Making Sense of Energy

Energy Market Update – August 2013

Alberta

Alberta’s energy watchdog has found evidence that competitors in the province’s wholesale electricity market are “signalling” each other to keep power prices up. Calling the market an oligopoly, The Market Surveillance Administrator (MSA) believes it has identified 10 instances since 2011 when Alberta’s electricity suppliers have “signaled” their offers and intentions to the competition in hourly trading reports. While competition in the wholesale electricity market depends on suppliers making anonymous offers, the MSA says that electricity sellers receiving the hourly Historical Trading Report are showing coordination, and not competition, during favourable market conditions. Wildrose energy critic Joe Anglin says the industry “collusion is resulting in millions of dollars in inflated electricity costs being passed on to consumers. Energy Minister Ken Hughes said “(The MSA) is doing its job by investigating this issue and bringing forward recommendations.” MSA Harry Chandler wants delays in the release of data, or the publishing of wide price bands rather than specific prices. (Source: Edmonton Journal)

Surging wholesale electricity prices should shock Albertans into abandoning regulated-rate options for a more stable contract deal with a power provider. A new report from the province’s electricity watchdog found average wholesale prices for electricity spiked 207% during the second quarter of 2013 over the same period last year. In its report, the Market Surveillance Administrator (MSA) notes the triple-digit spike was a result of a low supply cushion, higher demand, lower imports, as well as planned and forced outages. The average pool price for power was $123 per megawatt-hour compared with $40 per MWh in 2012, amid a 28% drop in supply reserve year-over-year. “This is the new normal,” predicted electricity consulting David Gray, who advised signing onto fixed-rate contracts for electricity, but floating-rate agreements for natural gas. About two-thirds of Albertans have not signed contracts with a provider, and instead pay the monthly regulated rate option, which is procured 45 days in advance by the province’s three major utilities. An Enmax spokeswoman said about 38% of its residential customers have already signed onto a contract. But customers on the regulated rate option are already paying higher prices because the company purchases electricity on the wholesale market. Enmax’s website shows its regulated rate has increased from $0.07 KWh in March (before the spike) to $0.11 KWh in August. Epcor saw comparable increases to its regulated rate. (Source: Calgary Herald)

Enbridge shut down nearby operations when a pair of ferruginous hawks decided to nest in a tree which was located within one kilometre of a company work site, south of Lethbridge. Enbridge officials waited about a month for the hawks, classified as a species at risk, to raise their three fledglings. As a result, Enbridge’s new $300-million transmission line will begin importing Montana wind power into the province in August, missing their end of July target. The soon-to-open 340-kilometre transmission line runs between Great Falls, Mont. and Lethbridge. Called the Montana-Alberta Tie Line (MATL), it is Alberta’s first direct link to the U.S. and the only private or merchant line in the province. It will operate like a pipeline, with Spanish-owned wind energy firm Grupo NaturEner supplying the power from its 189-megawatt Rim Rock wind farm near Kevin, Mont. (Source: Edmonton Journal)

The Canadian Wind Energy Association predicts that Canada can achieve 55,000 megawatts (MW) of domestic wind power capacity by 2025. WindVision 2025: Powering Canada’s Future notes that new wind turbine designs will be larger, more efficient, and more reliable than current models, providing clean energy at a price competitive with fossil fuels. GE’s new 2.5-MW Brilliant wind turbine is already providing next-generation designs built for the Canadian climate that will enable wind farm operators to generate higher electrical output, even at low-wind sites. The turbine offers an average 15% increase in annual energy production and a 25% increase in power generation capacity over previous models. Electrical storage capacity even allows the turbines to store up to 50 kilowatt-hours of power when the grid doesn’t need it and release that power when it does. (Source: Calgary Herald)

Bechtel recently announced the company has completed the Hanna Region Transmission Development HRTD project on schedule and under budget. The project included stringing 353 kilometers of 240 kilovolt (kV) and 144 kV transmission lines, constructing more than 1,200 new transmission towers, building 6 new substations, and upgrading 12 substations. “The construction of the HRTD project has helped us meet the increased demand for electricity in the Hanna region due to industrial growth in the area,” said Sett Policicchio, President of ATCO Electric Transmission Division. The company is now supporting ATCO Electric’s Eastern Alberta Transmission Line project. Bechtel will construct approximately 485 kilometers of 500-kV high voltage direct current transmission line that runs from the Gibbons-Redwater area northeast of Edmonton to the Brooks area southeast of Calgary. (Source: Electricity Forum)

City councillors approved a move to save the historic Rossdale power plant, but still haven’t decided how much money to spend on fixing the structure. “What’s going to happen is the council of the day will make a decision on the retention, which means it will be a $3 to $7 million investment in it,” Mayor Stephen Mandel said. The mayor and other members of council’s executive committee passed a motion to undertake stabilization of the site, which covers an area about the size of two football fields, but the decision on just how much to spend will be left for the newly elected city council in November. Committee members asked administrators to report back next year with a capital budget profile, cost analysis of restoring the site, and information on the possibility of generating revenue by leasing two existing pump houses. Epcor has previously said it is willing to pay $1 million toward the cost as long as the city takes over the site within two years. (Source: Edmonton Journal)

