Duke Energy files cost update for power plant

By PennEnergy


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Duke Energy Indiana filed testimony and exhibits with the Indiana Utility Regulatory Commission increasing the cost estimate for its Edwardsport coal gasification plant under construction in southwest Indiana.

The projects scale and complexity has added about $530 million to the previously approved $2.35 billion cost.

Indiana state utility regulators must review and approve Duke Energy Indianas filing before any new costs can be phased into customer electric rates.

Last November, Duke Energy Indiana alerted the commission that it was seeing upward pressure on costs as the projects engineering progressed. The company asked the IURC to schedule a proceeding to review a revised cost estimate.

The filing estimates the total cost of the Edwardsport IGCC project to be $2.88 billion, including projectfinancing costs. The total project, factoring in aspects such as engineering, construction and purchasing, is 57 percent complete. It is scheduled to be operating in 2012.

This is the first time a plant this size using this advanced clean coal technology has been built anywhere in the world, said James Turner, president and chief operating officer of Duke Energys Franchised Electric & Gas businesses. We worked with GE, Bechtel and other design firms to perform an engineering study early on however, as engineering progressed, the projects design and complexity expanded significantly. Unfortunately, this evolution in scope and complexity makes an increase in the cost estimate impossible to avoid, Turner added.

If approved, the increase in costs will add about 3 percent to the projects customer rate impact.

Based on a customers bill today, the project will result in an overall average 19 percent rate increase phased into rates by 2013.

Regulators granted the company permission in 2007 to construct the technologically advanced clean coal power plant in Edwardsport, Indiana. Regulators also approved the phase in of rate increases associated with the project.

The ability to phase in costs over time reduces the customer bill impact because it spreads out the increase and lowers financing costs. State utility regulators review and approve all plant costs before they are added to customer electric rates.

The 618MW plant will use advanced integrated gasification combined cycle technology. It will:

• Produce 10 times as much power as the existing plant at Edwardsport, yet with less environmental impact than the much smaller plant it replaces

• Be the first major new power plant built in Indiana in more than 20 years. The plant is key to modernizing the states aging electric system

• Generate marketable byproducts. This plant produces sulfur and slag for agricultural and construction materials

• Use less water. The IGCC plant will need less than onetenth the amount of water per day compared to the current plant when its operating.

The company will retire the existing 160MW plant — with coal and oil units more than 60 years old — in conjunction with the completion of the new facility.

About 1,400 construction workers and other professionals are working on site. That number is expected to grow to about 2,000 this summer. The plant will employ about 110120 fulltime workers. In addition, the 1.7 million to 1.9 million tons of coal the plant will use each year will support an estimated 170 mining jobs.

The IGCC plant will use technology to gasify coal, strip out pollutants, and then burn that cleaner gas to produce electricity. The plants efficiency reduces the plants carbon emissions per megawatthour by nearly half.

Duke Energy Indianas operations provide about 6,800 MW of electricity capacity to approximately 780,000 customers, making it the states largest electric supplier.

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Clean, affordable electricity should be an issue in the Ontario election

Ontario Electricity Supply Gap threatens growth as demand from EVs, heat pumps, industry, and greenhouses surges, pressuring the grid and IESO to add nuclear, renewables, storage, transmission, and imports while meeting net-zero goals.

 

Key Points

The mismatch as Ontario's electricity demand outpaces supply, driven by electrification, EVs, and industrial growth.

✅ Demand growth from EVs, heat pumps, and electrified industry

✅ Capacity loss from Pickering retirement and Darlington refurb

✅ Options: SMRs, renewables, storage, conservation, imports

 

Ontario electricity demand is forecast to soon outstrip supply as it confronts a shortage in the coming years, a problem that needs attention in the upcoming provincial election.

Forecasters say Ontario will need to double its power supply by 2050 as industries ramp up demand for low-emission clean power options and consumers switch to electric vehicles and space heating. But while the Ford government has made a flurry of recent energy announcements, including a hydrogen project at Niagara Falls and an interprovincial agreement on small nuclear reactors, it has not laid out how it intends to bulk up the province’s power supply.

“Ontario is entering a period of widening electricity shortfalls,” says the Ontario Chamber of Commerce. “Having a plan to address those shortfalls is essential to ensure businesses can continue investing and growing in Ontario with confidence.”

