Electricity Future Electricity Future

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2002 – Volume 73 – Number 1
Investing in Canada’s
Electricity Future
Electricity and
Climate Change
A Reality Check
Critical Infrastructure
Protection
How Prepared
are We?
Canadian
Electricity CEOs
Future Priorities
www.canelect.ca
n
CONTENTS
Utility Reviews
Canadian Utility Reviews
Letter from the Chair
14
A
CEA member utility CEOs look back on
the year that changed the world and
provide insight on future industry
projects and developments.
word heard constantly in the business world for the past
twenty years has been "change"; so much so that most of
us have become jaundiced when the terminology is used and tend
to significantly discount its impact. But, if there is an industry
for which this word truly has had meaning recently, it has been
the North American electricity industry.
Features
In less than twelve months, industry suppliers went from
allocating equipment to trying to find homes for excess inventory.
Electricity Future 2010 to 2020
4
To maintain a competitive advantage
in a competitive North American energy
marketplace, the right investment
conditions must be established to
better position Canada’s electricity
industry. – Hans R. Konow
Stephen Snyder
CEA Chair
President and CEO,
TransAlta
Electricity prices went from ridiculous highs to levels where
generators couldn't make a justifiable return on their investments.
Forecasters went from saying shortages of power would soon be
causing blackouts to forecasting inefficient plants would be mothballed due to excess supply.
What started out in the late 90s as a few jurisdictions taking tentative and hopefully orderly
steps to more open and competitive markets, progressed to a controversial debate as the
California saga unfolded. And of course, the year ended with the Enron debacle.
Critical Infrastructure Protection
A Continuing Priority
Forecasting the future has never been more difficult.
9
Our industry though doesn't have the luxury of sitting on the sidelines and waiting for
Ensuring high levels of security for
Canada’s electricity infrastructure has
long been, and continues to be, an
industry and CEA priority. – Francis Bradley
the dust to settle. We must continue to meet our customers’ needs for reliable and safe
power at competitive costs. Despite excellent efforts to encourage efficiency, our growing
economy continues to demand more power. Once again, we must attract large amounts
Partnerships for Success
10
Industry-wide environmental initiatives
and partnerships can foster goodwill
and create exciting new opportunities
for utilities. – Roy Staveley
Electricity and Climate Change
A Reality Check
of capital and engineering talent in order to build the infrastructure critical to continuing
to improve the standard of living we have all come to expect. And we must do this at a
time when market uncertainties abound. Environmental issues, especially climate change,
are more controversial and difficult than ever. The role of regulators is under question.
And many generators operating in regulated regimes find their allowed rates of return
12
Ratifying and implementing the
Kyoto Protocol poses many difficult
challenges for Canada and its electricity
industry. – Michael Cleland
significantly below U.S. regulated rates.
While the industry's task is clear – it must increase its investments and build new capacity
– the course to get there is full of obstacles, many never before encountered. Our traditional compasses and benchmarks may not work well in this environment. Electricity 2002 is
intended to bring intelligent discussion and perspectives to all of these issues – and more.
I'm sure you'll find it worthwhile reading and hopefully helpful in your decision–making.
Departments
Ottawa and Electricity
Maintaining a Competitive Edge
6
Michael Cleland
The View From Washington
8
Timothy Egan
2002
Financial Implications of
Stakeholder Use of Industry Data
13
Peter Gelineau
Volume 73
Number 1
The Canadian Electricity Association, Electricity 2002 is published by CEA to inform its members
on the activities of the electric utility industry and its’ association. Correspondence should be addressed
to the Editor, Electricity 2002 : 1 155, Metcalfe Street, Suite 1120, Montreal, Quebec H3B 2V6.
CEA Corporate Partners Assist
Canadian Utilities in Maintaining
Global Competitiveness
Tel.: 613.230.9263 Fax: 613.230.9326 E-mail: [email protected] Internet site: www.canelect.ca
33
Oskar Sigvaldason
CEA Appointment Announcements
Executive Editor: Francis Bradley • Editor: Brigitte Hébert
Design and Production: Presslink Communications
34
Printed on recycled paper.
Électricité 2002 est aussi disponible en français.
F E A T U R E S
c o v e r
s t o r y
Electricity Future 2010 to 2020
Over the last twenty years, Canada has enjoyed an abundance of electricity supply, which
has contributed to relatively low prices and high reliability. In turn, this reality has stimulated
economic growth and development, particularly among energy intensive sectors. Canada’s
comparative advantage has aided the development of resource-based industries from coast
to coast and served as a critical underpinning of the modern microelectronics-based knowledge
sectors. The future, however, is not without challenges. Over the last twenty years, while
electricity demand grew by 179,639,000 MWh, only 28,953 MW of new capacity was built.
This has resulted in a gradual narrowing of our historic surpluses and threatens both reliability
and price stability in the longer term.
What are the drivers of this situation and what needs to be done
about it? Demand growth, which ran at approximately 3.5% per year
from 1980 to 1990, has fallen over the past decade to approximately
1.5%. Looking forward, electricity consumption will grow slower
than GDP but faster than population. While the current recession will
undoubtedly result in a period of even lower growth, overall
long-term estimates project an average of around 1.3% growth per
year to 2020. Looking to 2010 and then 2020, this means that new
and replacement capacity will be required, in the former period, of
between 18,000 and 23,000 MW and by the end of the latter period,
between 38,000 and 45,000 MW – all of this in relation to the current
capacity of 110,952 MW.
The question then is do we have the necessary policy, regulatory,
and fiscal conditions to ensure investment in new capacity at such levels. This is not an academic question. Over the past three years, CEA
has developed two major studies of the comparative fiscal
conditions in the United States and Canada and concluded that
changes are needed if we are to compete effectively with U.S.
location and fiscal circumstances. It cannot be assumed, at this point,
that electricity's capacity growth will necessarily take place in Canada
for all the traditional reasons it did in the past.
Projections of new capacity requirements are often challenged by
those who suggest that appropriate demand-side investments
greatly reduce the need to build new plants. This can be true – up to
a point. However, much has been learned about investment in
energy efficiency over the past several decades. The most important
reality is that investment in either demand or supply-side tends to be
driven by economics. This means there has to be a good business case
if significant energy efficiency gains are to be made. During the
heyday of utility energy efficiency programs, estimates suggested
that about a 2% reduction in total demand was achieved by the
mid-nineties. Today those types of programs are significantly fewer
and exercise less impact. Government energy efficiency programs are
not sufficiently large in scale to fill the gap.
The reality is that until prices make demand–side energy efficiency
investment more attractive, we can only expect large and small
investors to do what is in their own best interests. Experts suggest
that something in the order of a 5% reduction per decade appears
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e l e c t r i c i t y
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achievable. This was factored into projections of the required new
capacity cited above. If we can do better than that, then new
capacity needs will fall towards the lower end of the scale. If we do
not achieve that target, then it will exceed the higher end.
If there is one thing we can learn from the much-publicized
situation in California, it is that tight supply can have a dramatic
impact on electricity prices. These in turn can bankrupt companies,
severely impact regional economies and lead to significant social
stress. Clearly, it is an important social, political and economic goal to
ensure the smooth functioning of energy markets that can respond
quickly to price and availability signals. In order to ensure markets
operate effectively, investors must be confident in the consistency of
policy, the predictability and timeliness of regulatory regimes, and
the competitiveness of fiscal and tax regimes.
All of this can be made to happen in Canada but, on a comparative basis, it is not there today. CEA, therefore, has brought to the
attention of Government the need to develop an overarching energy
policy framework that:
• recognizes and supports the development
of new electricity resources;
• refocuses efforts on removing regulatory
uncertainty and improving timeliness;
• puts in place a competitive fiscal regime
to make Canada a destination of choice for capital.
It is true Canada has attractive energy resources and plenty of
opportunities to develop hydro, coal, and gas resources. On the other
hand, it is equally true that our hydraulic resources are further from
load and require the development of social consensus around each
major project, our coal resources face challenges no less daunting of
an environmental nature, and natural gas is a continental commodity
offering little cost advantage to Canadian generators. And while
wind, solar, and biomass represent attractive new growth opportunities, they will remain relatively small in the total supply picture.
What this suggests is that the traditional comparative strength
Canada has enjoyed in its electricity supply industry will have to be
earned the hard way in the future because our huge comparative
resource input advantage is no longer available. Investors must
therefore construct the case for new projects around resource input
F E A T U R E S
strengths where they exist, and marry them to attractive policy,
regulatory and fiscal regimes that will once again place Canadian
projects at the top of investor options lists.
Canada's supply/demand picture must be looked at in the context
of North American trends. On the one hand, U.S. electricity requirements are relatively similar to those in Canada. There will be
substantial opportunities to supply American incremental needs
going forward. This is a role Canadian utilities have played actively in
the past and can aspire to play again in the future. On the other
hand, much of the new capacity in the United States is being fuelled
by natural gas, a good deal of that Canadian. It is generally conceded
that it is more cost-effective to ship gas by pipe and convert it to electricity close to load than to ship electrons by wire. New advanced
technologies may change that in the future, but for now, absent gas
prices moving up substantially, the competition for U.S. incremental
demand will remain challenging.
These developments are taking place in an environment, both
global and local, of changing industry trends. Around the world, the
electricity industry is unbundling into competitive and monopoly
segments characterized in the latter instance by its wires component,
and in the former by production and retail segments. Even in the
supposedly monopoly wires area, merchant transmission projects
have taken place where constraints have created significant price
differentials in contiguous markets. At the same time, consolidation
in the United States is leading to vastly increased scale and scope of
companies seeking to achieve critical thresholds considered necessary
to be globally competitive. Continentalization, globalization as well
c o v e r
s t o r y
as convergence between electricity, telecommunications, water and
gas, create a fluid and dynamic new marketplace for electricity and
related services. It is into this maelstrom that Canadian policy makers
must focus their attention and ensure that Canada remains a
competitive place to invest and do business.
As we consider the policy framework to respond to these challenges,
several key objectives seem apparent:
• Assuring supplies of affordable, reliable electricity for Canadians;
• Enhancing business opportunities and growing the economy –
through sales of power, equipment and services;
• Improving our environmental performance.
All of these must be addressed in a coordinated fashion if Canada is
to reap the full benefits and satisfy the essential requirements of its
electricity future. We have done well in the past but we cannot take
the future for granted. Canada's comparative strengths in electricity
will only continue to provide us with advantage and sustain our
economy if the right investment conditions are in place. That is our
challenge and the answer must be clear: Canada is open for business
and electricity remains a source of comparative advantage.
Hans Konow
[email protected]
613–230–4762
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5
D E P A R T M E N T S
i n
o t t a w a
Ottawa and Electricity
Maintaining a Competitive Edge
O
ver the past two years CEA has been working to raise electricity
issues higher on the screens of federal government decisionmakers and key advisors. In the process we have built our messages
around three closely related core themes: industry restructuring,
market integration and investment.
As the industry has evolved over the past several years and as its
circumstances have changed, the role of governments has changed. In
the case of the federal government, its involvement has grown – most
notably, as parts of the industry become taxable, as U.S./Canada issues
become more prominent and as environmental issues have grown.
What has not grown in proportion, at least not yet, is a widespread
senior level understanding of the electricity industry and the way in
which the various federal roles interact to influence the industry’s
future – for good or ill.
So what is Ottawa thinking about on the subject of electricity as of
the end of 2001?
Two major policy agendas underlie the thinking – one guided by the
ministerial reference group on energy, the other by the ministerial
reference group on climate change. The two groups are more or less
coincident in membership but, interestingly, the policy agendas are
almost completely at odds and so far there is limited evidence that the
necessary reconciliation has started in any substantial way.
