City spending $53-million to make electricity

June 21, 2001

City spending $53-million to make electricity

By JAMES WOOD

Soaring electrical costs have made the city believe now is the right time for a $53-million upgrade to its power plant.

On Monday, city council approved the purchase of a new General Electric LM 6000 machine consisting of a 40 megawatt turbine and 22 megawatt steam generator to replace a 21-year-old 34 megawattt turbine and 14 megawatt steam generator.

Chief commissioner Gerry Labas said the new equipment will mean greater capacity to produce electricity which can be sold into the provincial power pool at prices which have more than doubled in the last year.

"On the power grid, the price of energy is very high. So whatever we have in surplus we ship it onto the grid and we get good dollar," he said.

"The other thing that helps the economics in an indirect way is the cost of natural gas being as high as it right now. Because our power plant uses natural gas as a feed stock, we can drop the consumption. And in addition to that to be able to capture that high selling price, that's what makes the economics so attractive."

The new equipment will show a 33-per-cent increase in efficiency.

The money for the project will come from the city's electrical reserve, which is expected to have $11 million by the end of the year, and an internal loan from the gas utility. The expected rate of return on the investment is 14 per cent.

Labas said it is expected high power prices will last for the next five to six years, enabling the city to pay the new machine off.

It will also mean a reduction in environmental emissions, including nitrous oxide, by 80 per cent.

"The concurrent that we also have from an environmental perspective, is that given the Nox emissions, there is nothing to say in a couple of years or so we won't be told to replace that machine," said Labas.

Ald. Graham Kelly asked if the purchase of the new equipment would mean an increase in electricity rates.

Labas said the high power pool prices, which are forecast for the next 10 years, mean that rates should not have to be raised.

The city is assured delivery of the equipment by May 2002 and it is expected to be two-thirds on line by September of that year.

Ald. Wayne Craven asked why the city hadn't opened up the project for bids.

City electrical utility manager Bob Drever said the General Electric unit was the only one of its type and the city has had a good relationship with the company in the past.

The project will need environmental approval from the province but that is not expected to be a problem.

Mayor Ted Grimm said the purchase is part of maintaining the health of the city's utilities.

"We're in very good shape," he said.