13 August 2013

Nalcor’s Complaints to the Regie #nlpoli

Last week, the Quebec Superior Court dismissed a motion to hear an appeal from Newfoundland and Labrador Hydro over decisions taken by the Quebec’s energy regulator in 2010.

As NTV reported on Friday, “Newfoundland and Labrador Hydro asked for transmission access from Hydro-Québec TransÉnergie in January 2006. But Nalcor says it was met with delays, so it appealed to Quebec’s version of the Public Utilities Board, the Régie de l’énergie.”

That’s a fair, if very general,  account of the dispute.  You can see the same thing in the other media, such as the CBC’s online account.   The Telegram editorial on Monday described the dispute this way – “the Régie de l'énergie rejected all requested corridors for transmitting power through Québec” -  although that isn’t even close to what actually happened. 

That sounds like Nalcor’s release on the original decision in 2010, but to get the whole story, though, you have to go back and read the original decision, released by Nalcor several days after they issued the news release.

Nalcor’s claim in 2010 is also about as inaccurate as Nalcor’s claim last week that the disputes before the Regie in 2010 had nothing to do with the Muskrat Falls development.  That will become clear very shortly.

The issues are technical and, in many respects, complicated.  If you read the entire Regie decision, you can see a much more complex set of issues.  And if you go into the decision without preconceptions about who is right and who is wrong,  you can reach a very different conclusion than the one Nalcor and its supporters want you to accept unquestioningly.

Complaint P-110-1565

In this complaint, Newfoundland and Labrador Hydro argued that “the CF (Churchill Falls) generating station and the power contract are not designated resources of the distributor and Hydro-Quebec does not have priority for transmission service on the CF lines.” [para 52]

In essence, NL Hydro argued in its first argument that as a result of a series of decisions taken by Hydro-Quebec and the Regie in setting up open access transmission tariff (OATT) system, they had failed to include Churchill Falls and the three lines running from CF to the Quebec-Labrador border.  Hydro-Quebec didn’t have priority access to the lines inside Labrador as a result.

In its second argument, NL Hydro argued that even if Hydro-Quebec used to have priority access, the company lost the access when it failed to reserve the necessary capacity when HQ split into its transmission, production, and distribution sections.

In its third argument, NL Hydro argued that even if all that weren’t true,  the available transfer capacity on the Labrador lines from CF must be tied to actual commitments in the 1969 contract.

The Regie broke the complaint down into four issues, which is answered as follows.

Is the CF generating station a designated resource of HQD under the OATT? 

The Regie found that  - based on expert testimony - the CF generating station has historically provided “approximately 5,000 MW out of 35,000 MW of the electricity supplying the [province’s] native load, which Hydro-Québec and HQD could not do without. Witness Rioux explained that, except in power outage situations, the production from the CF Generating Station has always been available to supply Québec’s native load.” [para 223]

FERC rules specifically allowed that those sorts of arrangements that met core domestic electricity requirements would not be adversely affected by open access. [para 224]

The expert testimony and other evidence included regular correspondence between HQ and CFLCO that indicated that the CF plant was a designated resource.

Under the OATT,  did HQ Production or HQ Distribution have to reserve transmission service on the CF lines [inside Labrador]?

[262] Even expert witness Sinclair who testified for NLH admits that HQD benefits from priority transmission service under Part IV of the OATT, without it having to make reservations or enter into a transmission service agreement, contrary to the procedure set out in Part II for point-to-point transmission service…

It’s pretty bad when your own witness blows your own argument out of the water.

Are the CF lines a path within the meaning of OATT which has to be posted on OASIS [the transmission booking system]? 

At paragraph 267, the Regie found that “the preponderance of the evidence is that, before April 1, 2009, no one other than Hydro-Québec used or could use the CF Lines. Under the Power Contract, Hydro-Québec ‘is entitled and has agreed to purchase almost all the power and energy generated by the CF Generating Station, with the exception of a capacity of 225 MW for the benefit of Twin Falls Power Corporation Limited and an option to take back a maximum of 300 MW for the benefit of CF(L)Co for consumption outside Québec’".