The supply and demand mismatch is coming because of brisk economic growth combined with increasing electrification to balance demand and emissions and meet Canada’s goal to reduce CO2 emissions by 40 per cent by 2030 and to net-zero by 2050.

Hamilton’s ArcelorMittal Dofasco and Algoma Steel in Sault Ste. Marie are leaders on this transformation. They plan to replace their blast furnaces and basic oxygen furnaces later this decade with electric arc furnaces (EAFs), reducing annual CO2 emissions by three million tonnes each.


Dofasco, which operates an EAF that is already the single largest electricity user in Ontario, plans to build a second EAF and a gas-fired ironmaking furnace, which can also be powered with zero-carbon hydrogen produced from electricity, once it becomes available.

Other new projects in the agriculture, mining and manufacturing sectors are also expected to be big power users, including the recently announced $5 billion Stellantis-LG electric vehicle battery plant in Windsor. Five new transmission lines will be built to service the plant and the burgeoning greenhouse industry in southwestern Ontario. The greenhouses alone will require enough additional electricity to power a city the size of Ottawa.

On top of these demands, growing numbers of Ontario drivers are expected to switch to electric vehicles and many homeowners and business owners are expected to convert from gas heating to heat pumps and electric heating.

Ontario is recognized as one of the cleanest electricity systems in the world, with over 90 per cent of its capacity from low-emission nuclear, hydro, wind and other renewable generation. Only nine per cent comes from CO2-emitting gas plants. But that’s about to get dirtier according to analysts.

Annual electricity demand is expected to grow from 140 terawatt hours (a terawatt hour is one trillion watts for one hour) currently to about 200 terawatt hours in 2042, according to the Independent Electricity System Operator, the agency that manages Ontario’s grid.

Demand is expected to outstrip currently contracted supply in 2026, reaching a growing supply gap of about 80 terawatt hours by 2042. A big part of this gap is due to the scheduled retirement of the Pickering nuclear station in 2025 and the current refurbishment of the Darlington nuclear station reactors. While the IESO doesn’t expect blackouts or brownouts, it forecasts the province will need to sharply increase expensive power imports and triple the amount of CO2-polluting gas-fired generation.

Without cleaner, lower-cost alternatives, this will mean “a vastly dirtier and more expensive electricity system,” York University researchers Mark Winfield and Collen Kaiser said in a recent commentary.

The party that wins the provincial election will have to make hard decisions on renewable energy, including new wind and solar projects, energy conservation, battery storage, new hydro plants, small nuclear reactors, gas generation and power imports from the U.S. and Quebec. In addition, the federal government is pressing the provinces to meet a new net-zero clean electricity standard by 2035. These decisions will have huge impact on Ontario’s future, with greening the grid costs highlighted in some reports as potentially very high.

With so much at stake, Ontario’s political parties need to tell voters during the upcoming campaign how they would address these enormous challenges.

 

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Nuclear plant workers cite lack of precautions around virus

Millstone COVID-19 safety concerns center on a nuclear refueling outage in Connecticut, temporary workers, OSHA complaints, PPE shortages, and disinfecting protocols, as Dominion Energy addresses virus precautions, staffing, and cybersecurity for safe voting infrastructure.

 

Key Points

Employee and union claims about PPE, cleaning, and OSHA compliance during a refueling outage at the nuclear plant.

✅ 10 positive cases; 750 temporary workers during refueling outage

✅ Union cites PPE gaps, partitions, and disinfectant effectiveness

✅ Dominion Energy notes increased cleaning, communication, staffing

 

Workers at Connecticut's only nuclear power plant worry that managers are not taking enough precautions against the coronavirus, as some utilities weigh on-site staffing measures to maintain operations, after 750 temporary employees were brought in to help refuel one of the two active reactors.

Ten employees at the Millstone Power Station in Waterford have tested positive for the virus, and, amid a U.S. grid pandemic warning, the arrival of the temporary workers alarms some of the permanent employees, The Day newspaper reported Sunday.

"Speaking specifically for the guard force, there's a lot of frustration, there's a lot of concern, and I would say there's anger," said Millstone security officer Jim Foley.

