June 17th, 2019

Extra profits to cover capital asks at power plant

By COLLIN GALLANT on June 11, 2019.

NEWS FILE PHOTO
The city's electric utility is asking council to approve three new projects to upgrade a planned substantion, boost production capacity at the north end powerplant and also leave a backup generator on site in order to cut potential downtime in case of breakdown. Council will decide on the projects on June 21.

cgallant@medicinehatnews.com@CollinGallant

Flush with cash, the city’s electric generation department is proposing two new projects to its 2019 capital plan, while the utility will also double the size of a new substation in industrial quarters of the city’s northwest.

That is required to give the distribution department additional capacity beyond what was approved last year after two huge power contracts were signed for new customers in the immediate vicinity.

Now the original $8.7-million budget will grow above $16.1 million, while the generation department is proposing $7.1 million in new spending to acquire a backup turbine unit and other equipment to boost output.

“What it really represents is that we have a robust industrial sector in this community,” utility commissioner Brad Maynes told a council committee meeting on June 6.

Elected officials said the projects represent “re-investment” in the business unit at a time of extreme profitability.

If the budget amendments are approved by council on June 21, the generation projects will be paid for out of operating funds from the power plant, which forecasts a $35-million profit in 2019.

Funds for the substation would mostly be borrowed and paid off via utility rates, though Aurora Cannabis is covering about $2.6 million, or 16 per cent, of the work related to their 42-megawatt supply contracts.

That agreement, which kicks in later this year, plus another similar deal with Hut 8 data processing and other industrial activity, is quickly blocking off space in the planned substation, known as MHS10.

“The load growth has gotten to the point where the (first phase of the substation) will be allocated before it’s commissioned,” said Grayson Mauch, manager of electric distribution.

The power generation projects could see a heat recovery unit added on the year-old Unit 16 north-end single generator at a cost of $1.3 million to improve efficiency by about 10 per cent.

The department would also buy and refurbish a backup generator for $5.8 million that it currently has leased as a standby.

Most of that money would come out of operating cash, though $2 million would be paid out of equipment reserve funds that grow in profitable times.

At Unit 16, officials say part of the new turbine’s power output in used internally to heat a glycol system that dries air flowing into the natural gas-powered turbine. That’s required to stop ice crystals from forming and damaging the $26-million generator, but can use up to 4 megawatts, or about 10 per cent of the total output, in cold weather. Even then, when temperatures fall low enough, the machine must by governed.

A new system would use the waste heat from the engine to dry the air, thereby freeing up power for sale. Administrators say the gain could see the $1.3-million investment paid for in three years.

“I don’t look at it as a cost, but as an investment,” said Coun. Phil Turnbull, the chair of the committee.

“Anyone looking at a two-year payback on a million dollars would jump on it in a heartbeat.”

Keeping the generator in the city’s inventory would mean it could more easily swap out Unit’s 14 or 15 at the main power plant. Ordering such equipment when it breaks down takes more than 100 days at minimum, officials said.

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