In the next two paragraphs, the Regie noted HQ posted the capacity related to the 2009 wheeling agreement.

Did HQT comply with the OATT by calculating the ATC based on the historical electricity flows rather than on HQ’s rights to firm deliveries in the Power Contract?

Essentially, the Regie found that HQT was using the available data – the historical deliveries – and as such was using an acceptable approach.


There is nothing in this complaint about access to the Quebec transmission grid, despite what Nalcor and local media have previously claimed.

This complaint is all about control of the transmission lines and generating plant at Churchill Falls stemming from the 1969 Power Contract.  Readers familiar with the recent legal action by Hydro-Quebec and with the 2008 water rights case will recognise the connections right away.

readers familiar with the water management agreement imposed by the PUB will also recognise the idea in this complaint that there was some difference between the maximum capacity in the CF plant and what Hydro-Quebec was entitled to receive under the 1969 Power Contract.

Complaint P-110-1597

This complaint grew out of the request for access filed by Newfoundland and Labrador Hydro.  Under Quebec’s rules, NL Hydro had 45 days to complete an application for service.

This complaint asked the Regie to determine whether HQ’s system impact study and NL Hydro’s response to it effectively stop the clock on the 45 day rule.

NL Hydro argued that a system impact study conducted by HQ was insufficient because the company only looked at direct current options.  Expert testimony demonstrated that Nl Hydro had requested direct current transmission.

One of the more telling parts of the decision is in this section:

[384] According to NLH, the impact study was also incomplete in that it failed to identify and properly assess all system limitations, as required by section 19.3 of the
[385] In that respect, reference must be made to Engineer Deguire's testimony and to the impact study reports.
[386] The only testimony from a professional with expertise in transmission system impact studies and the manner in which the impact study in question was conducted is that given by Engineer Deguire. NLH did not call any experts to testify on these technical questions or to contradict witness Deguire.

[388] NLH did not any tender technical evidence to contradict witness Deguire. In reply, it restricted itself to arguing that it was not required to submit evidence to establish that the impact study was incomplete and that it sufficed to refer to the wording of section 19.3 of the OATT for a finding that the study did not contain the essential elements required by that regulatory provision.

On the question of the 45 days,  the Regie found that there was some confusion between what HQ and NL Hydro claimed in an exchange in December 2007 and January 2008.

[401]  Rather than reach agreement with HQT regarding a more specific framework for the facilities study within the 45-day period, NLH decided to contest the content of the impact study and to file its complaint on the eve of the 45-day period stipulated in section 19.3 of the OATT.

Bear in mind that in late 2008 and early 2009, Nalcor didn’t have a market for electricity from - nor did it have financing for -  the Gull Island project.  Had it booked space and achieved an agreement, Nalcor – through NL Hydro -  would have optioned space and potentially entered into commitments to upgrade transmission systems before it had a generating plant to make electricity to send down the lines.

Note that the Regie decision indicates Nalcor could still pursue its application with HQ without prejudice.

Complaint P-110-1678

According to NL Hydro, this complaint involves three issues:

"1) The methodology based on scenarios used in conducting the impact study for NLH's Request 101 and the obligation to provide NLH with a service agreement for the portion of the transmission service that is available;

(2) The notion of designated resource in the specific context of the HQT-LAW path and the Beauharnois generating station; and lastly

(3) The use of point HQT as a point of delivery."

This relates to the exchange of letters in December 2007 and January 2008 that were involved the previous complaint. What it centres on was NL Hydro’s request to book partial capacity on some lines – what HQ could provide without immediate upgrades - while HQ considered this to be a different request than the original one.

The Regie found that:

[491] The preponderance of evidence is to the effect that the January 24, 2008 request is not a partial request within the meaning of section 19.7 of the OATT cited above, i.e. part of the requested point-to-point transmission service, but rather it is a new Request for service resulting from the recombination of options. This is clear from the testimony of Engineer Deguire and that of expert Hanser.

The Regie dismissed all three complaints.