By Michael Lynch
Northwestern Ontario energy users should not have to pay Ontario Power Generation's (OPG) stranded debt charge, says Larry Hebert, chief executive officer of the Northwest Energy Association (NEA).
Hebert estimates "the stranded debt charge has cost energy users in the northwest more than $3.5 million per month," since its inception by the provincial government on June 1, 2001. Each customer on the Hydro One grid in Ontario pays 0.735 cents for each kilowatt/hour used.
Hebert says the huge $34-million debt incurred by the former Ontario Hydro was caused by it building nuclear facilities in southern Ontario. "We never were able to benefit from these nuclear plants because they werenÕt built for our load," Hebert says. "Therefore we shouldnÕt have to pay for them."
Hebert says the NEA is concerned about the impact the stranded debt charge is having on OPG's more direct customers. These include the large power users, such as pulp and paper mills that use huge quantities of power in the course of a year. Hebert, who is also general manager of Thunder Bay Hydro, estimates that "Bowater Inc. in Thunder Bay is paying twice as much in OPG stranded debt charges than Thunder Bay Hydro is paying."
The only stranded debt charge exemptions the Ontario government has allowed are for three communities that are not on the Hydro One grid.
Hebert says northwestern Ontario's contribution to eliminating the stranded debt is "insignificant" at five per cent of the load, and represents only a small portion of what is being collected across the province.
The NEAÕs case for exempting northwestern power users from the stranded debt charge will be presented to the provincial government by the Northwestern Ontario Municipal Association (NOMA) "in the near future," Hebert says. NOMA meets with Ontario cabinet ministers and officials on a regular basis.
Six municipal utilities make up the NEA: Atikokan, Fort Frances, Kenora, Sioux Lookout, Terrace Bay and Thunder Bay. The six utilities employ more than 170 people. It is a non-profit company that works collectively on behalf of its members.
Chair John Bath of Sioux Lookout says, "NEAÕs mandate includes the negotiation for bulk power, the co-ordination of equipment and other purchases, emergency services, central personnel management and the possibility of entering into future initiatives."
Bath says the NEA has given local utilities "the opportunity to have a broader perspective of the environment and the region in which they are active."
The NEA is considering three major initiatives with an estimated cumulative value of $7 billion in capital investment.
"Private investors are being sought for the bulk of the investment," says Hebert.
The first initiative is an electrical/syngas (synthesis gas) generation plant to be built in Thunder Bay at a cost of $1.3 billion to $1.9 billion. This cost is in addition to the $7 billion required for the three major initiatives. It is an alternative energy plant with associated spinoff industrial activity. Such a plant would employ a gasification technology to process low-value feedstock and produce syngas as a commodity or burned directly to produce electricity.
Gasification technology involves the partial oxidation processing of low-value, secondary oil-bearing materials such as petroleum, coke, coal, residuals from heavy oil processing and industrial wastes to produce clean burning synthesis gas. It can be sold as a commodity or burned directly to produce electricity.
Hebert says the NEA can act as the facilitator, potential purchaser of power or as a directly involved partner. An investment of approximately $1 million could install NEA or Thunder Bay Hydro as a minority equity partner.
"The NEA is seeking a deal to ensure that some of the plants 1,000 megawatt output stays in northwestern Ontario," Hebert says.
The second initiative involves a northerly extension and new feed. A connection could be developed from Manitoba sources to Red Lake, Ont. Such a line would be able to service northern communities and would significantly upgrade the current Red Lake radial line elevating it to a looped feed.
A subsequent phase extension of this line west would offer service opportunities for many northern communities. This includes bringing the grid system to all First Nation communities in the north, which "would bring economic development opportunities to many First Nation communities," Hebert says. NEA could become involved in a minor equity position, Hebert says, in order to gain local decision making input and general participation.
The third initiative is a new east-west feed from Manitoba to northwestern Ontario. The construction of additional high-capacity transmission connections from Manitoba to Sudbury or Sault Ste. Marie would respond to long-range projections for requirements of reliable and economic power supply in the region. Many rare mineral finds already discovered will turn into mine developments with a new grid in place, Hebert predicts.
Such an extension would facilitate the purchase of Manitoba power and bring the western portion of the provincial electrical network closer in size to the relative capacity of the eastern portion of the network. The recommended route would be parallel to the Highway 11 and Highway 17 transportation corridors.
"These connections would achieve the objectives of the NEA," Hebert says, "and would deliver new connections to the U.S markets for Ontario and Manitoba power."
This would include the additional capacity that will be generated by the Thunder Bay syngas plant.
"This grid system would provide low-cost reliable power to industry in the area and attract new industry," Hebert says. For U.S. delivery options, the connection could be at Pigeon River, or crossing at Sault Ste. Marie, or from Thunder Bay across the bottom of Lake Superior to the Upper Peninsula of Northern Michigan. Another connection near Fort Frances is anticipated, Hebert says.
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