Fire cost NALCOR $18 million in lost revenue

A fire at Churchill Falls last November cost the province’s energy corporation a total of $18 million in lost revenue in late 2008 and early 2009 under the Guaranteed Winter Availability Contract (GWAC) with Hydro-Quebec.

NALCOR Energy released updated information in response to a request from your humble e-scribbler.

The fire occurred November 3, 2008 in a cable shaft at the Churchill Falls generating station and caused what a NALCOR spokesperson described in an e-mail as “extensive damage”.  Damage knocked two of the plant’s 11 turbines out of action and reduced overall generating capacity by a reported 1,000 megawatts.

According to the spokesperson,

This contributed to the decrease in GWAC revenue to Nalcor Energy in 2008 of $8.4 million and year-to-date 2009 of $9.6 million. No penalties [for non-performance] apply under GWAC.

One of the turbine/generation units was back in action by February 2009.  Repairs to the second unit were completed over the summer.

Under the GWAC,  Churchill Falls Labrador Corporation [CFLCo] agrees to supply Hydro-Quebec with a set amount of power during HQ’s high demand winter season apparently in addition to that supplied under the 1969 contract.  The power is used in Quebec. 

GWAC is one of several elements of a 1998 deal that included the recall and resale of a block of 130 megawatts of power and a new shareholders agreement for CFLCo between majority shareholder Newfoundland and Labrador Hydro and minority shareholder Hydro-Quebec.  

In the recall component of the deal, NL Hydro recalled a block of power under the 1969 contract and then resold it to Hydro Quebec at new, higher rates.

The recall element of the agreement has now been replaced by a new deal to wheel upwards of 800 megawatts of Churchill Falls power to the United States through Quebec.  Newfoundland and Labrador Hydro pays Hydro Quebec’s transmission corporation $19 million annually in fees for wheeling the power under terms set down by Quebec’s provincial energy regulatory board.

NL Hydro gets  about the same net price for its power under the wheeling deal with Emera and Hydro Quebec as it did selling the power directly to Hydro Quebec. 

Note that some of the links on GWAC are no longer active. They seem to have disappeared in a series of routine redesigns of websites in the provincial government and in the development of the new NALCOR website.

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Wheeler deal numbers and stuff

1.  Five year sale of 130 megawatts (MW), 2004-2009:  $46 million annually. [See Note 1]

2.  Price (per kilowatt hour) for the five years:  4.0 cents per KWH.

3.  Two year deal to sell 130 MW of power to Emera:  Minimum $40 million annually.

4.  a.  Price for Emera deal (low;  $40 million for 130 MW):  3.5 cents per KWH

b.  Price for Emera deal (high;  $80 million for 250 MW): 3.6 cents per KWH [See Note 2]

5.  Cost of wheeling (paid to Hydro Quebec Transenergie):  $19 million.

6.  Cost of wheeling:  1.6 cents per KWH.

7.  Average consumer electricity price, New York, 2008:  16.9 cents per KWH. [21.125 Canadian cents per KWH at 25% exchange rate]

8.  Average consumer electricity price, New York, June to Sept 2008:  19.825 cents per KWH. [See Note 3]

9.   According to a cabinet minister familiar with the details of the 1998 Guaranteed Winter Availability Contract (GWAC), Newfoundland and Labrador Hydro considered wheeling the power in 1998 but decided against it since the price earned and the wheeling costs were considered too high. 

The figure at left shows pricing trends to 1999 for New York State. (Source: US EIA)

The information released thus far covers wheeling costs to the New York border. 

Additional wheeling costs would apply for each transmission system through which the power is wheeled before delivery to the final consumer. 

Emera is a broker, not a New York state energy retailer.

10.  The GWAC is apparently still in place.  This requires Newfoundland and Labrador Hydro to operate the plant at Churchill falls at peak efficiency to deliver at least 682 MW to Hydro Quebec during the winter months.  This amount may have been increased under this deal to 800 MW to replace the power that was sold to Quebec from 1998 to 2009 as part of the GWAC but which will now be wheeled to New York.

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Note 1:  Values in Canadian dollars.  American prices in American dollars, except as noted.

Note 2:  130 megawatts is equivalent to 1.1388 billion KWH.  250 MW is equivalent to 2.19 billion KWH.  The figures at Line 4 are derived by simply dividing the revenue by the power output.  Since Newfoundland and Labrador Hydro did not release sufficient detail it is unclear if the revenue figures correspond to the power output or not. 130 megawatts at the higher price yields a price of 7.0 cents per KWH.

Note 3:  Source:  New York Energy Research and Development Authority