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Two external events – or more accurately, sets of events – have
created this situation. One is the Bush administration’s energy agenda
and its wish to engender stronger North American energy integration.
The other is the series of climate change negotiations from COP 6 late
in 2000 to COP 7 just completed in November and to which the U.S. is
no longer a party. As a consequence of these forces, Ottawa finds itself
trying to straddle an ever-widening gulf between its attachments to
the North American economy and to United Nations multilateralism.
In this context, the electricity industry has several hurdles to
overcome in order to ensure that its message is getting through.
One is simply ensuring that electricity does not get lost in the crowd
in the North American energy dialogue. The big story insofar as
energy exports are concerned is hydrocarbons and electricity’s more
modest contribution to the trade picture attracts much less attention.
The counter–argument – a difficult one with which to hold people’s
attention – is that the case of electricity is more nuanced with the
primary issue being effective system integration including enhanced
opportunities for trade, system efficiency and reliability.
A second challenge is ensuring that the trade question does not
obscure the issue of supplying Canadian needs. As Hans Konow points
out in this Review’s cover story, Canadian demand growth and plant
replacement over the next two decades have far larger implications for
i n
o t t a w a
the Canadian industry than does any possible level of export growth.
The point here is that although the impetus for the North American
dialogue was the Bush administration’s energy policy, the real issue
is the need to bring energy back in focus as a matter for policy –
domestically as well as internationally.
Another hurdle is the general perception that electricity is something
provincial, not really an industry in the normal sense and therefore not
a matter for federal attention. On the first point, the industry walks a
fine line. No one is calling on the federal government to extend its jurisdiction, but rather to ensure it acts within its jurisdiction in a way that
reflects the need to promote a continuing healthy Canadian
electricity sector. With respect to the second, the message is simply that
electricity is fast becoming like other industries – fast changing,
working in competitive markets and seeking to attract private capital.
The biggest hurdle of all is finding a way to bring the energy/
environment dialogue on to a higher and more productive plane.
Pressures on electricity on the environment front include climate
change, numerous other air emissions, fish and other habitat management and the management of nuclear-related issues, all set in a context
of increasingly involved and complex approval processes and a NIMBY
effect that is growing. Taken together these pressures hem the industry
in on all sides. Virtually all generation (and transmission) options are
subject to requirements that are increasingly difficult to reconcile with
the need for new infrastructure. So far, there has been some dialogue
but not enough at the level and with the focus needed.
What is encouraging with respect to all of the above is that the tenor
of the conversation is changing. Federal officials and ministers are
receptive and what Ottawa thinks on the issues is a great deal more
informed at the end of 2001 than it was a year ago. Looking into 2002
the signs are both positive and troubling with the government’s climate
change position being the most troubling. There is work to be done to
ensure Canada’s reasonable wish to be an environmental world citizen
does not compromise Canada’s long-standing electricity advantage and
our competitiveness in the North American marketplace.
Michael Cleland
[email protected]
613–230–9876
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2 0 0 2
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w a s h i n g t o n
The View from Washington
S
ince the 1999 decision by CEA’s Executive Committee that the
Association should view the U.S. as part of the domestic advocacy
agenda, CEA has maintained an active presence in the Washington
energy policy debate. 2001 was particularly busy, with the Bush
Administration’s Energy Plan. Shortly after its release, CEA published its
own paper for decision-makers in Washington and Ottawa entitled
“Developing a North American Energy Perspective.” It outlines four
themes for advancing the binational electricity relationship: increasing
trade, encouraging investment, protecting the environment, and
supporting technology advancement.
The paper has been a particularly valuable tool in Washington. CEA
used it for discussions on Capitol Hill and with a variety of administration agencies, as Congress and the Administration continued to debate
the content and merits of an electricity title in energy legislation.
That legislative debate remains an ongoing one. At various times
over the first year of the 107th Congress, it appeared as though
momentum for legislative action was strong – particularly by
Republicans after the release of the Administration’s Energy Plan.
However, several events intervened that either reduced or diverted
that momentum.
First came the loss of Senate control for the Republicans. Vermont
Senator Jim Jeffords’ move to independent status ended Alaskan
Republican Frank Murkowski’s lock on the Senate Energy Committee
and, perhaps as significant, gave Jeffords control of the Environment
and Public Works Committee. The Senate loss was a major blow to
Republican plans to get legislative action on parts of the Bush plan.
Moreover, it changed the whole legislative agenda, taking energy out
of its priority position and moving it behind Democrat concerns under
new Senate Leader Tom Daschle.
Second came the attacks of September 11, 2001, and the subsquent
anthrax scare. The two events combined to divert momentum away
from energy legislation towards national security. While energy security was, and still is, a part of that broader security discussion,
proposed action on energy legislation per se lost momentum. Despite
talk of unity on Capitol Hill in a war effort, the fact remains that
unanimity on certain issues – including energy matters – has yet to be
demonstrated.
Third, the activity of new FERC Chairman Pat Wood on the RTO file
over the course of the fall did much to revise what was generally
accepted thinking on legislative action, particularly with respect to
reliability. At the end of the last Congress, there was broad agreement
on the merits of NERC consensus reliability language. Moreover,
enacting such language was seen as a clear step along the path to
ensuring greater national reliability in the face of regional electricity
crises. However, the disappearance of the California crisis, and the
growing rumblings of dissatisfaction with the NERC language from
power generators and marketers, have eroded the consensus of
support. Meanwhile, Chairman Wood has continued to engage in a
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very public dialogue about the idea of RTOs, their appropriate
number and place, and how with them the FERC can address many of
the competitive electricity issues without Congressional action,
suggesting that reliability can also be addressed without legislation.
The combination of these events has resulted in the continued
hurry-up-and-wait mentality on energy legislation that has existed in
Congress for several years. It appeared that comprehensive legislation
was the preferred course and that this would probably evolve over
the spring of 2002. Moreover, comprehensive legislation would
likely extend beyond the scope of traditional energy issues to include
language addressing pollution control and climate change. There are
a variety of key issues that people wanted addressed – from
development of ANWR (the Administration and Senator Murkowski),
to relief from new source review (House and Senate Republicans), to
action on multi–pollutant legislation (Senate and House Republicans
and Democrats), to action on a variety of environmental provisions
(Senate and House Democrats), to a host of smaller but important
changes desired by elements on all sides such as PUHCA
and PURPA repeal. However, Enron’s collapse has thrown
comprehensive legislation off track and may provide an excuse
to delay any legislative action this year.
For CEA – foreign nationals watching the debate with strong
vested interests – the approach remains to keep our heads below the
horizon while quietly seeking to ensure that legislative initiatives
(1) reflect the continental marketplace, and (2) facilitate greater
integration of that marketplace. Key issues for our attention continue
to be the reliability file, the RTO debate, the avoidance of protectionist
measures like reciprocity, and the appropriate drafting of environmental provisions from multi-pollutant bills to climate change action
to renewable portfolio standards. The challenge has became somewhat greater since September 11 and the growing fortress mentality
that has arisen out of it, forcing us to remind our American colleagues
that when it comes to energy, the fortress can’t cope without us.
The analogy of the mouse sleeping next to the elephant to describe
the Canada-U.S. relationship is a tired one, but to stretch it a little
farther, CEA has attempted to make the mouse think smarter, not
harder. By positioning ourselves close to the elephant’s ear – through
good contacts established at the White House, at State, at the EPA, at
DOE, and in Congress, and working in close cooperation with the
Canadian Embassy in Washington – we are managing to remind
decision–makers early and often of how their activities could best ensure
greater continental energy security and efficiency, and thereby serve the
long–term interests of energy consumers on both sides of the border.
Timothy Egan
[email protected]
416–535–2815
F E A T U R E S
c r i t i c a l
i n f r a s t r u c t u r e
p r o t e c t i o n
Critical Infrastructure Protection
A Continuing Priority
W
hile the terrorist attacks in the United States on September 11
of last year raised the profile of the need to protect critical
infrastructure, this has been a major area of focus of Canadian utility
companies for many years, and a key focus of the association for the
past two years, since Y2K.
Coordination with NERC is facilitated principally by the Chair of the
Working Group, Stuart Brindley of The IMO. In addition to his duties as
CEA Working Group Chair, he is a member of the NERC CIP Working
Group, and is thus able to work towards ensuring programs and
activities are complementary.
CIP Primer
Critical infrastructure protection for the electricity sector means
safeguarding the essential components of the electric infrastructure
against physical and cyber threats in a manner consistent with appropriate risk management, with both industry and industry-government
partnerships, while sustaining public confidence in the electricity sector.
The Early Warning System (EWS) developed by the Working Group
is a model being looked at by other sectors as a fast and efficient
method of communicating information in times of high alert. Seiki
Harada of BC Hydro, Vice-Chair of the Working Group, led the team
that developed the EWS and its methodology, which uses the Internet,
email, web-enabled cell phones and Blackberry handheld devices to
deliver real time threat information to members on a 24/7 basis.
The focus of CEA activities includes both physical and cyber threat to
infrastructure. Physical damage, either from natural or malicious
means, is easily understood and the September 11 terrorist attacks
have served to raise industry and public awareness. Less difficult to
quantify is the potential impact of cyber attacks.
A recent Price Waterhouse Coopers calculation put the total cost of
computer virus attacks around the world in 2000 at approximately
US$1.6 trillion. That’s more than twice Canada’s GDP. According to
media sources, the May 2000 Love Bug virus alone caused US$6.7B in
damage in the first five days of its appearance.
Then there was the case of the hacker known as “Mafiaboy,” a
15–year old Montrealer, who attacked sites such as e–Bay, Yahoo,
Amazon and other Internet-based businesses, resulting in US$1.2B lost
revenues. Yahoo and e-Bay stock value dropped between 17 and 23%
in the weeks following the attacks.
Clearly, the increasing frequency and impact of cyber–based attacks
coupled with the electricity industry’s growing dependence on
e–commerce and electronic controls means that risk mitigation in this
area is a very significant CIP challenge.
CEA Activities
In January 2000, following the successful Y2K transition, CEA members
formed the Critical Infrastructure Protection (CIP) Working Group in
order to coordinate activities, share best practices, and interface with
the federal government. In its first year-and-a-half of activities it had
established an effective information sharing Intranet site, implemented methods for coordinating activities with the North American
Electric Reliability Council (NERC) and other partners, developed and
implemented an Early Warning System for threats to electricity
infrastructure, and worked closely with the federal government.
Today, all CEA Councils and Working Groups use the CEA Intranet to
facilitate their activities. But in early 2000, the CIP Working Group was
the first to begin actively testing the Intranet, developed by Crossdraw,
intended to facilitate online coordination and cooperation. The initial
test was a success, and the CIP section on the CEA Intranet continues to
expand and includes: an electronic filing system for key documents;
issues monitoring information; an area for on-line discussions; and the
alerts and advisories sent by the Canadian federal government as well
as those from the FBI’s National Infrastructure Protection Center.
The federal government established a Task Force in early 2000 to
develop the federal approach to CIP. This work resulted in the establishment by the Prime Minister of the Office of Critical Infrastructure
Protection and Emergency Preparedness (OCIPEP) in February 2001.
Throughout this process, members provided input through the CIP
Working Group to government concerning industry concerns and
views on CIP and the role both industry and government should play.
Today, CEA has a strong working relationship with OCIPEP, and with
participation of officials from Natural Resources Canada, is working
together towards a framework for the sharing of sensitive information.