Foley, vice president of the local chapter of the United Government Security Officers of America, noted broader labor concerns such as unpaid wages for Kentucky miners while saying security personnel have had to fight for personal protective equipment and for partitions at access points to separate staff from security.

Foley also has filed a complaint with the Occupational Safety and Health Administration saying Millstone staff are using ineffective cleaning materials and citing a lack of cleaning and sanitizing, as telework limits at the EPA drew scrutiny during the pandemic, he said.

Officials at Millstone, owned by Dominion Energy, have not heard internal criticism about the plant's virus precautions, Millstone spokesman Kenneth Holt said.

"We've actually gotten a lot of compliments from employees on the steps we've taken," he said. "We've stepped up communications with employees to let them know what's going on."

As another example of communication efforts, COVID-19 updates at Site C have been published to keep workers informed.

Millstone recently increased cleaning staff on the weekends, Holt said, and there is regular disinfecting at the plant.

Separately, utility resilience remains a concern, as extended outages for tornado survivors in Kentucky may last weeks, affecting essential services.

Responding to the complaint about ineffective cleaning materials, Holt said staff members early in the pandemic went to a Home Depot and got a bottle of disinfectant that wasn't approved by the federal government as effective against the coronavirus. An approved disinfectant was brought in the next day, he said.

The deaths of nearly 2,500 Connecticut residents have been linked to COVID-19, the disease caused by the virus. More than 29,000 state residents have tested positive. As of Sunday, hospitalizations had declined for 11 consecutive days, to over 1,480.

With more people working remotely, utilities have reported higher residential electricity use during the pandemic, affecting household bills.

For most people, the coronavirus causes mild or moderate symptoms, such as fever and cough, that clear up in two to three weeks. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia, and death.

In other developments related to the coronavirus:

SAFE VOTING

Secretary of the State Denise Merrill released a plan Monday aimed at making voting safe during the Aug. 11 primary and Nov. 3 general election.

Merrill said her office is requiring all cities and towns in the state to submit plans for the two elections that include a list of cleaning and safety products to be used, a list of polling locations, staffing levels at each polling location, and the names of polling workers and moderators.

Municipalities will be eligible for grants to cover the extra costs of holding elections during a pandemic, including expenses for cleaning products and increased staffing.

Merrill also announced her office and the Connecticut National Guard will perform a high-level cybersecurity assessment of the election infrastructure of all 169 towns in the state to guard against malicious actors.

Merrill's office also will provide network upgrades to the election infrastructures of 20 towns that have had chronic problems with connecting to the elections system.

 

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E.ON to Commission 2500 Digital Transformer Stations

E.ON Digital Transformer Stations modernize distribution grids with smart grid monitoring, voltage control, and remote switching, enabling bidirectional power flow, renewables integration, and rapid fault isolation from centralized grid control centres.

 

Key Points

Remotely monitored grid nodes enhancing smart grid stability and speedier fault response.

✅ Real-time voltage and current data along feeders and laterals

✅ Remote switching cuts outage duration and truck rolls

✅ Supports renewables and bidirectional power flows

 

E.ON plans to commission 2500 digital transformer stations in the service areas of its four German distribution grid operators - Avacon, Bayernwerk, E.DIS and Hansewerk - by the end of 2019. Starting this year, E.ON will solely install digital transformer stations in Germany, aligning with 2019 grid edge trends seen across the sector. This way, the digital grid is quite naturally being integrated into E.ON's distribution grids.

With these transformer stations as the centrepiece of the smart grid, it is possible to monitor and control using synchrophasors in the power grid from the grid control centre. This helps to maintain a more balanced utilisation of the grid and, with increasing complexity, ensures continued security of supply.

Until now, the current and voltage parameters required for safe grid operation could usually only be determined at the beginning of a power line, where there is usually a grid substation in place. Controlling current flow and voltage in the downstream system was physically impossible.

In the future, grids will have to function in both directions: they will bring electricity to the customer while at the same time collecting and transmitting more and more green electricity via HVDC technology where appropriate. This requires physical data to be made available along the entire route. To ensure security of supply, voltage fluctuations must be kept within narrowly defined limits and the current flow must not exceed the specified value, while reducing line losses with superconducting cables remains an important consideration. To manage this challenge, it is necessary to install digital technology.