Changes by Alberta’s provincial government will protect consumers by bringing greater transparency to electricity costs. Under new regulations, the onus is now on electricity transmission companies to prove the cost of transmission lines is reasonable. Under the old regulations, it was up to consumer groups to challenge the cost – a cost that is ultimately passed on to Albertans. “We have taken action to ensure that Albertans aren’t on the hook for unjustified costs associated with building transmission lines,” said Energy Minister Ken Hughes. As part of its broader powers to scrutinize the cost of new transmission projects, the Alberta Utilities Commission will be able to assess information earlier in the process, so it can ensure that all costs are necessary. An estimated $14 billion in new transmission infrastructures will be built over the next decade to meet the growing electricity demands Albertans and industry within the province. (Source: Electricity Forum)

Capital Power has unveiled a deal to sell 3 natural-gas fired power plants in New England to Emera Inc. for $541 million US. Capital Power plans to wind down its commodity and energy trading business outside Alberta by the end of the year, closing its office in Toronto immediately and its Chicago office next year. Teams in Alberta, Boston and San Diego will continue. Despite selling three assets for over half a billion dollars, the sale will hurt the company in the short term. “While we will continue to pursue contracted power generation opportunities throughout North America, growth in our merchant power business and our trading activities will now be focused on North America’s strongest power market, Alberta,” said Brian Vaasjo, Capital Power’s chief executive. (Source: Globe and Mail)

ATCO Electric has submitted an updated cost estimate to the Alberta Electric System Operator for the 485 kilometre (km), 500 kilovolt direct current Eastern Alberta Transmission Line (EATL) project between Edmonton and an area southeast of Brooks. The backbone line is being built to add much needed reinforcement and capacity to Alberta’s electricity system. The submission updates the costs associated with the EATL project from $1.6 billion to $1.8 billion. The increase in estimated costs is due to an increase in detailed engineering and design costs, inflation, higher Alberta construction costs and delays in receiving approval for the project. (Source: ATCO)

The new federal infrastructure plan known as the Building Canada Plan 2013 has billions of dollars set aside for infrastructure projects of regional significance. This nation-building concept using federal government assistance has already been established with the building of the Lower Churchill generation and transmission system from Labrador to Newfoundland, Nova Scotia and beyond. Since Manitoba Hydro produces some of the cheapest and most environmentally friendly power on the planet, a next logical project to be funded by the plan would be to head west and have Alberta greatly reduce greenhouse gas emissions by importing clean hydroelectricity from Manitoba. (Source: Edmonton Journal)

On August 23, 2013, ENMAX Corporation placed the final panels on its head office roof to complete one of the largest solar installations in Calgary. Covering over 8,000 square feet, the system will provide about 57,000 kilowatt hours of renewable energy each year. That’s enough energy annually to power approximately one third of computers and monitors at the company’s head office. (Source: Enmax)

Electricity Prices for Alberta

The Alberta power pool price averaged 8.364 cents per kWh in August 2013. This price is 2.750 cents higher than last month’s average of 5.614 cents per kWh. The pool price has averaged 8.742 cents per kWh over the last 12 months.

As of September 13, 2013, the forward market was predicting electricity prices for the calendar years of 2013, 2014, 2015, 2016 and 2017. These prices are 6.625, 5.750, 5.075, 5.300, and 5.525 cents per kWh respectively.

Gas Prices for Alberta

Direct Energy’s gas rate for August was $1.778 per GJ in the North and $2.054 per GJ in the South. The September rate has been set at $2.322 per GJ in the North and $2.547 per GJ in the South. Alberta gas prices have averaged $3.043/GJ over the last 12 months.

As of September 9, 2013, the forward market was predicting gas prices for the calendar years of 2013, 2014, 2015, 2016 and 2017. These prices are 3.26, 3.67, 3.79, 3.91, and 3.98 dollars per GJ respectively.

British Columbia

FortisBC has decided to move ahead with the Advanced Metering Infrastructure (AMI) project, after receiving approval from the BC Utilities Commission (BCUC) on July 23, 2013. “Advanced meters, also referred to as smart meters, will help FortisBC customers see how their electricity is being used, so they can better understand their bills and make more informed decisions on how to conserve energy,” said Tom Loski, vice-president of customer service at FortisBC. “Electricity rates will be lower with advanced meters than without them, since the new meters will reduce electricity theft and nearly eliminate the expense from manual meter reading.” As part of the BCUC decision approving the AMI project, the commission directed FortisBC to submit an application providing an option for customers to receive an advanced meter with the wireless radio transmissions turned off if they pay the incremental cost of opting-out. The process of exchanging the approximately 130,000 electricity meters throughout B.C.’s Southern Interior will start next year and is expected to be finished by the end of 2015. The project affects only FortisBC’s electricity customers, and does not include changing gas meters anywhere in the province. Advanced meters are able to wirelessly transmit meter readings and other operational information such as power outages. They also have the ability to communicate with FortisBC and provide near real-time electricity use information to customers. (Source: Fortis BC)