September 11, 2001, and Beyond
The value of the network provided by the CIP Working Group was in
evidence on September 11. A CEA delegation was meeting with Energy
Ministers that fateful morning. When initial reports began coming in,
the scheduled meeting was suspended in order to focus on the events
in New York and Washington, and their potential impact on infrastructure. In a matter of minutes, CEA President Hans Konow was able
to report to Ministers and officials on the state of the grid, the level of
alert electric utilities were moving towards, and the types of security
measures being implemented as a result of the alert.
Today, members routinely use the Early Warning System to advise
members in realtime of incidents or emerging threats. During the
second half of 2001, 19 early warning alerts were issued.
Future priorities of CEA’s CIP activities include ensuring that
a framework for sharing sensitive information with Canadian and
U.S. governments is in place, that any reporting system implemented
is appropriate in its depth and scope, that activities are
coordinated on an international basis and amongst sectors, that
members have access to best CIP practices, and that the EWS
continues to evolve as a timely and effective method of communicating
early warning information.
Francis Bradley
[email protected]
450–472–5552
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9
F E A T U R E S
i n d u s t r y
a n d
e n v i r o n m e n t
Partnerships
for Success
I
n 1998, the Conference Board of Canada facilitated a process that
brought together representatives from government, industry and
environmental organizations to form what became known as the
New Directions Group. The objective was to review and reach
agreement on the essential principles and elements for achieving a
successful voluntary or non-regulatory initiative. The program
elements considered necessary for achieving success included:
1. accurately measured performance indicators,
2. accountability through third party verification,
3. an independent public panel,
4. annual public reporting, and
5. a program that strives to exceed existing regulations.
CEA adopted these elements in an industry-wide initiative that
became known as the Environmental Commitment and Responsibility (ECR) Program in 1997. This decision was taken at the time by
CEA’s Board of Directors as part of a broader effort to focus CEA’s
core business on issue management and advocacy. This new direction
required CEA to explore partnering opportunities, a more proactive
approach and new ways to provide value-added services. The
experience with programs such as the VCR and ARET were considered
generally successful, but were viewed as multi-sector “voluntary”
initiatives in which member utilities participated with other industry
sector stakeholders. The decision by CEA’s Board of Directors was
bold and progressive. The ECR Program aimed no less than to launch
an industry-wide voluntary initiative to enhance the credibility of the
Canadian electricity industry. It would require all CEA corporate
member utilities to participate and success would hinge on the
ability to successfully implement the elements endorsed by the New
Directions Group if the Program was to have any influence on
opinion regarding the industry’s environmental performance.
The ECR Program has now been in place for four years. There is no
question the Program has made a positive impression on key federal
government officials and policy decision-makers. Although this
program’s effectiveness does not extend to the broader general
public, something that CEA will need to eventually address, the
decision to proceed down the path of an industry-wide voluntary
program on environmental performance has nevertheless
contributed in achieving significant and surprising benefits for
CEA’s member utilities.
The ECR Program has raised the confidence of the regulator that
the Canadian electricity industry can accurately measure, track,
verify and report on progress being achieved while at the same time
giving the industry the operating flexibility to achieve such performance in an efficient and cost-effective manner. This became
particularly evident during the Strategic Options Process (SOP) on
wood preservatives in 1999 when Environment Canada agreed to a
voluntary program proposal from CEA that embraced the principle of
management practices rather than new and more stringent
regulations for the virtual elimination of various toxic chemicals. The
avoided cost of early replacement of 1.6 million poles was significant
with a present value saving estimated to be up to $1 billion.
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F E A T U R E S
i n d u s t r y
A not too dissimilar experience unfolded in 2000 as a result of
Environment Canada proposing more restrictive and costly regulations for the virtual elimination of PCBs. Through early consultation,
the proposal was significantly revised based on data and information
provided to Environment Canada. Much of this information was
collected through the ECR Program. This information was combined
with additional survey data and analysis to provide a credible
response to Environment Canada’s proposal. This formed the basis
for CEA to propose a voluntary or non-regulatory approach similar to
the SOP on Wood Preservatives. Environment Canada has not as yet
adopted this proposal, but has made significant revisions to the
proposed new regulations that offer the possibility of a more flexible
regime. The intention is to have the proposed regulations gazetted
in 2002. Although we will not know the final version of the new
regulations for some time, it is already clear that major costs have
been potentially avoided – costs that would have been incurred if the
information on which the initially proposed regulations were based
had not been successfully challenged.
As a result of this experience, it was becoming evident that the
ECR Program model was being selected as an alternative to more
stringent and costly environmental regulations. What was not
expected was the next development in which the framework of the
ECR Program would be adopted to create a voluntary program for
effectively managing regulations that were industry-wide, but not
environmental in nature. This occurred in 2001 when Measurement
Canada initiated the Electricity Trade Sector Review (ETSR).
Through the ETSR process, it had become more obvious than ever
that the regulatory burden on utilities and manufacturers from third
party review, onerous testing and certification requirements were
imposing significant costs on the industry. It was estimated the
existing and newly proposed regulations were so costly that there
was almost no deployment of electronic meters and telemetering in
the Canadian market. The industry worked with Measurement
Canada to develop and reach agreement on the E-MAP proposal,
which was modeled on the ECR Program. Measurement Canada is
expected to adopt the proposal in part because it offers the
opportunity to more efficiently allocate its limited resources. They
also accepted the proposal because industry was able to demonstrate
that such a program could be successfully implemented as a result of
four years of experience with the ECR Program. This was critical for
reassuring Measurement Canada they could retain and adequately
exercise their regulatory obligations and at the same time were
satisfied that consumer groups were reassured there was sufficient
oversight and accountability to protect the interests of the general
public. Estimated savings for the electricity industry are expected to
reach up to $200 million annually, providing operating savings to the
industry, improved service to customers, more efficient utilization of
assets and additional metering business revenue opportunities.
It is when one reviews this trend and the accumulated benefits
that have flowed from early decisions to pursue a strategy of
partnering and voluntary initiatives that the full scope of payback
a n d
e n v i r o n m e n t
becomes apparent. It is also obvious that potential new and exciting
industry-wide voluntary or non-regulatory opportunities lay ahead
for the Canadian electricity industry. To achieve such benefits,
whether related to air emissions, fish and water management, or
non-environmental issues such as power quality or infrastructure
protection, the industry would be well served adopting the principles
and elements defined by the New Directions Group and well tested
and developed through the ECR Program.
Roy Staveley
[email protected]
613–230–9047
Powering
the Future
In British Columbia, the need for
electricity continues to grow.
BC Hydro is looking into emerging
technologies – such as ocean wave
energy – as new sources of clean,
green, renewable energy to help
meet that need.
Our studies show a number of sites
with ocean wave energy potential
on Vancouver Island – and we’ve
invited experienced wave energy
developers to work with us on this
initiative.
It’s just one of the many projects
we’re working on now to create new
ways to power the future.
A01-784
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11
F E A T U R E S
c l i m a t e
c h a n g e
Electricity and Climate Change
A Reality Check
A
s Canada looks to the possibility of ratifying the Kyoto protocol,
Canada’s electricity industry is ever more sharply focused on the
potential implications. What remains clear is that even with recent
agreements in Bonn and Marrakech, ratifying and implementing
Kyoto holds many difficult challenges for Canada.
Canada’s electrical generators have been committed for many
years to slowing the growth rate of Canadian greenhouse gas
emissions. CEA’s Emissions Performance Equivalent Standard, tabled
with governments in late 1999, is the most concrete expression of
that commitment but by no means the only one, as individual
utilities pursue many actions to reduce or offset their emissions.
Looking out beyond the Kyoto commitment period (2008-2012), CEA
members see several strategies that could start moving Canada to a
much lower emissions future. These include zero emission options
such as hydro, nuclear and wind, and low emissions options such as
fuel cells, combined cycle gas and integrated coal gasification and
emissions capture and storage. Combined with international offsets
and sinks, there is strong potential to accommodate economic
growth while eventually moving to emission levels much lower than
Kyoto – albeit well beyond the Kyoto timeframe.
Kyoto itself is primarily symbolic except perhaps with respect to its
machinery (by no means an unambiguously positive contribution to
world governance). The level of world emissions required to eventually stabilize GHG concentrations is orders of magnitude greater
than Kyoto and those levels require both a technological transformation and the full engagement of all countries including LDCs
who within a few years will account for over half of world emissions.
The question is whether Kyoto’s symbolism moves us in the right
direction or forces a process of misinvestment that could leave the
world no closer to the long run goal.
The absence of the United States from the Kyoto framework
contributes both to its ineffectiveness and to making Canada’s
position particularly difficult.
However, the primary difficulty is the time frame – difficult for
most parts of the economy, especially so in sectors with long
investment lead times and long lived capital stock. And no sector has
longer horizons in both respects than electricity. The work done by
CEA on electricity supply and demand and on the potential for
greenhouse gas reductions paints a reasonably clear picture:
• Given the willingness of governments to engage, CEA’s EPES
proposal can make a start on limiting net GHG’s in the Kyoto
time frame – and CEA members with proposed new coal facilities
are proposing to respect the EPES standard.
• More substantial limitations are on the horizon but the great
majority have lead times – for planning, environmental
assessment and construction or for further research and
development – which extend well beyond 2012.
In short, Canada’s electricity industry can not, within the Kyoto
time frame, achieve anything close to the physical emissions
reductions needed to meet minus six, far less to go substantially
12
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beyond minus six. The last point is important. Much of the optimism
about Canada’s ability to meet Kyoto is predicated on electricity
carrying a disproportionate share of the burden, offsetting the
effects of lesser contributing sectors. What this means is that all
sectors including electricity would – if Canada chooses to implement
– be forced to purchase large quantities of offsets from domestic
sinks or international mechanisms.
There is view that such purchases will be very inexpensive and easy
to come by. There is another view, however, that such a strategy
would entail significant costs in dollars, management resources and
the relative competitive position of Canadian companies.
With respect to sinks, the evidence remains ambiguous as to how
many low–cost sinks credits will be available in Canada. In terms of
international credits, the effects of supply/demand balance, the
market behaviour of Russia – in effect the monopolist supplier of
credits – and the transaction costs involved with complying with the
Kyoto rules will all contribute to costs significantly higher than the
optimistic estimates. In any event, we are also starting to see
emerging the unsurprising (if economically unsound) political
response from some Canadian jurisdictions that offset purchases
outside the jurisdiction are politically unacceptable.
Before ratifying, Canada needs to ask itself some hard questions
about just what kind of challenge it may be taking on. Alternatively,
if Canada is indeed unavoidably captured by the Kyoto process, then
the next debate will be on implementation. In either event, the
debate on electricity will center on two key questions:
• What is the actual physical capability of Canada’s electric
power sector to reduce its emissions by 2010 and what
costs would be entailed in various levels of reduction?
• In the event that physical reduction tonnes are as scarce as
CEA’s analysis suggests, what would be the implications of
a strategy based almost wholly on offsets – domestic sinks
and international credits?
Canada may well go down a different road than the United States
in respect to greenhouse gas emissions simply because there seems
no practical way out. In doing so, whether we implement or not, we
will add one more business risk and one more cost element to our
already flagging industrial competitiveness. And little to nothing will
have been done for the environment.
Michael Cleland
[email protected]
613–230–9876
b e n c h m a r k i n g
Financial Implications of
Stakeholder Use of Industry Data
A
s the North American electric industry deregulates, CEA’s
Benchmarking Business Entity (BBE) is aligning itself to address
the changing needs of its members as they deal with issues from
regulatory requirements to detailed benchmarking initiatives.