The possibility of remotely controlling grids also reduces downtimes in the event of faults and supports a smarter electricity infrastructure approach. With the new technology, our grid operators can quickly and easily access the stations of the affected line. The grid control centres can thus limit and eliminate faults on individual line sections within a very short space of time.

 

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All-electric home sports big windows, small footprint

Cold-Climate Heat Pumps deliver efficient heating and cooling for Northern B.C. Net Zero Ready homes, with air-source Mitsubishi H2i systems, triple-pane windows, blower door ACH 0.8, BC Hydro rebates, and CleanBC incentives.

 

Key Points

Electric air-source systems that heat and cool in subzero climates, cutting emissions and lowering energy costs.

✅ Net Zero Ready, Step Code 5, ACH 0.8 airtightness

✅ Operate efficiently to about -28 C with backup heat

✅ Eligible for BC Hydro and CleanBC rebates

 

Heat pump provides heating, cooling in northern B.C. home
It's a tradition at Vanderhoof-based Northern Homecraft that, on the day of the blower door test for a just-completed home, everyone who worked on the build gathers to watch it happen. And in the spring of 2021, on a dazzling piece of land overlooking the mouth of the Stuart River near Fort St. James, that day was a cause for celebration.

A new 3,400-square foot home subjected to the blower door test – a diagnostic tool to determine how much air is entering or escaping from a home – was rated as having just .8 air changes per hour (ACH). That helps make it a Net Zero Ready home, and BC Energy Code Step 5 compliant. That means it would take about a third of the amount of energy to heat the home compared to a typical similar-sized home in B.C. today.

From an energy-efficiency perspective, this is a home whose evident beauty is anything but skin deep.

"The home has lot of square footage of finished living space, and it also has a lot of glazing," says Northern Homecraft owner Shay Bulmer, referring to the home's large windows. "We had a lot of window space to deal with, as well as large vaulted open areas where you can only achieve so much additional insulation. There were a few things that the home had going against it as far as performance goes. There were challenges in keeping it comfortable year-round."


Well-insulated home ideal for heat pump option
Most homes in colder areas of B.C. lean on gas-fueled heating systems to deal with the often long, chilly winters. But with the arrival of cold climate heat pumps capable of providing heat efficiently when temperatures dip as low as -30°C, there's now a clean option for those homes, and using more electricity for heat is gaining support in the North as well.

Heat pumps are an increasingly popular option, both for new and existing homes, because they avoid carbon emissions associated with fossil use while also offering summer cooling, even as record-high electricity demand in Yukon underscores the need for efficient systems.

The Fort St. James home, which was built with premium insulation, airtightness and energy efficiency in mind, made the decision to opt for a heat pump even easier. Still, the heat pump option took the home's owners Dexter and Cheryl Hodder by surprise. While their focus was on designing a home that took full advantage of views down to the river, the couple was under the distinct impression that heat pumps couldn't cut it in the chilly north.

"I wasn't really considering a heat pump, which I thought was only a good solution in a moderate climate," says Dexter, who as director of research and education for the John Prince Research Forest, studies wildlife and forestry interactions in north central B.C. "The specs on the heat pump indicate it would work down to -28°C, and I was skeptical of that. But it worked exactly to spec. It almost seems ridiculous to generate heat from outside air at those low temperatures, but it does."

 

Getting it right with support and rebates
Northern Homecraft took advantage of BC Hydro's Mechanical System Design Pilot program to ensure proper heat pump system design, installation, and verification for the home were applied, and with BC Hydro's first call for power in 15 years driven by electrification, the team prioritized efficient load management.

Based on the home's specific location, size, and performance targets, they installed a ducted Mitsubishi H2I air-source heat pump system. Windows are triple pane, double coated, and a central feature of the home, while insulation specifications were R-40 deep frame insulation in the exterior walls, R-80 insulation in the attic, and R-40 insulation in the vaulted ceilings.

The combination of the year-round benefits of heat pumps, their role in reducing fossil fuel emissions, and the availability of rebates, is making the systems increasingly attractive in B.C., especially as two new BC generating stations were recently commissioned to expand clean supply.