Powerex, the electricity trading subsidiary of BC Hydro, will pay 273 million USD in cash and offer California electric utilities a credit worth 477 million USD to settle claims against it related to allegations that it helped inflate the California power market during that state’s electricity market crisis in 2000/01. California suffered rolling blackouts and record-high electricity prices during the crisis in a market that FERC concluded had become dysfunctional. The agency has since ordered refunds from the trading companies that sold power into that market and the province said the majority of its settlement will provide refunds as previously mandated. Powerex will run a net loss of $101 million this fiscal year as a result of the settlement. (Source: Calgary Herald)

TransCanada Corp. says it’s building a $1.5-billion extension to its pipeline system in northeastern British Columbia that will help deliver natural gas to an export terminal planned for Prince Rupert, B.C. The North Montney Mainline will extend TransCanada’s existing Groundbirch pipeline by adding 305 kilometres of new large-diameter pipe. Progress Energy, a subsidiary of Malaysian energy giant Petronas, has signed up to ship $2 billion cubic feet per day on the North Montney Mainline. Progress is planning to build a liquefied natural gas terminal near Prince Rupert so the resource can be exported to lucrative Asian markets. The North Montney Mainline will link up with a separate $5 billion pipeline that TransCanada is building to connect northeastern B.C. gas with Progress’ Prince Rupert terminal, called Pacific Northwest LNG. The southern segment of the North Montney line should be up and running by the second quarter of 2016, the northern portion a year later, and the export delivery facilities in 2019. (Source: Edmonton Journal)

Ontario

The 40-year-old Pickering nuclear power plant will continue supplying power for another five years without a major refit – providing it meets several conditions. An extension of the generating station’s operating license to August 31, 2018, was granted to Ontario Power Generation by the Canadian Nuclear Safety Commission, pushing the plant 18% past its original design life. The commission announced a “hold point” order for the plant on the shores of Lake Ontario. It states the generating station cannot operate past 210,000 “full power hours” until new safety assessments are conducted, incorporating lessons learned from the Fukushima nuclear plant disaster in the Japanese tsunami. OPG officials insisted the plant can go for 247,000 hours with the existing pressure tubes, arguing that the reactors can be quickly and safely shut down if leaks develop. (Source: Toronto Star)

Hydro One is investing $25 million to build the new Barwick Transformer Station (TS), in the Township of Chapple to improve the electricity supply and provide more capacity for communities between Rainy River and Fort Frances. The new station is expected to be in-service by August 2014. Hydro One’s Fort Frances TS is nearing end-of-life and a new station is required to serve customers west of Fort Frances. Construction is expected to begin in early August. The new transformer station will consist of two 115,000/44,000 volt transformers and will occupy a 150-metre by 150-metre site located north of Highway 11 and west of Westover Road, in the community of Barwick. (Source: Electricity Forum)

TransCanada Corp. is suing the gas distribution business of rival Enbridge Inc. over its decision to end an agreement that would see the two firms co-operate on a 23-kilometre stretch natural gas pipeline in the Greater Toronto Area. “TransCanada will suffer irreparable harm if Enbridge does not abide by the terms of the (memorandum of understanding),” TransCanada said in a statement of claim. Enbridge and TransCanada signed a memorandum of understanding in January to build one section of pipeline that would be used by both companies — called “Section A. However, Enbridge terminated its MOU with TransCanada last month. Guy Jarvis, president of Enbridge’s gas business, said that was because TransCanada was doling out space on its share of the GTA pipeline in a manner Enbridge believed was against the law. In its statement of claim, TransCanada accuses Enbridge of terminating the MOU “for its own convenience.” It wants the court to order Enbridge to “continue to operate under and abide by all the terms of the MOU.” (Source: Calgary Herald)

Electricity Prices for Ontario

The weighted-average Hourly Ontario Energy Price (HOEP) was 2.375 cents per kWh in August 2013. This price is 0.785 cents lower than last month’s 3.160 cents per kWh. The weighted-average price has averaged 2.702 cents per kWh over the last 12 months.

The Global Adjustment rate for August was set at 4.010 cents per kWh. This rate was 7.380 cents in July. The Global Adjustment is an additional charge paid by non-regulated customers. It has averaged 5.111 cents over the last 12 months. (Source: IESO)

Manitoba

Manitoba Hydro and SaskEnergy announced today a tentative agreement, pending regulatory approval, for the sale of SaskEnergy’s Swan Valley Gas to Manitoba Hydro for the purchase price of $200,000. Swan Valley Gas distributes natural gas in and around Swan River, Manitoba, including the towns of Minitonas and Benito. “Swan Valley’s customers are facing a significant increase in their rates because of a substantial reduction in natural gas consumption by the area’s industrial sector,” said Scott Thomson, Manitoba Hydro’s President & Chief Executive Officer. “We view this acquisition as an opportunity for these customers – who are all Manitobans – to benefit from being a part of a much larger customer base.” An additional charge will be temporarily applied to Swan Valley customers’ bills to recoup the purchase price paid by Manitoba Hydro. Even with this additional temporary surcharge, the overall annual natural gas bill for the typical residential customer is expected to be lower than that currently charged by Swan Valley Gas. (Source: Manitoba Hydro)