BBE Working with NERC on Generation
Equipment Reliability Performance
The impact of deregulation on reliability has raised very serious
concerns with respect to the collection and use of reliability data. In
the PJM Interconnection jurisdiction, unit specific data must be
reported 20 days following the end of each month. Failing to provide
this data results in financial penalties. The New England and New
York ISOs have implemented similar systems and other jurisdictions
are evaluating doing the same. PJM requires this generator unit data
to be supplied in North American Electric Reliability Council’s (NERC)
Generating Availability Data System (GADS) format. This NERC GADS
data is very similar to CEA’s Equipment Reliability Information System
(ERIS) Generation data.
As a result of this changing environment CEA’s Consultative
Committee on Outage Statistics (CCOS) sanctioned a task force (TF) to
evaluate the systems and recommend a plan of action. The TF, which
includes NERC’s GADS Manager M. Curley, continues to work on
establishing consistent definitions so that the CEA ERIS Generation
Equipment reporting system will be able to provide NERC-GADS
format reporting. This will result in the creation of one industry
“standard” for reporting generator reliability performance. The
collaboration has resulted in both organizations making minor
modifications to ensure the needs of both systems are met. Other
benefits include a review of the methodologies used by both systems
and the changing environment in the unbundled industry. An
example is in the calculation of NERC generating unit performance
indicators, which presently include external causes such as transmission system limitations. The CEA approach is consistent with the
deregulated environment where unit performance is not penalized
by events outside their control. Initial NERC participant reaction to
this and other CEA recommendations has been positive with respect
to modifying and/or adding to NERC-GADS.
This initiative will also increase access to U.S. data for CEA participants while at the same time alleviating the possible need for CEA
member companies to change their data collection systems to report
to the NERC-GADS format, should it eventually become an industry
requirement.
Data for the Canadian Regulatory Environment
As deregulation begins to impact the Canadian industry, the importance of “benchmarks” has grown significantly. The Ontario Energy
Board (OEB) has identified service quality indicators as part of its
performance-based regulation (PBR) process. As can been seen on
pages 5-6 of the OEB’s “Electricity Distribution Rate Handbook,” the
first phase of its PBR process is the collection of data which will be
used to set benchmark levels that will have financial implications.
(http://www.oeb.gov.on.ca/english/home.htm)
“It is anticipated that by the second generation PBR plan, there
will be sufficient data collected to set industry service quality
performance standards. Once these standards have been established,
PBR incentive mechanisms with economic consequences will be
introduced around the service quality indicators.”
The reliability data requested by the OEB is the same as collected
by the CEA Service Continuity Program. CEA tracks frequency and
severity of customer outages using the SAIFI, SAIDI and CAIDI indicators, and it also collects customer outages in 10 cause categories.
For over 30 years, the program has served the industry well in
providing valuable comparisons in order to assist companies in
performance improvement. However, the use of the data in a PBR
environment has shifted the focus to how outages would impact
companies’ financial performance. The cause categories that
have drawn the most attention have been Adverse Weather and Loss
of Supply.
The Consultative Committee on Outage Statistics (CCOS), which
oversees CEA’s reliability programs, has always stressed the importance of ensuring the accuracy and credibility of data. Similarly, the
CEA COPE Customer Service Business Unit Committee has been
reviewing the non-reliability service quality indicators requested by
the OEB in order to investigate issues of consistent definitions and
accurate reporting.
In discussions with respect to the regulatory environment in
Alberta, member utilities have been using reliability data from the
Bulk Electricity System (BES-DP) and the ERIS Forced Outage
Performance of Transmission Equipment reports. The BES report
focuses on the measurement of the frequency and duration of interruptions at the point of delivery to the distribution system. Here
again, consistently accepted definitions that can be adopted by
regulators have provided CEA members with significant value.
Customer Interruptions for 2000 (%)
Human Element (2.0)
Tree Contact (7.8)
Adverse Environment (2.3)
Foreign Interference (8.6)
Loss of Supply (21.5)
Lightning (5.9)
Adverse Weather (8.2)
Defective Equipment (20.8)
Unknown/Other (7.6)
Scheduled Outage (15.3)
2.0 %
2.3 %
15.3 %
21.5 %
20.8 %
8.2 %
5.9 %
8.6 %
7.6 %
7.8 %
Peter Gelineau
[email protected]
514–866–5375
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13
Canadian Utility Reviews
ATCO Electric
The final stages of the deregulation of Alberta's electricity
industry – including the introduction of customer choice –
was a major focus for both
ATCO Electric and our customers
in 2001.
Since January 1, Alberta electricity consumers have been able
to choose an energy supplier.
ATCO Electric will not be an
energy producer or supplier in
the new world; instead, we will
focus on the delivery of electricity over a safe, reliable system
of power lines.
conditions drove the market prices for both natural gas and electricity
higher. As a result, the provincial government implemented energy
rebates and an electricity price cap of 11 cents per kilowatt-hour.
ATCO Electric undertook a number of initiatives to help our
customers deal with rising costs. Together with ATCO Gas, we
established ATCO EnergySense. This joint energy management
program promotes energy conservation through an energy management hotline, an online home energy audit, and by arranging for full
energy evaluations of customers' homes and businesses. We also
improved call centre service by adding staff, upgrading technology
and extending our hours.
We took steps in this direction at the beginning of the year, when
our generation assets and employees were transferred to our sister
company, ATCO Power – an independent power producer with
worldwide assets and experience.
Regulatory proceedings were also high on the agenda this year. In
July, ATCO received approval from the Alberta Energy and Utilities
Board for a new distribution tariff – the delivery charges that will
recover the costs of providing transmission and distribution service. As
well, the AEUB gave interim approval in July to apply a purchased
energy adjustment – a one-time cost recovery measure – to
customers who leave the regulated rate option. This ensures all current
and former regulated rate option customers pay their share of costs
ATCO Electric has incurred to purchase energy on their behalf.
We further signaled this direction in April, when we (along with
another sister company, ATCO Gas) announced that we are seeking a
world-calibre company to acquire our retail operations (activities
related to the supply and sale of energy to consumers).
ATCO Electric has also applied to the AEUB to determine how and
when customers should be charged for outstanding costs related to
high pool prices during 2000. The hearing has been completed and
the company expects a decision in the last quarter.
The sale, once it is completed, will allow us to focus entirely on
pursuing excellence in the transmission and distribution of energy.
However, until it is finalized, ATCO Electric will continue
providing the full electric service package to smaller customers
through the "regulated rate option."
In November, we unveiled our new employee volunteerism
program. This innovative program recognizes and rewards the
volunteer contributions of our strongest ambassadors – our people –
as they give back to the towns and cities in which we live and work.
J.R. (Dick) Frey
President
To enable choice for our customers, we focused on finalizing
systems and processes to facilitate transactions with retailers. We
also worked to establish a "default supply" and "supplier of last
resort" option for larger customers who are unable to find a retail
energy supplier.
Volatility in the market price of energy was a major challenge in
2001. At the beginning of the year, a number of unique market
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U T I L I T Y
r e v i e w s
BC Hydro
Larry Bell
Chair and Chief Executive Officer
BC Hydro had an exceptional
year in 2001, recording record
revenues and earnings. Unpredictable weather in western
North America and volatile
prices in the energy markets
presented opportunities for BC
Hydro and its power marketing
subsidiary Powerex, which led to
profits of around $850 million.
While those extraordinary, onetime opportunities will not be as
significant in 2002, it looks to be
an exciting and challenging year
in other ways.
BC Hydro’s mission is to provide integrated energy solutions to our
customers in an environmentally and socially responsible manner.
Our "triple bottom line" reporting measures our social and environmental performance as well as our financial results, an important step
in our goal of being a sustainable energy company.
Sustainability means we must make the most of the energy
available, focus more on our customers, strengthen electricity trade
opportunities, build on our positive relationships with our employees
and other stakeholders, protect the environment and reduce greenhouse gas emissions. Sustainability also requires BC Hydro to explore
new opportunities for developing green energy sources, pursuing
sustainable business ventures like hydrogen and fuel cell development,
and expanding our Power Smart programs for residential, commercial
and industrial customers.
A new Green and Alternative Energy Division was formed this year
to encourage research and development of emerging green energy
technologies and processes. BC Hydro is committed to meeting 10 per
cent of future growth with power that is renewable, environmentally
friendly and socially responsible. A 20 MW demonstration project is
under development for Vancouver Island which will combine wind
technology, micro hydro, and ocean wave generation, a new technology for British Columbia. The demonstration project is scheduled to
be on-line by 2003. Other sites around the province are being studied
for the potential of wind generation, and micro hydro and biomass
(wood waste) projects are also being developed.
We are revitalizing our Power Smart energy efficiency programs
with a three-year campaign called the Power Smart Home Energy
Learning Program (h.e.l.p.). Through h.e.l.p. we are showing
customers how they can use energy more wisely and save on their
energy bill. In this way we can also manage our electricity load and
reduce environmental impacts. The h.e.l.p. campaign was launched
in February 2001 with a new online tool called the Power Smart
Home Energy Profile, which helps customers identify energy-saving
opportunities in the home. The campaign is being expanded to include
the institutional, educational, corporate and industrial sectors.
Electricity demand in British Columbia is forecast to grow by 1.8 per
cent each year, and new energy resources will be needed by 2007.
While BC Hydro has committed to acquiring at least 10 per cent of new
energy from "green" sources, increased natural gas resources are also
planned. In keeping with our sustainability mandate, all decisions will
be made in consultation with our stakeholders and after weighing the
social and environmental impacts.
British Columbia is at the forefront of emerging new energy
technologies and BC Hydro is investing in research and development
through partnerships with experts and entrepreneurs in the industry.
Hydrogen, distributed resources and e-business have evolved from
being seen as potential opportunities into deliberate strategies
for action.
An external review places BC Hydro in the top five best-performing
distribution companies worldwide in terms of price, reliability and
safety. Yet more electricity is being transmitted over our wires than
ever before. Our employees are working hard to ensure the system is
able to support such an increase in activity, and we are continuing to
invest resources to ensure reliability.
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15
U T I L I T Y
r e v i e w s
Columbia Power Corporation
Columbia Power Corporation
(CPC) is a Crown corporation
wholly owned and controlled by
the Province of British Columbia.
CPC’s primary mandate is to
undertake power project investments as the agent of the
Province on a joint venture basis
with the Columbia Basin Trust
(CBT).
In 1996, CPC and CBT made
their first investment with the
purchase of the 125 MW
Lorne Sivertson
President
Brilliant Generating Station
near Castlegar, BC. Since then,
a number of projects have been completed as part of the Brilliant
Capital Program. The construction of a new switchyard and life extension and upgrade work to the second turbine unit was completed in
2001. Together, these projects employed over 40 local people, and
increased the generating capacity, reliability and safety of the dam.
Projects under way this year at the dam include upgrade and life
extension work to the remaining two turbine units.
Nearby, construction of the 185 MW Arrow Lakes Generating
Station is approaching completion. Work on the related Arrow Lakes
to Selkirk Substation Transmission Line is complete, with some minor
planting and seeding work to be completed along the corridor early in
2002.
Planning is now under way for the development of new
powerhouses at both the Brilliant and Waneta Dams. In the fall of
2001, the joint venture partners received a Project Approval Certificate
from the Environmental Assessment Office for the Brilliant Expansion
Project. Construction of the Brilliant Expansion Project is planned to
begin in the fall of 2002. Exploratory drilling around the Waneta Dam
began in the winter of 2000, and further project scoping for the
Expansion Project continued throughout 2001. Project engineering,
environmental studies and public consultation are scheduled for 2002.
In These Changing Times,
Partnership With Your Registrar
Has Never Been More Critical!
