BC Hydro, Teck talk power purchase
By Scott Simpson
Vancouver Sun
May 12, 2009
Deal might be made if beneficial for ratepayers, Hydro official says
BC Hydro is negotiating with Teck Resources to purchase electricity from the company's Waneta generating facility near Trail in southeastern B.C.
Hydro confirmed that negotiations are under way although Teck would not specify the names of parties with which it is discussing possible power sales.
Teck is reportedly negotiating to sell about one-third of Waneta's output -- or enough electricity to power 100,000 homes.
Teck has a National Energy Board permit to export electricity from the 450-megawatt Waneta station on Pend d'Oreille River. NEB records show the Vancouver-based mining giant grossed $7.9 million from firm power exports to the United States in 2008.
Teck fetched an average price of $61.28 per megawatt for exported power in 2008 -- or about 2.5 times BC Hydro's cost to generate electricity from its own heritage generating facilities around the province.
"We are in discussions with Teck as well as some other existing power producers in B.C. just to see [if] they have any available energy," Hydro media relations manager Susan Danard said in an interview. "No agreement has been reached. We are discussing what they could provide for us, and at what price and that's about as far as we can go at this point. Generally speaking we would be interested in negotiating either short- or even long-term electricity purchase agreements -- but only if the terms are beneficial for our ratepayers."
Electricity sales have at times been extremely lucrative for Teck -- during the 1999-2000 California electricity crisis the company shut down its smelter at Trail because it could make more money selling into the California market.
Over the past year as a result of a higher debt burden and falling commodity prices, Teck has been seeking ways to lower its costs in order to get a better grasp on its debts.
"We are only able to say that we continue to keep our options open with respect to asset sales as part of our broader plan to reduce debt and position the company for short- and long-term success," Teck communications manager Catherine Hart said in an e-mail.
The Waneta facility is 55 years old and power production costs are likely very low -- as they are at Alcan's similarly aged Kemano generating facility on the Nechako River near Kitimat on B.C.'s central coast.
Hydro is paying Alcan $50-$60 per megawatt hour for surplus power from Alcan's aluminum smelter at Kitimat.
As the NEB's numbers show, Teck's average price for sales into the U.S. market is somewhat higher -- $61 per megawatt hour.
It's likely that Hydro will pay Teck more than it does Alcan because Teck has added leverage -- it has its own dedicated transmission line to the U.S. border.
In the 2006 Hydro call for new sources of power, the average price paid by Hydro was $88, including the cost of delivery.
Energy sector commentator David Austin found the deal surprising, given that Hydro recently announced it's reducing by almost 50 per cent the volume of electricity it is planning to contract with private power producers in a new call for renewable sources of electricity.
Read Scott Simpson's BLOG at vancouversun.com/energy
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Posted by Arthur Caldicott on 12 May 2009