BC Hydro offers home renovation rebates of up to $10,000 for energy-efficient upgrades to existing homes. Rebates are available for windows and doors, insulation, heat pumps, and heat pump hot water heaters. In partnership with CleanBC, rebates of up to $11,000 are also available – when combined with the federal Greener Homes program – for those switching from fossil fuel heating to an electric heat pump.


'Heat dome' pushes summer highs to 40°C
Cooling wasn't really a consideration for Dexter and Cheryl when they were living in a smaller bungalow shaded by trees. But they knew that with the big windows, vaulted ceiling in the living room, and an upstairs bedroom in the new home, there may come a time when they needed air conditioning.

That day arrived shortly after the home was built, as the infamous "heat dome" settled on B.C. and drove temperatures at Fort St. James to a dizzying 40°C.

"It was disgustingly hot, and I don't care if I never see that again here," says Hodder, with a laugh. "But the heat pump maintained the house really nicely throughout, at about 22 degrees. The whole house stayed cool. We just had to close the door to the upper bedroom so it wasn't really heating up during the day."

Hodder says he had to work with the heat pump manufacturer Mitsubishi a couple times over that first year to fix a few issues with the system's controls. But he's confident that the building's tight and well-insulated envelope, and the heat pump's backup electric heat that kicks in when temperatures dip below -28°C, will make it the system-for-all-seasons it was designed to be.

Even with the use of supplemental electric heating during the record chill of December-January, the home's energy costs weren't much higher than the mid-winter energy bills they used to pay in the couple's smaller bungalow that relied on a combination of gas-fired in-floor heating and electric baseboards, as gas-for-electricity swaps are being explored elsewhere.

Fort St. James is a former fur trading post located northwest of Prince George and a short drive north of Vanderhoof. Winters are cold and snowy, with average daily low temperatures in December and January of around -14°C.

"During the summer and into the fall, we were paying well less than $100 a month," says Hodder, looking back at electricity bills over the first year in the home. "And that's everything. We're only electric here, and we also had both of us working from home all last year."

 

Word of mouth making heat pumps popular in Fort St. James
While the size of the home presented new challenges for the builders, it's one of five Net Zero Ready or Net Zero homes – all equipped with some form of heat pump – that Northern Homecraft has built in Fort St. James, even as debates about going nuclear for electricity continue in B.C.

The smallest of the homes is a two-bedroom, one-bathroom home that's just under 900 square feet. Northern Homecraft may be based in Vanderhoof, but it's the much smaller town of Fort St. James where they're making their mark with super-efficient homes. Net Zero Ready homes are up to 80% more efficient than the standard building code, and become Net Zero once renewable energy generation – usually in the form of photovoltaic solar – is installed, and programs like switching 5,000 homes to geothermal show the broader momentum for clean heating.

"We were pretty proud that the first home we built in Fort St. James was the first single family Net Zero Ready home built in B.C.," says Northern Homecraft's Bulmer. "And I think it's kind of caught on in a smaller community where everyone talks to everyone."

 

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EPA: New pollution limits proposed for US coal, gas power plants reflect "urgency" of climate crisis

EPA Power Plant Emissions Rule proposes strict greenhouse gas limits for coal and gas units, leveraging carbon capture (CCS) under the Clean Air Act to cut CO2 and accelerate decarbonization of the U.S. grid.

 

Key Points

A proposed EPA rule setting CO2 limits for coal and gas plants, using CCS to cut power-sector greenhouse gases.

✅ Applies to existing and new coal and large gas units

✅ Targets near-zero CO2 by 2038 via CCS or retirement

✅ Cites grid, health, and climate benefits; faces legal challenges

 

The Biden administration has proposed new limits on greenhouse gas emissions from coal- and gas-fired power plants, its most ambitious effort yet to roll back planet-warming pollution from the nation’s second-largest contributor to climate change.

A rule announced by the Environmental Protection Agency could force power plants to capture smokestack emissions using a technology that has long been promised but is not used widely in the United States, and arrives amid changes stemming from the NEPA rewrite that affect project reviews.

“This administration is committed to meeting the urgency of the climate crisis and taking the necessary actions required,″ said EPA Administrator Michael Regan.