ISO 9000 and ISO 14000
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If management system registration is one of
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around the globe are in your plans, call us.
We'll give you a world of reasons to give us
your business. Registration Services for all
your business needs.
Please call Client Services at
(604) 244-6800
16
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U T I L I T Y
r e v i e w s
ENMAX Corporation
Headquartered in Calgary,
Alberta, ENMAX Corporation is
a wholly owned subsidiary of
The City of Calgary with three
wholly owned subsidiary companies – ENMAX Energy, ENMAX
Power and ENMAX Encompass.
ENMAX Energy provides electricity and natural gas – and
energy products and services –
to residential and business
customers across Alberta. ENMAX
has over 400,000 customers in
Robert Nicolay
President and Chief Executive Officer
the primary Alberta markets of
Calgary, Red Deer, Lethbridge,
Cardston, Crowsnest Pass and Fort Macleod.
ENMAX Energy does not generate electricity or produce natural
gas, but instead owns short and long-term contracts that ensure
enough supply to meet customer needs.
ENMAX Encompass provides customer services for ENMAX and a
number of municipalities, through a call centre, billing and adjustment
services and a meter reading group.
Growth and the future:
• Continue to improve customer service and efficiency.
The ENMAX Vision is to be:
• The energy company of choice for our customers, every day.
• The career choice for exceptional people – enabling them
to experience growth and fulfillment, every day.
• The investment of choice for our shareholders, every day.
To successfully fulfil its mission and vision, ENMAX will consistently
follow core values in all business processes. These values include
integrity and ethics, customer focus, team spirit and camaraderie,
innovation and creativity, effective communication, continuous
learning and development and an entrepreneurial attitude.
The ENMAX Mission
To be a customer-focused, fiercely competitive, sustainably profitable
leader in the energy market.
• Reduce costs per customer and increase margins through
expansion into natural gas, fibre optics and new geographies
and products.
• Continue to effectively manage the ENMAX supply portfolio.
• Manage supply to maximize potential of the NEB export license
and the FERC licensing that have recently been acquired.
Recently (Nov. 1, 2001), ENMAX was honoured with a Canadian
Wind Energy leadership award for its Greenmax program. The award
recognizes the tremendous growth of Greenmax, a program that
gives ENMAX customers the option to support the development
of wind power. When the program began in 1998 it consisted of
two wind turbines; today, ENMAX contracts the output from
42 turbines.
ENMAX Power delivers electricity to homes and businesses in
Calgary and some of its surrounding areas. ENMAX Power owns,
operates and maintains the regulated power delivery system
(transmission and distribution systems) in the City of Calgary.
Recently, ENMAX Power bid for and won a $16.3 million substation
construction project in northwest Calgary.
Please visit the ENMAX web site at enmax.com for more information.
• Continue to participate in Alberta transmission growth.
• Provide third-party services to other wires companies
(load settlement and billing).
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17
U T I L I T Y
r e v i e w s
Hydro One
Since Hydro One began
operations about two-and-ahalf years ago, we have focused
on being the best in the energy
delivery business.
We have grown in size,
acquiring new customers and
assets in an effort to improve
our efficiencies in the distribution business. Over the space
of approximately 18 months, we
acquired 88 municipal utilities
and integrated them into our
Eleanor Clitheroe
distribution operations. These
acquisitions give us an additional 240,000 customers, raising our customer base to 1.2 million.
We have also substantially grown some of our new businesses,
particularly telecom and energy services.
In 2001, we also moved forward with our decision to consolidate
our 11 existing transmission operating centres and the Distribution
Operating Management Centre into one centre by 2004. The implementation of this strategy is an example of our "best in class" asset
management approach to business. The state-of-the-art operating
centre will provide significant savings, improve operating
efficiencies and performance, and position the company for future
growth opportunities.
During 2001, Hydro One became one of the first distribution
companies in the province to complete the necessary steps to
become ready for the open, competitive electricity marketplace,
which is expected to occur in Ontario in 2002.
Going forward we are embarking on a strategic direction that will
move us further and faster towards becoming a strong and commercial
business.
This strategic direction which provides for a focus on our core
wires competencies will help us get our costs in line with those of
other utilities and their service providers.
There are major service providers in businesses like customer care
who achieve economies of scale and use industry specific processes
that we simply cannot match. We need to use the cost-saving capabilities of these service providers if we are to be cost competitive.
An example of this is an agreement we reached with Cap Gemini
Ernst & Young to create a new e-services entity. This new entity will
provide services to the Hydro One Family of Companies at a cost that
is competitive with other service providers.
A big part of our strategy for success involves expanding our
investment focus to grow the high-value parts of our business.
We plan to take advantage of new transmission opportunities
beyond Ontario and major new interconnections with neighbouring
provinces and states.
The restructuring of the transmission industry in North America
provides an opportunity for Hydro One to establish itself as one of
the premier wires companies on the continent. Regulatory pressure
in the U.S. is resulting in transmission businesses being put up for sale
by their current integrated utility owners. We have built into our
business plan an initial investment in transmission facilities in the U.S.
in the near future to capitalize on these opportunities.
Many feel that at the end of five years, there will only be a
handful of transmission companies in North America. Our goal is to
be one of those companies.
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U T I L I T Y
r e v i e w s
Hydro Ottawa Holding Inc.
In the ever-changing energy
sector, Ottawa residents are
depending on Hydro Ottawa
and its family of companies to
provide them with reliable and
competitive services. It has only
been a year since we opened our
doors, yet we have succeeded in
reengineering our business in
preparation for the new marketplace. Our company’s wealth of
knowledge, skill and experience
in the Ottawa community is a
Ron Stewart
known commodity. It is this
history that provides Hydro
Ottawa with the momentum to build and meet the sector’s
challenges and opportunities in the years to come.
Over the past twelve months, shareholder value has grown with
the successful launch of two subsidiary companies: Energy Ottawa
Inc. and Telecom Ottawa Inc. Energy Ottawa’s water heater rental
business already has over 36,000 customers and is expanding its
service territory. With the other subsidiary company, Telecom
Ottawa, we have 120 km of fibre optic backbone throughout Ottawa
and connections with more than 80 buildings. Telecom Ottawa’s
existing contracts are with a who’s who in Ottawa – from some of the
largest corporate clients, to federal government agencies, from
Silicon Valley North to Parliament Hill. In the months to come,
Telecom Ottawa will be implementing an aggressive strategy
to provide broadband data connectivity across the entire city of
Ottawa – and further its already dominating position in Ottawa’s
telecom market.
completed, Chaudiere Generating Stations will have a capacity of 15
megawatts (about a 50% improvement on our previous generating
output). They will be fully automated and monitored from a
computer screen at one of our sites. Chaudiere is now one of only
a handful of environmental leaders in Ontario that offer waterpowered alternative source electricity.
Also, in our premier year, we have been successful in reaching an
agreement to purchase a local, neighbouring hydro. Now, the 1,284
Casselman Hydro customers will have the added benefit of Hydro
Ottawa’s 24/7 system control centre, a dedicated bilingual call centre,
and 170 power line tradespersons who are only a half hour drive
from Ottawa city limits. We view this as a first step in expanding our
service territory and increasing shareholder value.
At Hydro Ottawa, our focus is on optimizing value for, and meeting
the needs of our customers. We are committed to over 250,000
residents and businesses in a service territory that spans 1,050 square
kilometers. Our company people are caring and committed to the
community in which we live – and this is our greatest asset, whether
we are serving the community in our traditional services, or launching
into the exciting new business opportunities the open marketplace
brings.
This is an exciting time to be at Hydro Ottawa! Everyone, from our
Board and senior management team throughout our company’s
dedicated teams and in each subsidiary, is committed to delivering
shareholder value by exceeding our customers’ expectations. In such
an era of change, we are certain that our customers will find comfort
in knowing they are at the centre of Hydro Ottawa’s commitment to
provide increasingly reliable services in the City of Ottawa.
In our evolving sector, Hydro Ottawa is at the forefront in
developing new opportunities for our Ottawa customers. For example,
through the subsidiary Energy Ottawa, we are revitalizing two
generating stations, which are today in the final stages of major civil
construction, refurbishment, and automation work. When work is
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U T I L I T Y
r e v i e w s
Hydro-Québec
2001 was a milestone year for
Hydro-Québec as it restructured
its operations to adapt to the
new regulatory and market
realities and further improve its
ability to achieve its business
objectives. The third quarter
ended with consolidated net
income of $790 million, indicating that once again this year
the company’s profits are well
on the way to topping the
billion-dollar mark that was
André Caillé
reached for the first time in
2000. Hydro-Québec also tabled
its Strategic Plan 2002-2006, which confirms that the rate freeze
will be extended to 2004 and which ties the company’s overall
performance to stringent management that makes the divisions
accountable for their own business objectives.
is conditional on the granting of a permit by the federal government.
The Government of Québec and the Grand Council of the Crees
reached an agreement in principle on the construction of a
hydropower project on the Eastmain River (James Bay territory) and
the partial diversion of the Rupert River. The government also gave
the go-ahead on two draft-design studies: one for the construction
of a dam and hydropower station on the Romaine River, and the
other for a run-of-river station on the Péribonka River. Hydro-Québec
Production plans to build a combined-cycle gas-turbine station at
Melocheville, slated for commissioning in 2006. Although hydropower
is still the number one generating option, this natural gas plant will
diversify the company’s supply sources while increasing its production
capability to meet expected demand growth.
To comply with the new law that opened up the Québec power
wholesaling market to competition, Hydro-Québec created three new
"divisions", or operating companies: Hydro-Québec Distribution,
Hydro-Québec Production and Hydro-Québec IAC (engineering, procurement and construction); TransÉnergie, the transmission provider, had
already been established in 1997. Under the legislation (An Act to
amend the Act respecting the Régie de l’Énergie), up to 165 TWh/year
of hydropower generation and existing long-term purchases must be
set aside as a "heritage pool" and sold to the distributor at 2.79 cents
per kilowatthour. Electricity demand beyond this volume must be met
through calls for tenders. Transmission and distribution costs continue
to be set by the Régie de l'énergie (energy board). Hydro-Québec
Distribution has submitted an Electricity Supply Plan that forecasts
domestic demand over the next ten years, and has asked the Régie for
permission to launch a call for tenders in 2002 with a view to meeting
surplus demand as of 2006-2007.
On the international scene, wholly owned subsidiary Hydro-Québec
International signed a contract to build an interconnection in
Australia, in conjunction with consulting engineers SNC-Lavalin.
The Murraylink project, as it is called, consists of a 180-km transmission
line and two converter substations. Hydro-Québec also entered
into a joint venture with Shell Hydrogen and Gesellschaft für
Elektrometallurgie to develop and market hydrogen storage materials
and containers.
To ensure sales growth on wholesale markets, Hydro-Québec
Production is continuing to expand its generating plant. The
Government of Québec this year authorized construction of a
generating station on the Toulnustouc River, as well as the partial
diversion of the Portneuf and Sault aux Cochons rivers to optimize
the existing facilities in the Bersimis complex. Startup of these projects
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Hydro-Québec’s capital program for 2001 is about $2.4 billion.
Nearly 75% of this amount is allocated for ongoing operations,
including $750 million to ensure the long-term operability of plant
and equipment and $500 million to meet the growth in domestic
demand. About $300 million will also be spent on reinforcing and
improving the transmission and distribution systems.
Another development was the new Fondation Hydro-Québec pour
l'environnement, a foundation with a mission to contribute to the
enhancement and long-term protection of the environment.
Finally, the Québec order of professional technologists honored
Hydro-Québec with an award for the most important technological
innovation of the 20th century, namely, power transmission at 735 kV.
