N.L. Hydro changes 2018 budget

PUB approves almost $171 million in maintenance and upgrades

Newfoundland and Labrador Hydro was planning more than $206 million in additions, maintenance and upgrades in its proposed capital budget for 2018, with the Public Utilities Board (PUB) ultimately approving $171 million in projects just before Christmas.

It was no easy ride through the regulatory review, with push back to plans submitted by Hydro for as much as $809 million in capital spending through 2022 — spending that is not part of Nalcor Energy’s Muskrat Falls project costs.

Push back came from Newfoundland Power on several fronts, challenges asking if specific projects were required for Hydro to meet its obligation of reliable power at lowest cost.

Consumer advocate Dennis Browne also challenged Hydro’s plans, asking if specific proposed spending was reasonable.

“Annual capital budget expenditures by both Newfoundland Power and Newfoundland and Labrador Hydro are at levels which are not sustainable,” he wrote in a submission to the PUB.

Browne went further and said the current means of reviewing utility spending (a contributor to ratepayer costs) “does not fit into the Muskrat Falls equation” and advocated for an all-out overhaul of the system — involving public consultations and legislative changes as required.

“This will be our focus going forward to ensure affordable electricity,” he stated.

Hydro revised its plans for its Muskrat Falls to Happy Valleygoose Bay interconnection during the budget review.

The corporation also withdrew a proposed new heating system at the Holyrood thermal power plant. The corporation told the PUB it needed to check to assure it was indeed the least-cost option (Hydro was expecting to spend about $1.5 million in 2018 and $4.2 million in 2019 for the new system as proposed).

The revised capital budget put to the PUB stood at $199 million. It includes projects to be completed within the year, relevant multi-year project costs and allowance for unforeseen events. Not everything was approved by the PUB.

Hydro power plant work

While there are dozens of proposed projects the PUB did approve spending on, more information was sought on a package of 12 refurbishment projects at hydro plants.

The consolidated, two-year refurbishment plan was estimated at $10.3 million this year and $4.3 million in 2019, covering work on everything from control gates to surge tanks and generating turbines.

The PUB questioned why Hydro had submitted only two supporting reports for the proposed items with its initial budget application, when it had engineering and other professional reports relevant to each piece of work.

The regulator was not happy with the review of a dozen projects as one and sent the package back to Hydro with a request for further information on each item.

Some or all of the work on the hydro plants may yet be approved within the year, through supplementary review, but was not part of the initial capital budget approval of about $171 million.

Holyrood power plans

As the Muskrat Falls project cost and timelines have changed, so too have the timelines and costs associated with the upkeep of the Holyrood Thermal Generating Station.

At this point, Hydro has the goal of keeping Holyrood on the books at full generating capacity through at least the winter of 2021.

From there, “Units 1 and 2 are in standby mode until decommissioning is determined to be appropriate.”

It was always the plan to have the third of the three generating units in the main plant building remain available beyond the in-service of the Labrador-island Link and Muskrat Falls power. That third unit will be kept in a synchronous condenser mode, or essentially used to address voltage and moderate what’s travelling on the lines.

From 2018 to 2022, Hydro was planning to spend an average of $9.7 million per year (with high- and low-spending years) on the Holyrood plant.

Browne has flagged that as a high cost. The consumer advocate has also challenged whether or not spending for the conversion of Holyrood in the wake of Muskrat Falls power should even be covered by Hydro, as opposed to being a requirement for Nalcor Energy’s Lower Churchill Project, as part of the project.

“According to Hydro, ‘there are no costs that can be associated with the continued use of Holyrood as a synchronous condensing facility that fall to the Muskrat Falls Project,” the PUB noted.

Holyrood remains an essential power-producing facility for the island, even beyond Muskrat Falls in-service. The combustion turbine added at the site and meant to be used as a backup has been used more than expected to date.

Part of the current capital costs will see upgrades to fuel storage and water supply systems for the combustion turbine, and to support continued use — once the main plant is converted, with units 1 and 2 taken offline as power producers — of the largest emergency backup power source for the Avalon Peninsula.