Thousands of pages of documents get filed with the province’s Public Utilities Board every year, and buried among them are fascinating things.
Like this story in three parts: on Aug. 1, 2019, Newfoundland and Labrador Hydro asks the PUB for permission to spend $1.7 million to put fire protection in its diesel generating station in Charlottetown, Labrador, because the station was at risk, having no fire protection at all in an area with limited water supplies.
On Oct. 7, the generating plant burned down.
On Oct. 11, Hydro told the board it won’t need the money anymore.
But there are other revealing things in Hydro’s submissions to the board as well.
In 2019’s budget, Hydro said it would have to spend $133.6 million in 2020 to keep the system running. Now, it’s decided that the necessary amount for 2020 is just $111.9 million, $21.7 million less than it forecast last year.
Hydro applies to the board for permission to do capital work — work it maintains is absolutely necessary for the system to operate. Here’s how it described the necessity of that work in its capital budget application: “Hydro submits that all projects that are before the board in this application are required to meet Hydro’s obligations … to provide power and service to its customers that is reasonably safe and adequate and at the lowest possible cost consistent with reliable service.”
OK — so, the work’s needed.
Interesting, then, that the required work has shrunk so much. In 2019’s budget, Hydro said it would have to spend $133.6 million in 2020 to keep the system running. Now, it’s decided that the necessary amount for 2020 is just $111.9 million, $21.7 million less than it forecast last year. (The corporation says it’s mindful of the rate impacts of capital spending.)
But it’s not just 2020 where there’s a huge change: Hydro’s five-year financial plan has also gotten a massive haircut. In addition to 2020’s drop of $21.7 million, spending is forecast to drop to $111.4 million in 2021, $108.7 million in 2022, $102.1 million in 2023, and $101.9 million in 2024.
That’s a reduction of $80 million in work that was deemed to be necessary in upcoming years, and now isn’t. Some of it is a paper change; the utility has dropped the percentage of contingency amounts it sets aside for overruns in project costs from 17 per cent to nine per cent.
Still, the utility warns that, “Some assets have reached or exceeded their expected service lives and many others are approaching that juncture. Other major assets have not reached their expected service lives, but some of their components, auxiliary equipment, or systems have or are about to do so. This includes components of major facilities such as the Bay d’Espoir Hydroelectric Generating Facility, the Holyrood (Thermal Generating Station), the Hardwoods and Stephenville Gas Turbines, and much of Hydro’s transmission and distribution systems.”
It looks like a case of “pay now or pay later.”
The emphasis seems to be on the latter.
That didn’t work so well in Charlottetown.