U T I L I T Y
r e v i e w s
Manitoba Hydro
Celebrating the Past – Working
for the future
The year 2001 has been an
extraordinary one for Manitoba
Hydro, marking both the 50th
Anniversary of the Manitoba
Hydro-Electric Board and our
best financial performance ever.
For the fourth time in the last
five years, Manitoba Hydro set a
new record for net income,
achieving $270 million in the
2000-2001 fiscal year, a significant
R.B. Brennan, FCA
increase over last year’s $152
million. Over the last 12 years,
revenues from electricity exports have multiplied eight-fold, reaching
an all-time high this year with over $480 million in sales.
These record revenues are helping Manitoba Hydro achieve the
financial targets integral to improving the Corporation’s flexibility and
maintaining the low rates enjoyed by our customers.
However, satisfaction with the progress Manitoba Hydro has
achieved does not preclude us from working to ensure the Corporation
continues to improve.
We are actively working to improve the value of the electricity we
export. The construction of a new gas combustion turbine plant near
Brandon, Manitoba just passed a significant milestone with the
arrival of the second of two natural gas combustion turbine
generators. When complete in mid-2002, the new plant will fulfil a
key backup role in our system and allow the Corporation to
maximize export revenues by converting interruptible export sales
to higher priced firm sales.
Manitoba Hydro is also continuing to study three potential sites
for hydroelectric generation in the north, the Wuskwatim and Notigi
sites along the Burntwood River system and the Gull Rapids site on
the Nelson River. The development of one or more of these sites will
further enhance Manitoba Hydro’s ability to take advantage of the
lucrative market for electricity in the United States.
Manitoba Hydro is continuing to forge new relationships with
Aboriginal people in northern Manitoba. Earlier this year, we signed
an Agreement-In-Principle with the Nisichawaysihk Cree Nation on
the potential development of the Wuskwatim and Notigi Generating
Stations enabling the Nisichawaysihk to obtain an ownership
position by investing in the proposed projects.
We continue to strengthen our position as a leader among
Canadian utilities in voluntary actions to reduce greenhouse gas
emissions. Our decision to extend the life of the Selkirk Generating
Station by converting the plant to natural gas, one of the
cleanest forms of thermally generated power, will significantly
reduce its emissions.
Manitoba Hydro also remains focused on providing our customers
with the best rates and service. Electricity rates have not increased in
five years, and our industrial customers have not seen an increase in
a decade.
The acquisition of Centra Gas in 1999 and the creation of a "onestop energy company" have increased convenience to our customers
and produced synergies.
Manitoba Hydro has achieved a great deal in its 50-year existence,
emerging as a leading energy utility in North America, with exceptional customer service and some of the lowest rates in the world.
Our Power Smart program continues to introduce new initiatives to
reduce energy use in Manitoba and increase the electricity available
for export sales.
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U T I L I T Y
r e v i e w s
Maritime Electric
In 1994 Maritime Electric
moved from traditional cost of
service regulation to incentive
based regulation. Since that time
the Company’s exposure to
increases in purchased and
produced energy costs has
resulted in volatility in earnings.
During 2001, the Provincial
Government amended the law
under which Maritime Electric
operates to allow for rate adjustments to pass these cost increases
James A. Lea
on to customers. The amendPresident and Chief Executive Officer
ments help ensure Maritime
Electric’s financial stability and will enable the Company to continue
to maintain a reliable supply of electrical energy for PEI.
As a first step towards obtaining gas supply for these projects,
Maritime Electric and Westcoast Power submitted preliminary
requests to Maritimes and Northeast Pipeline for a total of 36 million
cubic feet per day of natural gas service to PEI.
In the fall, Maritime Electric announced plans for new on-Island
natural gas fired generation. A study completed through the summer
concluded that new generation is feasible. The project is now
advancing to the development phase and will be developed in two
stages with a 140 MW joint project with Westcoast Power to be in
place late 2004 and a 60 MW project in place by 2006.
For more information visit our Web site at www.maritimeelectric.com.
Maritime Electric entered into two new Energy Purchase
Agreements to replace one which expired in October. One is with
Emera Energy Inc. (Nova Scotia Power) for 30 MW of firm energy;
the other, with NB Power, is for 50 MW of firm power and the
balance of the Company’s peaking requirements.
In partnership with the PEI Energy Corporation, Maritime Electric
launched a Green Power Program. The PEI Energy Corporation,
a Provincial Crown Corporation, installed eight 660 kW wind
turbines at North Cape, PEI. A portion of the output is being made
available to Maritime Electric customers. The majority of the output
is designated for use by Provincial and Federal Government buildings
in PEI.
YOUR POTENTIAL IS JUST AS
IMPORTANT AS YOUR PRODUCT.
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Bruce Winter, Toronto, 416 814 5880
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© 2002 PricewaterhouseCoopers. PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP and other members of the worldwide PricewaterhouseCoopers organization.
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U T I L I T Y
r e v i e w s
NB Power / Énergie NB
Operating Performance
NB Power's business unit structure
has enhanced our ability to set
performance targets, measure
results and take corrective actions
where necessary.
The conventional Generation
Business Unit met its performance target for unit availability.
Improved planning and work
procedures reduced the time to
complete maintenance outages.
Besides meeting record in
James Hankinson
province customer demand for
electricity, the high level of
station availability contributed to successful export sales. Programs
to improve efficiencies, streamline maintenance practices and optimize
staffing levels continued to strengthen the cost structure of the
business unit.
The 27-day unplanned outage late in the fiscal year reduced the
capacity factor at the Point Lepreau Nuclear Generating Station to
65.1%. Prior to that, an extensive planned maintenance outage was
completed safely and ahead of schedule. During the year, the station
received separate reactor and solid waste facility license renewals
from the federal regulator. Staff have made progress in improving
safety programs, work practices and business planning - each is an
important factor that contributes to safe and predictable operations
at the station.
During the fiscal year, transmission and distribution functions were
separated. The Transmission Business Unit assumed responsibility for
transmission assets and power system operations, while the five
Distribution service regions were combined with the Customer
Service and Marketing Business Unit to form the Customer Service
Business Unit. By consolidating these service functions, we have
the appropriate structure in place to focus on transmission business
development and improving customer service.
The new business unit structure for Transmission better positions
NB Power for open access to regional transmission networks and
facilitates opportunities for energy trading. A major asset renewal
program will continue to improve transmission system reliability.
The realignment of Customer Service will allow for improved
customer service as all points of contact with customers are now
combined. Both business units have significantly improved their
safety performance.
all to benefit our customers. The development plan proposes an
investment program that addresses business challenges related to
ageing facilities, interconnection capacity, environmental standards
and the evolving energy marketplace. Investment analysis has
identified three potential projects; the refurbishments of the Point
Lepreau and Coleson Cove generating stations and the construction of
a second international power line to New England.
The Board has approved expenditures for detailed feasibility studies
of these development projects. Preliminary engineering and project
costing is under way in order to make final decisions.
To enhance performance improvement, NB Power has placed
substantial emphasis on business risk management. The Corporation
and each business unit have identified risks affecting operations and
financial results and implemented mitigation plans. During 2000-2001,
the Corporation's risk profile was updated resulting in the identification of reprioritization of the following business risk factors:
Export markets – maintain and expand access to export markets
Point Lepreau Generating Station refurbishment –
effective management of refurbishment project
Coleson Cove Generating Station refurbishment –
effective management of refurbishment project
Leadership – attracting, developing, retaining strong
leaders and deployment to high priority areas
Generation ability – due diligence in maintaining
generation reliability
Transmission reliability – due diligence
in maintaining transmission system reliability
Shared Priorities
NB Power's operating and financial performance has created a sound
foundation for business development. Our business operations are
more efficient and our debt has been reduced significantly. This
progress will complement the investment program necessary to
refurbish our generating assets and enhance our export capabilities.
The result will be greater reliability, rate stability and improving
environmental performance – these are important priorities that
NB Power shares with our customers.
Business Development
During the year, the Board of Directors approved a business
development plan. NB Power's priorities are to provide reliable
electricity, meet environmental standards and continue rate stability,
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U T I L I T Y
r e v i e w s
Newfoundland & Labrador Hydro
In 2001, the Hydro Group of
Companies continued to focus on
its core strategies of safety, reliability and the environment. To
ensure the involvement and
input of all employees in the
strategic and operational issues
of the corporation, a framework
for stimulating such a dialogue
and process was introduced to all
employees during 2001.
The commitment to safety for
our
employees and customers is
William E. Wells
paramount; last year, a revised
Health and Safety Program was
launched. Our goal is to achieve an exemplary safety record.
Construction began in June on Hydro’s $135 million – 40 MW
Granite Canal project, within the existing Bay d’Espoir system. As
well, Hydro contracted with Corner Brook Pulp & Paper and Abitibi
Consolidated Inc. at Grand Falls-Windsor to provide an additional 15
MW and 32 MW, respectively, to the Island grid. All three projects
will be on-stream in 2003.
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At Churchill Falls, remedial work was successfully undertaken on a
section of the mile-long west tailrace tunnel which is 45 feet wide
and 60 feet high. The tunnel had been dewatered and inspected in
2000 for the first time since it went into operation in the early 1970’s.
Construction continued throughout 2001 on the $47 million
upgrade of the two high voltage transmission lines servicing the
Avalon Peninsula with the completion of another $13 million
segment. Projects were also completed to improve the reliability of
the transmission line from Churchill Falls to Labrador East and the
lines from Bay d’Espoir to the Eastern Avalon.
In 2001, the Hydro Group published its first Environmental
Performance Report. This annual report will measure our performance
and ensure accountability as we maintain our commitment to the
environment and the success of our environmental management
system. All the generation facilities within the Hydro Group have
been registered ISO 14001 compliant since 2000. Our environmental
management system will be fully implemented throughout our
Transmission and Rural Operations Division by December 2002.
At the end of May, Hydro filed its first general rate application
since 1991 with the Public Utilities Board. Under legislative amendments effective in 1996, Hydro became a fully regulated utility and
this is the first hearing under the new legislation before the Public
Utilities Board. Hydro has not had a general rate increase since 1991,
and at that time, the Board recommended a price of $12.50/barrel
for No. 6 fuel to be incorporated in Hydro’s rates. Thirty percent of
the Island Interconnected System requirement is supplied by our
thermal generating station at Holyrood. Hydro is seeking a price
more reflective of current costs in its rates which would better enable
the Rate Stabilization Plan to work more effectively, as it has in the
past, in smoothing out rate impacts as a result of variabilities in the
price and consumption of No. 6 fuel. There are other significant rate
issues and cost allocations to be decided by the Board during this
hearing. The hearing began in September and is continuing into 2002.
U T I L I T Y
r e v i e w s
Newfoundland Power Inc.
For Newfoundland Power,
2001 was a year defined by
achievements. In addition to
maintaining competitive electrical
rates, Newfoundland Power
continued to focus on creating a
more customer-focused electrical company by responding to
customers’ expectations for
better, more convenient services.
In 2001, Newfoundland Power
achieved a customer satisfaction
rating of 90 per cent – a 27 per
Philip G. Hughes
cent improvement since 1996!
Our focus on listening to customers and delivering results has been part of the reasons for this
achievement. However, our employees’ dedication to provide customers with superior service has truly defined our Company’s success
in this area.
Throughout the year, Newfoundland Power continued its commitment to leveraging technology and employee training to provide
efficient customer service solutions. In 2001, we increased customers’
accessibility to our Company by providing more self-service options
than ever before over the Internet so customers can carry out
business when and where it’s convenient for them. Continual
improvements to our Customer Service Call Centre have also enabled
our employees to provide faster, more knowledgeable service to
customers in a one-stop shopping manner.
