Wait­ing for the Muskrat

The Beacon (Gander) - - Editorial - Rus­sell Wanger­sky Rus­sell Wanger­sky is TC Me­dia’s At­lantic re­gional colum­nist: he can be reached at rus­sell.wanger­sky@tc.tc — Twit­ter: @Wanger­sky.

It’s fall­back time again at the New­found­land and Labrador Hy­dro cor­ral.

Of­ten, when you hear about Nal­cor and Muskrat Falls, the mes­sage is about de­lays and the project’s bud­get sit­u­a­tion. All de­press­ing enough.

But imag­ine that you are Muskrat Falls’ sin­gle largest cus­tomer, and it turns out you’re not go­ing to get power for much longer than you think.

Sud­denly, you need new op­tions — or more pre­cisely, in New­found­land and Labrador Hy­dro’s case, you need old op­tions. Very old op­tions. And you need them to work.

Tucked aware among thou­sands of pages of reg­u­la­tory doc­u­men­ta­tion at the prov­ince’s Pub­lic Util­i­ties Board, Hy­dro is try­ing to get per­mis­sion to re­place a se­ries of con­troller cards on volt­age con­trol sys­tems at two gen­er­at­ing units at the Holy­rood sta­tion. It’s a $1.3-mil­lion project, which isn’t small pota­toes, and the PUB took the op­por­tu­nity to ask an in­ter­est­ing ques­tion of the util­ity: with Muskrat Falls now de­layed, what are your cap­i­tal plans and the costs of main­tain the Holy­rood plant un­til you do get power?

Some of the an­swers are sober­ing.

The orig­i­nal plan was that Hy­dro ex­pected to have Muskrat power by 2015. The plan now is to eval­u­ate op­er­at­ing the en­tire gen­er­a­tion sta­tion, all three units, un­til 2021. And 2021 is a fair ways away.

“There are sev­eral ma­jor as­sets at Holy­rood that Hy­dro is mon­i­tor­ing for the need for cap­i­tal up­grades, con­sid­er­ing re­li­able op­er­a­tion is re­quired to 2021,” the com­pany wrote. “Such as­sets in­clude fuel stor­age tanks, boiler stacks, and the Unit 1 and Unit 2 gen­er­a­tors. As an ex­am­ple, Hy­dro is work­ing to en­sure the re­quired life of at least three of the stor­age tanks to 2021 with­out a re­quire­ment for an in­ter­nal in­spec­tion, which, in­clud­ing clean­ing costs and con­fined space work re­quire­ments, is ex­pected to cost in ex­cess of $600,000 per tank. If this ap­proach is not suc­cess­ful, then sig­nif­i­cant cap­i­tal in­vest­ment will be re­quired to com­plete the in­ter­nal in­spec­tions to keep the tanks in ser­vice.”

The util­ity is al­ready pre­par­ing to have con­sul­tants up­grade a 2010 study, the “Holy­rood Con­di­tion and Life Ex­ten­sion Study” by AMEC Fos­ter Wheeler to see what work would have to be done now; orig­i­nally, that study ex­pected Holy­rood to have en­tered only a standby op­er­a­tion al­most two years ago.

So Hy­dro is look­ing ahead: “The cur­rent sched­ule for Muskrat Falls in-ser­vice has also re­sulted in the ad­di­tion of projects to the cap­i­tal plan. For ex­am­ple, Holy­rood has been fol­low­ing orig­i­nal equip­ment man­u­fac­turer rec­om­mended in­ter­vals for the cap­i­tal over­haul of ma­jor equip­ment such as the tur­bine/gen­er­a­tor and ma­jor pumps, to en­sure re­li­able op­er­a­tion. Over­haul projects for tur­bine valves, gen­er­a­tors, and ma­jor pumps have been added to the five year cap­i­tal plan for 2018, 2019, and 2020.”

(In­ter­est­ingly, stud­ies done to sup­port Muskrat Falls in­di­cated that, just to reach 2017, Holy­rood would need $800 mil­lion in up­grades, in­clud­ing $600 mil­lion in pol­lu­tion con­trol up­grades. Sub­stan­tially less than that has been done.)

In April, the util­ity will go to the PUB again: to ask per­mis­sion for a fur­ther $2.6 mil­lion in un­ex­pected up­grades in pip­ing, boiler re­li­a­bil­ity and tur­bine re­li­a­bil­ity at Holy­rood.

All of this will re­quire more money from ratepay­ers — as will Muskrat Falls it­self, not only be­cause of the in­creased cost of the project, but be­cause the de­lay means Muskrat isn’t pay­ing off its debts. It’s still un­der con­struc­tion, rather than sell­ing high-priced elec­tric­ity to us, so the in­ter­est clock is tick­ing along. Five years’ worth of in­ter­est on bil­lions in bor­row­ing is no small pota­toes.

It is a long road with no turns. But sur­prises? Yes, far too many sur­prises — and sur­prises beget still more sur­prises.

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