The plan would not only “improve air quality nationwide, but it will bring substantial health benefits to communities all across the country, especially our front-line communities ... that have unjustly borne the burden of pollution for decades,” Regan said in a speech at the University of Maryland.

President Joe Biden, whose climate agenda includes a clean electricity standard as a key pillar, called the plan “a major step forward in the climate crisis and protecting public health.”

If finalized, the proposed regulation would mark the first time the federal government has restricted carbon dioxide emissions from existing power plants, following a Trump-era replacement of Obama’s power plant overhaul, which generate about 25% of U.S. greenhouse gas pollution, second only to the transportation sector. The rule also would apply to future electric plants and would avoid up to 617 million metric tons of carbon dioxide through 2042, equivalent to annual emissions of 137 million passenger vehicles, the EPA said.

Almost all coal plants — along with large, frequently used gas-fired plants — would have to cut or capture nearly all their carbon dioxide emissions by 2038, the EPA said, a timeline that echoed concerns raised during proposed electricity pricing changes in the prior administration. Plants that cannot meet the new standards would be forced to retire.

The plan is likely to be challenged by industry groups and Republican-leaning states, much like litigation over the Affordable Clean Energy rule unfolded in recent years. They have accused the Democratic administration of overreach on environmental regulations and warn of a pending reliability crisis for the electric grid. The power plant rule is one of at least a half-dozen EPA rules limiting power plant emissions and wastewater treatment rules.

“It’s truly an onslaught” of government regulation “designed to shut down the coal fleet prematurely,″ said Rich Nolan, president and CEO of the National Mining Association.

Regan denied that the power plant rule was aimed at shutting down the coal sector, but acknowledged — even after the end to the 'war on coal' rhetoric — “We will see some coal retirements.”

 

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Electricity subsidies to pulp and paper mills to continue, despite NB Power's rising debt

NB Power Pulp and Paper Subsidies lower electricity rates for six New Brunswick mills using firm power benchmarks and interruptible discounts, while government mandates, utility debt, ratepayer impacts, and competitiveness pressures shape provincial energy policy.

 

Key Points

Provincial mandates that buy down firm electricity rates for six mills to a national average, despite NB Power's debt.

✅ Mandated buy-down to match national firm electricity rates

✅ Ignores large non-firm interruptible power discounts

✅ Raises equity concerns amid NB Power debt and rate pressure

 

An effort to fix NB Power's struggling finances that is supposed to involve a look at "all options" will not include a review of the policy that requires the utility to subsidize electricity prices for six New Brunswick pulp and paper mills, according to the Department of Natural Resources and Energy Development.

The program is meant "to enable New Brunswick's pulp and paper companies have access to competitive priced electricity,"  said the department's communications officer Nick Brown in an email Monday 

"Keeping our large industries competitive with other Canadian jurisdictions, amid Nova Scotia rate hike opposition debates elsewhere, is important," he wrote, knocking down the idea the subsidy program might be scrutinized for shortcomings like other NB Power expenses.

Figures released last week show NB Power paid out $9.7 million in rate subsidies to the mills under the program in the fiscal year ended in March 2021, even though the utility was losing $4 million for the year and falling deeper into debt, amid separate concerns about old meter issues affecting households.

Subsidies went to three mills owned by J.D. Irving Ltd. including two in Saint John and one in Lake Utopia, two owned by the AV group in Nackawic and Atholville and the Twin Rivers pulp mill in Edmundston.

The New Brunswick government has made NB Power subsidize pulp and paper mills like Twin Rivers Paper Company since 2012, and is requiring the program to continue despite financial problems at the utility. (CBC)
It was NB Power's second year in a row of financial losses, while it is supposed to pay down $500 million of its $4.9 billion debt load in the next five years to prepare for the refurbishment of the Mactaquac dam, a burden comparable to customers in Newfoundland paying for Muskrat Falls elsewhere under separate policies, under a directive issued by the province

NB Power president Keith Cronkhite said he was "very disappointed" with debt increasing last year instead of  falling and senior vice president and chief financial officer Darren Murphy said everything would be under the microscope this year to turn the utility's finances around.  