In 2001, Newfoundland Power was proud to receive a Canadian
Information Productivity Award (CIPA) of Excellence for Customer
Care and a CIPA premier Best of Category Award. These national
awards recognize Newfoundland Power as having the best customer
care solution in Canada. Newfoundland Power is the first
Newfoundland company to be presented with these prestigious
national awards.
Newfoundland Power’s system reliability improved in 2001 to
further contribute to customers’ satisfaction with our service. In
2000, we successfully reduced the number and length of outages
experienced by customers by 25 per cent and 39 per cent, respectively,
compared to 1999. Despite more than 600 centimeters of snow and
our most difficult winter on record, our Company’s service reliability
continued to improve over the past year with a further 19 per cent
reduction in the number of outages and a 37 per cent reduction in
the length of outages affecting customers.
Responding to customers’ expectations that Newfoundland Power
keep its operating costs down, our Company achieved a milestone in
its reduction of operating cost per customer. In 2001, Newfoundland
Power brought its operating cost per customer down to $238 – a 23
per cent reduction since 1992. We will continue on this path by focusing on operating efficiencies, leveraging technology and investing in
employee development and training.
In 2001, Newfoundland Power achieved its environmental objective
of ISO 14001 certification for generation facilities. Our Company’s
environmental management system focuses on continual improvement, prevention of pollution and meeting legal requirements. Our
employees’ commitment to ensure environmental compliance within
our daily operations and the level of individual responsibility taken
on by our employees in respect to environmental commitment have
been nothing short of praiseworthy.
In June 2001, Newfoundland Power employees were awarded the
Newfoundland and Labrador Provincial Environment Award for their
commitment to working with community groups and schools to
promote environmental awareness and protection. This is the third
environmental award presented to our employees in a 14-month
period.
In addition to our operational successes, Newfoundland Power
was successful in increasing earnings in 2001. Earnings for 2001 are
forecast to be $28 million compared to $26.5 million in 2000.
Earnings per share for 2001 are forecast to be $2.71 – a five per cent
increase over the previous year.
This increase in earnings is due to operating efficiencies, increased
pole rental revenues from our $40 million acquisition of 70,000 joint
use poles in our service territory that were previously owned by
Aliant Inc., higher energy sales and the favorable resolution of an
income tax issue.
Building on our successes in 2001 and previous years,
Newfoundland Power will continue to listen to customers and
respond to their expectations for safe, reliable, low-cost electrical
service while positioning our Company to respond to further challenges by increasing operating efficiencies, leveraging the talents of
our workforce and maximizing earnings potential.
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U T I L I T Y
r e v i e w s
Nova Scotia Power Inc.
With all of the recent changes
to the province’s energy industry,
the year 2001 couldn’t help but
be an exciting one for Nova Scotia
Power. We’ve been an active
participant in the provincial
development of a new energy
strategy, helping to ensure that
the new policy is in the interests
of Nova Scotians, our customers
and our shareholders. And to
realize our vision to be the
customer’s choice in energy and
David McD.Mann
services, we continue to aggresPresident and Chief Executive Officer
sively pursue long-term strategies
that offer the greatest benefits to our customers, employees and
shareholders.
2001 Highlights
• To launch our “green power” program, we purchased two 600 kW
wind turbines to be operational in 2002. In addition, we requested
up to 50 megawatts of wind power from independent power
producers for the provincial grid.
• We were an active participant in the provincial government’s
process for the development of a new energy strategy. Our
submission to the Nova Scotia Energy Task Force included
responses to a number of issues, such as the restructuring of
the electricity industry, environmental and climate change issues,
and the development of the oil and gas sector.
• We purchased and installed a microturbine at our Tufts Cove
Generating Station, enabling us to better evaluate the capabilities
of one of the new distributed generation technologies that are
becoming available to customers today as an option to purchasing
power from their traditional utility.
• Nova Scotia Power’s parent company, Emera, has had a busy year
– the company recently acquired Bangor Hydro-Electric, expanding Emera’s customer base by 25%. It also purchased an 8.4%
interest in a suite of Sable Offshore Energy Inc. assets.
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• A new energy exchange pilot program has been approved, giving
large industrial customers the option to reschedule portions of
their industrial processes for periods of up to four hours on days
of extreme peak demand, which will help lower demand at peak
times and help us manage fuel costs.
• We continue to help our customers realize energy savings with
two innovative options: “real time” pricing creates savings for
those larger customers with an ability to shift their consumption
to less expensive hours of the day; and electric thermal storage
units help our smaller customers achieve the same kind of savings,
while helping us utilize our plants more efficiently.
• We continued our community efforts through our Good Neighbor
family of programs. Highlights of 2001 include our Good
Neighbor Energy Fund, a partnership with the Salvation Army
that helps families with home heating costs, and our Good
Neighbor Employee Charitable Fund, which generates donations
to local charities through the generosity of our employees and
dollar for dollar matching program.
• Our reliability performance continues to improve; over the past
10 years, the number of power outages has decreased by 50%
and their duration has fallen by 30%.
• Our innovative and environmentally responsible vegetation
management programs continue to be at the forefront of the
North American utility sector.
U T I L I T Y
r e v i e w s
Ontario Power Generation
Ontario Power Generation
(OPG) is a major North
American electricity company
based in Ontario and focused
on producing and selling electricity to distribution companies
and large industrial customers.
We are ready to compete and
win in Ontario’s new electricity
market, which will open on May
1, 2002. We are aggressively
decontrolling parts of our
generation portfolio, steadily
Ron Osborne
improving asset performance,
testing our systems and
processes to ensure market readiness, and we have launched several
major environmental initiatives as part of our commitment to
become a sustainable development company.
Since its creation as a company in 1999, OPG made sustainable
development one of its fundamental and defining values. We are
investing in the latest clean air equipment at our fossil-fueled
stations, supporting the development of alternative fuel technologies such as fuel cells that will help reduce air emissions, and we
plan to spend $50 million to grow our green energy portfolio to 500
MW by 2005. As part of this program, we launched the largest wind
turbine in North America at our Pickering station in 2001.
Finally, OPG contributes significantly to Ontario’s communities by
supporting over 500 local community projects and initiatives in 2001.
We also make a major contribution to the Ontario economy. We
annually purchase about $1 billion in goods and services. We pay
more than $1 billion in employee salaries; and in 2000 we
contributed more than $1 billion dollars in taxes, dividends and other
payments to the province, which can be used to help pay down the
legacy debt left by our predecessor Ontario Hydro.
In 2001, we took significant steps towards meeting the decontrol
obligations in our operating license. In May, we finalized the leasing
of our former Bruce A and B nuclear facilities to Bruce Power. We
also continued the decontrol process, announced in 2000, of our
fossil-fueled Lakeview and Lennox stations, and we announced plans
to decontrol six additional generating facilities: our Thunder Bay and
Atikokan fossil-fueled stations and four hydroelectric stations on the
Mississagi River near Sault Ste. Marie. As of late 2001, the auctions
of these properties were under way.
Our flexible generation portfolio of nuclear, hydroelectric and
fossil-fueled plants is a key competitive advantage for the company.
Throughout 2001, OPG continued to improve the performance of
these assets through ongoing investments and upgrades to enhance
safety and efficiency, increase capacity and strengthen environmental performance. Improvements at our R.H. Saunders hydroelectric
station, for example, have added 120 MW to our capacity. These and
many other performance initiatives have increased the reliability of
our generation fleet. During the summer, OPG met unprecedented
electricity demand, when Ontario experienced a heat wave resulting
in four all-time demand records.
Progress was also made towards returning to service our 2,000 MW,
smog-free Pickering A nuclear station. The past year saw the project
reach several important milestones – including approval by the
Canadian Nuclear Safety Commission (CNSC) of Pickering A return
to service, and unanimous support for the project by the Pickering
City Council.
In preparation for market opening, OPG also successfully participated in a number of "real-life" market simulations, administered by
the Ontario’s Independent Market Operator, to test our technical
systems and capabilities and ensure their overall readiness in a
competitive environment.
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U T I L I T Y
r e v i e w s
Saint John Energy
Saint John Energy has invested
a great deal of time and
resources during the year 2001
preparing for restructuring of
the electrical industry in New
Brunswick.
To date, the Government of
New Brunswick has released
a “white paper” on energy,
describing the framework for a
provincial energy policy that will
guide New Brunswick over the
next decade.
Richard Burpee, P. Eng.
General Manager
Saint John Energy began the implementation phase of its
Enterprise Application Project during 2001. This project addresses the
need for greater information requirements in the areas of
management, customer, and geographical information systems.
In addition to this major technological upgrading, 2001 saw the
continuation of the commissioning of Saint John Energy’s
Supervisory Control and Data Acquisition System.
By improving these areas of our operation, we feel that we will
be able to deal more effectively with the restructuring of the
New Brunswick electrical marketplace, regardless of its ultimate
composition.
Saint John Energy is currently
an active participant in the “Market Design Committee,” created by
the province, as a stakeholder group to advise on a course of action
to fulfill the goals of the “white paper.”
To address the uncertainty of potential market restructuring,
Saint John Energy has concentrated its efforts on improving internal
business functions. In particular, the upgrading of systems that
will provide better information and more efficient control of our
distribution system.
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U T I L I T Y
r e v i e w s
SaskPower
In 2001, we continued to
build toward our vision – to excel
in competitive energy markets.
We launched an energy marketing subsidiary – NorthPoint
Energy Solutions Inc. – to functionally separate transmission
service from wholesale market
operations in support of the
standards of conduct initiatives
in our Open Access Transmission
Tariff (OATT). Implementing the
OATT in 2001 has enabled us to
John Wright
share the use of surplus capacity
on our transmission system and
gain reciprocal access to the unused transmission capacity of other
jurisdictions.
In addition to our ongoing investment in SaskPower’s generating
and T&D assets, work continued in 2001 on two major supply
initiatives. The 228-MW Cory Cogeneration Station is an environmentally progressive project from ATCO Power of Alberta and
SaskPower International, our development arm. SaskPower will
purchase the electricity to meet Saskatchewan’s future energy needs
and the thermal energy will be sold to the Cory mine site for its use.
We’re also repowering our Queen Elizabeth Power Station in
Saskatoon with six state-of-the-art Hitachi turbines, adding 150 MW
of capacity with combined-cycle technology.
We made some exciting progress this year in renewable energy
and alternative technologies. Saskatchewan winds will soon be
generating 16.3 MW of electricity through two wind power
initiatives. We also launched a solar demonstration project at
the Saskatchewan Science Centre – one of the province’s leading
family attractions, funded in part by SaskPower – that includes
interactive displays to educate visitors about electricity and
environmental issues.
By developing pilot projects that use alternative technologies such
as biomass and flare gas, we’re able to consider their potential in
the marketplace. In conjunction with industry partners, we’re also
investing in research on clean-coal technologies that may one day
change the way our industry uses this core fuel.
Out in the field, our sales team is working to improve our understanding of customers and their industries, from oil, mining and
manufacturing to pulp and paper. We’re developing relationships
with key decision-makers and determining how SaskPower can
add value through new products, services, partnerships and joint
ventures. We worked with Saskatchewan’s natural gas utility,
SaskEnergy, to launch an interactive energy information service for
Saskatchewan residents – consumers can go on-line to learn about
the electricity and natural gas usage in their homes.
We also continue to actively promote safety to our customers and
employees and we’re making solid progress toward our objective to
be a safety leader among Canadian utilities.
