a major barrier to new energy investment, the association is also concerned about such factors as tax increases, methane regulations and carbon policy, Dooley said.

However, the association thinks the future for the oilsands is positive, she said.

“Industry recognizes there’s still a demand that exists … (forecasts) highlight the fact there’s still room in Alberta for development to fill that demand.”

The AESO needs to be nimble and watch the economy and make sure we’re planning things for the long term, but also for the short term.