"We need to do better," said Murphy on Thursday

"We need to step back and make sure we're considering all options, including approaches like Newfoundland's ratepayer shield agreement on megaproject overruns, to achieve that objective because the objective is quickly closing in on us."

However, reviewing the subsidy program for the six pulp and paper mills is apparently off limits.

The subsidy program requires NB Power to buy down the cost of "firm" electricity bought by pulp and paper mills to a national average that is calculated by the Department of Natural Resources and Energy Development.

Last year the province declared the price mills in New Brunswick pay to be an average of  7.536 cents per kilowatt hour (kwh).  It is higher than rates in five other provinces that have mills, which the province points to as justification for the subsidies, even as Nova Scotia's 14% rate hike approval highlights broader upward pressure, although the true significance of that difference is not entirely clear.

In British Columbia, the large forest products company Paper Excellence operates five pulp and paper mills which are charged 17.2 per cent less for firm electricity than the six mills in New Brunswick.

The Paper Excellence Paper Mill in Port Alberni, B.C. pays lower electricity prices than mills in New Brunswick, a benefit largely offset by higher property taxes. It's a factor New Brunswick does not count in calculating subsidies NB Power must pay. (Paper Excellence)
However, local property taxes on the five BC mills are a combined $7.8 million higher than the six New Brunswick plants, negating much of that difference.

The province's subsidy formula does not account for differences like that or for the fact New Brunswick mills buy a high percentage of their electricity at cheap non-firm prices.

Not counting the subsidies, NB Power already sells high volumes of what it calls interruptible and surplus power to industry at deep discounts on the understanding it can be cut off and redeployed elsewhere on short notice when needed.

Actual interruptions in service are rare.  Last year there were none, but NB Power sold 837 million kilowatt hours of the discounted power to industry at an average price of 4.9 cents per kwh.   

NB Power does not disclose how much of the $22 million or more in savings went to the six mills, but the price was 35 per cent below NB Power's posted rate for the plants and rivaled firm prices big mills receive anywhere in Canada, including Quebec.

Asked why the subsidy program ignores large amounts of discounted interruptible power used by New Brunswick mills in making comparisons between provinces, Brown said regulations governing the program require a comparison of firm prices only.

"The New Brunswick average rate is based on NB Power's published large industrial rate for firm energy, as required by the Electricity from Renewable Resources regulation," he wrote.

The subsidy program itself was imposed on NB Power by the province in 2012 to aid companies suffering after years of poor markets for forest products following the 2008 financial collapse and recession.  

Providing subsidies has cost NB Power $100 million so far and has continued even as markets for pulp products improved significantly and NB Power's own finances worsened.

Report warned against subsidies
NB Power has never directly criticized the program, but in a matter currently in front the of the New Brunswick Energy and Utilities Board looking at how NB Power might restructure its rates, including proposals such as seasonal rates that could prompt backlash, an independent consultant hired by the utility suggested rate subsidies to large export oriented manufacturing facilities, like pulp and paper mills, is generally a poor idea.

"We do not recommend offering subsidies to exporters," says the report by Christensen Associates Energy Consulting of Madison, Wis.

"There are two serious economic problems with subsidizing exports. The first is that the benefits may be less than the costs. The second problem is that subsidies tend to last forever, even if the circumstances that initially justified the subsidies have disappeared."

The Christensen report did not directly assess the merits of the current subsidy for pulp and paper mills but it addressed the issue because it said in the design of new rates "one NB Power business customer has raised the possibility that their electricity-intensive business ought to be granted subsidies because of the potential to generate extra benefits for the Province through increases in their exports"

That, said Christensen, rarely benefits the public.

"The direct costs of the subsidies are the subsidies themselves, a part of which ends up in the pockets of out-of-province consumers of the exported goods," said the report.  

"But there are also indirect costs due to the fact that the subsidies are financed through higher electricity prices, which means that other electricity customers have less money to spend on services provided by local businesses, thus putting a drag on the local economy."

The province does not agree.

Asked whether it has any studies or cost-benefit reviews that show the subsidy program is a net benefit to New Brunswick, the department cited none but maintained it is an important initiative, even as elsewhere governments have offered electricity bill credit relief to ratepayers.

"The program was designed to give large industrial businesses the ability to compete on a level energy field," wrote Brown.
 

 

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