Brian Zinchuk is editor and owner of Pipeline Online
SaskPower has long had a 150 megawatt interconnect with North Dakota. It will soon build a 650 megawatt interconnect, about the capacity of Boundary Dam Power Station. The horizon is the United States, just one mile south. Those distant power poles are on Yankee soil. Photo by Brian Zinchuk
The following is a Hansard excerpt of the Crown and Central Agencies Committee of the Legislature on Dec. 20, 2022. In that discussion, NDP SaskPower Critic Aleana Young asked Crown Investments Corporation Minister Don Morgan about the interconnect’s cost. The SaskPower CEO was also present, but did not speak in this portion. Troy King, SaskPower vice-president, finance and business performance and CFO, does speak.
Ms. Aleana. Young: — I guess the first of my last two questions is in regards to the deal with the Southwest Power Pool: 20 years, $52 million a year. Understanding that’s just for the infrastructure, which to me, that’s about a billion dollars total that the corporation will be paying for essential deconstruction of infrastructure in the United States. That’s correct? Potentially to import up to 650 megawatts per year?
Hon. Mr. Don Morgan: — Correct.
Ms. A. Young: — And there is no cost built into that for the actual power. The billion dollars is just to build infrastructure in the States?
Hon. Mr. Morgan: — That’s correct. Because the power price changes hour by hour, day by day, that’s to maintain the infrastructure. Southwest Power Pool is a group of producers in the US [United States] that is about 10 times what we would have access to here. So we would likely be guaranteed a relatively competitive supply of electricity from that at whatever current rates might be going forward.
Ms. A. Young: — For sure. And appreciating the volatility of those power rates, as you said, hour by hour, minute by minute in some cases, I’d assume there was an assumed cost, or you know, cost per megawatt hour built into whatever business case was developed. You know, essentially SaskPower is paying to build infrastructure in a foreign country, even one as close as the United States, but there would be a cost built into that. So what is the anticipated cost that we would need in order to make that accountable?
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Hon. Mr. Morgan: —We would not be in a position to disclose the suppositions or other things that would be on pricing going forward. We don’t disclose the cost on an hour-by-hour or day-by-day basis on the website. I know some other jurisdictions do, but SaskPower has decided that they can make the best deals by playing close to . . . They would certainly have used a number of different assumptions on that decision.
One of the good things about the Southwest Power Pool is that the parties that are on the other side of the border have got reverse times. You know, our high time of use, our peak times are into December, January. Theirs, it’s the other times of year.
Ms. A. Young: — But that does seem to be changing a bit, I think, with consumption patterns and demand patterns in Saskatchewan, you know, more people running AC [air conditioning]. It seems to be less the case than it was perhaps in years past.
Hon. Mr. Morgan: — Peak day was December 10th a year ago.
Ms. A. Young: — Yes. But I’ve heard it’s getting higher in summer as well from some of SaskPower’s own reporting. But I guess for cost of . . . You know, again power purchase and purchase of fuel is one of the driving factors for SaskPower’s costs going up year over year.
And I guess it’s just — perhaps by way of comment more than question — frustrating that there’s no assumed cost that’s available, you know, for public transparency around what factors may have gone into that billion dollars kind of cost of service, that when the corporation borrows, I assume it’s on the basis of the tax base in Saskatchewan, which is the people of the province.
Mr. Troy King (SaskPower vice-president, finance and business performance and CFO): — So when you refer to the Southwest Power Pool and that capacity that we’re going to lease, I call it we’re going to lease it for 20 years as opposed to we’re going to own and pay for it. When you look at our energy needs, we break them into many components, but I would break them into two: energy and capacity.
And so when we get access to that 650 megawatts from the south, that’s primarily capacity is the way I look at it. So that’s the ability to bring in that much energy. By comparison, the Great Plains facility that we’re building, it’s about 377 megawatts and it’s just shy of $800 million. For $800 million we get 377 megawatts of capacity, so what we’re getting out of this is really double that capacity for a billion dollars.
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Ms. A. Young: — That’s for the infrastructure, not for the cost of power.
Mr. King: — Yeah, and for $800 million, all we get is the infrastructure for Great Plains. Then with Great Plains, you’ve got to put the staff in. You’ve got to do the fuel. You’ve got to do the maintenance to get it running and get the energy, whereas with the Southwest Power Pool, we have to really, as you’ve indicated, we have to still buy the energy from them.
The minister had mentioned that the prices in the Southwest Power Pool are some of the lowest in North America that we can take access to, but really it’s two different pieces. One is the capacity, and that’s what we’re getting from there, and then you’ll get the energy. So capacity-wise, it compares very favourably to building gas generation that we may or may not be able to run.
The other piece the minister also touched on is just the impacts of renewables and the need to fill that gap and that variability. So renewables are quite volatile. I was just looking on my phone. Today wind is giving us about 37 megawatts of capacity right now out of 615 and solar is giving us 2. So we need something to fill in those variances and try and minimize your amount of, you know, total capital and total energy spent. Having access to the Southwest Power Pool diversifies our portfolio, allows us to avoid building even more gas that puts us at risk of, you know, early retirement under the new standards, and it’s a different source of bringing in energy.
Conversely when we have excess wind and excess solar on our system — we have 600 megawatts now, we’re looking to build upwards of 3000 megawatts — we need somewhere to put it when you have too much wind. The Southwest Power Pool gives you access to move that energy to the United States, as the minister said, to a market far larger than ours. And so really as part of building more renewables and lowering our emissions, having that capacity is really key.
Ms. A. Young: — Sure. And I appreciate that. And I appreciate the challenges SaskPower have. I think what the average person hears though is perhaps, you know, that’s going to be hundreds of people not working in Moose Jaw or other facilities but working in the United States to provide power to the province of Saskatchewan
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