Costly catch-up

Published on October 9, 2016

To be fair, this is a good news story, or at least one with interesting implications. Or, you might see it as a cautionary tale.

Recently, Newfoundland and Labrador Hydro went to the Public Utilities Board to ask for permission to spend $4.7 million to service its combustion turbine. It’s work that would need to be done, according to manufacturer’s guidelines, in February. Recognizing that peak power use is at that time of year, Hydro is fast-tracking the work, preparing to do it before winter. That’s good planning — servicing assets effectively so they’ll be ready when needed. It’s worth pointing out that Hydro says it understands that trying to get the work done by Dec. 1 means an “aggressive” maintenance effort, but it’s one that can’t, because of the circumstances, be weighed against slower, cheaper options.

Now, the cautionary tale.

Remember the combustion turbine?

It was purchased, brand new, for $120 million, and only went into full operation in March 2015. It provides backup power for the Northeast Avalon grid, and was expected to be used fairly lightly.

Problem is, it hasn’t been used anywhere near as lightly as the utility expected. The turbine’s maintenance schedule requires inspection and overhaul of its combustor unit after the equivalent of 400 start-ups. When the turbine was purchased, the utility had no idea that work would be done so quickly; the original estimate had the unit reaching that milestone in spring 2018.

But the knee bone’s connected to the leg bone, and if the knee bone is the combustion turbine, the tottering old leg bone is the Holyrood Generating Station. Problems with boiler tubes at Holyrood mean that generating units at the station were shut down for part of the winter, and de-rated after that, meaning they no longer operated at full capacity until repair work was done. (So far this year, Hydro has gone to the PUB for $26.5 million in unexpected repairs, ranging from the combustion turbine overhaul to repairs to a hydroelectric turbine at Baie d’Espoir.)

Using the combustion turbine more often means the $4.7 million in maintenance came sooner than expected — and another, even larger job, a $10-million hot gas path inspection and maintenance, will be required sooner, too, in 2019.

 

What we’re seeing now is a utility playing catch-up. Both the Liberty Consulting Group and the PUB have pointed out there were ongoing maintenance issues at Hydro that fell well below the standard set by usual utility practice.

The unexpected emergency capital work, all of which ends up being paid for by ratepayers, may be a sign that Hydro is taking preventative maintenance more seriously.

It’s only a shame that this province and its ratepayers are now nowhere near as able to absorb the unexpected costs.