Diversity is a corporate priority at SaskPower and we’re involved in
a number of activities to help us develop a workforce that reflects
the customers we serve. We established a network for Aboriginal
employees to ensure that employees receive the support they need
to prosper in our workforce. Shared internal responsibility is one of
the key elements of our diversity strategy, and we’re supporting our
management team with the resources they need to communicate
more effectively in the workplace and develop diversity initiatives in
their areas.
This year was a fiscally challenging one, due in large part to the
impact of drought conditions on our hydro generation, combined
with the increased volume of natural gas we needed to meet our
load requirements. Challenges offer important learning opportunities
and I congratulate our employees on the excellent work they have
done to position SaskPower for the future.
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29
U T I L I T Y
r e v i e w s
TransAlta
TransAlta is Canada’s largest
non-regulated electric generation
and marketing company, with
more than $7 billion in assets
and 8,000 megawatts of capacity.
As one of North America’s lowest
cost operators, our growth is
focused on developing coal and
gas-fired generation in Canada,
the U.S. and Mexico.
We have transformed from an
integrated, regulated Alberta–
based coal and hydro utility
Steve Snyder
to become Canada’s largest
non-regulated power generator
with operations in Australia, Canada, the U.S. and Mexico. Our strategy is to build on our strengths and take advantage of the new
power economy where non-regulated assets provide higher growth
and returns.
Our business strategy puts us into a competitive generation services
marketplace that provides higher growth potential than possible
under regulation. Our competitive edge is our track record as a
low-cost operator of generation assets, our success as a developer of
gas-fired independent power projects and the intelligent use of our
trading capabilities to identify growth opportunities and maximize
our returns.
We have the focus, the financial strength and the people to succeed
and we’ll do it responsibly while maintaining our dividend. In 2001,
for the third year in a row, our world-class reputation for sustainable
development was recognized by the Dow Jones Sustainability Group
Index, identifying TransAlta as a leading electric company in its group
of global equity indexes.
More information about TransAlta can be found at
www.transalta.com.
Does it ever stop?
The challenges facing electric utilities never seem to stop. In this climate of change, solid
partnerships with suppliers are the key to successfully meeting today's challenges and making
the most of new opportunities.
Thomas & Betts is such a partner. Our job doesn't begin and end with the products we supply.
Our ability to provide integrated solutions that meet the needs of today and tomorrow is as
much the result of quality relationships as quality products.
Change never stops. And, the more things change, the more you can count on
30
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U T I L I T Y
r e v i e w s
Toronto Hydro Corporation
Toronto Hydro Corporation
operates three subsidiaries that
carry on the businesses of electricity distribution, retail energy
sales and services, and telecommunications. The City of Toronto,
our shareholder, wholly owns
Toronto Hydro Corporation.
Toronto Hydro-Electric System
Limited operates the largest
municipal distribution utility in
Canada and delivers electricity
to a broadly diversified,
Courtney Pratt
economically robust customer
base of 660,470 residential and
commercial consumers. We distribute 20% of the electricity in
Ontario, have a system peak load of 4,803 MW and revenues of
$1.9 billion. Over the past year, we have continued our successful
strategy of transforming our business processes to create seamless
customer service at a competitive cost while increasing workplace
safety and distribution system reliability. Also, in preparation for
market opening, we have completed an extensive end-to-end test
of our information systems involving retailers and distribution
companies, and are offering technical readiness assistance to other
utilities to ensure a successful market opening in 2002.
– that we use for our own communications purposes. We have
leveraged the built-in, surplus capacity into a dynamic fibre leasing
company providing data management services to our customers.
Toronto Hydro Corporation is confident that competition will
bring positive changes in the energy market for Ontario consumers.
We have been a strong advocate of market restructuring for many
years and have played a leading role in the design of Ontario’s
wholesale and retail electricity markets. While there is still much to
do, Toronto Hydro is an industry leader and we are committed to
creating an energy marketplace that works for everyone.
Toronto Hydro Energy Services Inc. is our competitive retail affiliate.
It is a fully integrated energy services company licensed to serve the
energy needs of customers across Ontario. Toronto Hydro Energy
Services Inc. is the first electricity retail affiliate in Ontario to enter
the natural gas market. This service offering is in response to
customer demands for simplified energy solutions and competitive
products and services. Toronto Hydro Energy Services Inc. also owns
and operates the water heater rental business which it acquired from
Toronto Hydro-Electric System Limited under the new market rules,
and we are committed to bringing clean and green energy options
to our customers.
Toronto Hydro Telecom Inc. is dedicated to maximizing the value
of our fibre optic network and bringing other telecommunications
services to our customers. We have an extensive fibre optic system
crisscrossing the City of Toronto – more than 700 kilometres in length
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31
U T I L I T Y
r e v i e w s
Winnipeg Hydro
Warming homes, lighting
streets, powering commercial
properties, Winnipeg Hydro has
been delivering high quality,
reliable and safe electricity to
customers for over 90 years. As
a department of the City of
Winnipeg, we generate electricity at our two hydroelectric
plants on the Winnipeg River,
transmit that power 130 kilometers, and distribute it to our
central Winnipeg service area
customers.
Ian McKay
Director
Taking care of our customers
has always been a top priority. In the past year we have strived to
make the range of services available to our customers more convenient
and accessible. An electronic bill presentment and payment system
was developed by Winnipeg Hydro and is being used by all City of
Winnipeg departments.
This automated system allows the city’s utility bills to be processed
and paid electronically via the Intranet. In addition, Winnipeg Hydro
customers can now receive an electronic version of their bills via the
Internet on epost™. Epost is a web-based service that delivers the
mail online for Canada Post, allowing customers to receive, pay and
manage mail electronically. Electronic mail delivery and payment is
environmentally friendly and will also save costs through reduced
use of ink, paper, envelopes and postage. Customers also continue to
enjoy the convenience of “one-stop-shop” service, with the expanded
operation of the point-of-payment system. The system enables us to
accept a variety of customer payments including taxes, bus tickets,
various utility payments and parking tickets, in addition to Winnipeg
Hydro payments.
Through information and promotional activities Winnipeg Hydro
customers are encouraged to think about and practice energy
conservation. The efficient use of energy is consistent with the City
of Winnipeg’s stated environmental principles that are aimed at
protecting the environment through environmentally responsible
decision making.
Our new environmental management policy, introduced on
January 17, 2000, expanded on our mission statement and is helping
us achieve our environmental objectives. Responsible stewardship of
our natural environment is a guiding principle in our business
philosophy. These activities include improving efficiency in the use of
resources, minimizing waste, improving air and water quality and
management of land resources. As we proceed to fully implement
our environmental management system, projects are being imple-
32
2 0 0 2
mented to lessen our impact on the environment. Installation of a
new powerhouse sewage treatment plant has begun and oil spill
containment structures designed for our powerhouses are being
constructed. Our first publicly available report on environmental
performance was released in 2001. During the year, our compliance
with the CEA’s Environmental Commitment and Responsibility
program was confirmed by an independent verification team.
A key factor in Winnipeg Hydro’s high reliability rating is our
commitment to major rehabilitation and upgrading work at various
facilities throughout the system. Completion of the installation of
fiber/radio communications linking our power plants has improved
communications within our organization. Work continues on the
installation of fibre optic cables between all substations. Through
careful design and planning, we enhanced the capacity, reliability
and flexibility of our generation, transmission and distribution,
securing a safe and reliable supply of power to substations and, in
turn, to our customers. Our performance, in terms of system reliability,
continues to rank among power supply leaders in Canada. Annually,
only one out of four customers experience an outage, compared
to the national average of between two and three outages per
customer per year.
With the implementation of uniform electricity rates, consumers
in Winnipeg and throughout Manitoba enjoy the lowest electric
rates in Canada, if not North America. Winnipeg Hydro continues to
play a significant role in Manitoba by delivering environmentally
friendly, renewable energy from hydroelectric generation. The utility
also supports Winnipeg financially by providing the city with a steady
source of revenue each year.
“To lead Winnipeg Hydro onward and upward” is the mandate of
our new Director Ian McKay, who joined us in July of 2001. Ian brings
with him a wealth of experience in the operation of electric utilities.
He has a great deal of knowledge about Manitoba’s electrical industry
and is clearly focused on the future. Winnipeg Hydro’s results today
are directly tied to past decisions and investments. With further
investments in new and refurbished assets and continued improvements in all phases of our operations, there is every expectation
Winnipeg Hydro’s future will continue to shine brightly.
c o r p o r a t e
p a r t n e r s
CEA Corporate Partners Assist Canadian
Utilities in Maintaining Global Competitiveness
H
ans Konow set the stage well
in his lead article on the need
for a very significant increase in
investment in Canada’s electricity
industry over the next 20 years.
This view is consistent with the
clear recognition in the United
States that more investment in
both new and existing infrastructure is a national priority.
There is also the awareness
that meeting the challenge is not
achieved by simply adding more
Oskar Sigvaldason
supply facilities and upgrading
existing plants. It is recognized that the electricity business is a commoditized business within an integrated North American marketplace. The
objective is not only to supply low-cost reliable electricity, but to meet
customer expectations for better quality as well as an increasing array
of environmental and socio-economic requirements.
Canada’s electric utilities are well positioned to meet the competitive
challenge within the North American market. They have taken advantage of low-cost energy supplies to enhance their market position.
However, to ensure and enhance competitiveness, they have also been
strong advocates for a competitive fiscal regime for attracting investment and for a regulatory framework which supports competition.
So, what does this mean for the industry’s Corporate Partners?
The traditional Partners have been equipment manufacturers and
consulting engineers – the traditional suppliers of goods and services for
electricity utility organizations. Even despite reduced investment by
electric utilities in Canada through the 1990s, the Partners have
continued to be strong and active, and are ready to meet the growing
infrastructure needs of the next two decades.
As utility companies have changed over the past several years,
Corporate Partners have also changed. It is clear that the dominant
needs for goods and services is no longer limited to more generating
and transmission equipment and consulting engineering services.
Indeed, as utility leaders face the challenge of maintaining leadership in
an increasingly competitive market, their needs also include information technologies, management consulting, financial services, policy
analysis, along with equipment that produces greater effectiveness in
terms of operating efficiency, improved power quality, remote operations control and environmental efficiency.
In response to this, the former Manufacturers and Consultants
Committee has been expanded to include all suppliers of goods and
services. In recognition of this broader mandate, its name has been
changed to Corporate Partners Committee.
A fundamental objective of this Committee is to assist Canadian
utilities in maintaining global competitiveness, especially within the
North American electricity market. This challenge also presents
Canadian suppliers of goods and services with the opportunity of also
being globally competitive.
There are several developments of particular interest to Corporate
Partners. With the many organizational and institutional changes
impacting on the industry, there is a need for creating newer modified
utility companies with changed management arrangements and
radically different corporate cultures. This creates opportunities for
assisting in implementing changed cultures, including different
management structures and personnel development.
There are changes in certain utility companies towards adopting the
"enterprise model." This includes dis-aggregation of traditional
fully-aggregated utilities into separate corporate entities – owners,
shareholders/investors, managers, administrators, operators, marketers,
suppliers, etc. It is noteworthy that certain traditional suppliers of goods
and services are moving into these evolving corporate roles, including
utility management operations and administration. In some cases, they
are even taking on ownership roles.
These changes can lead to improved utility performance. With
competitive contracts, containing appropriate incentive provisions, a
contracted organization is strongly motivated to delivering superior
performance. This includes not only reduced costs, but also more
reliable supply, improved quality of service, greater client satisfaction,
better returns on investment, and improved performance relative to
various environmental indicators.
To achieve increasing standards of performance, there continue to be
encouraging developments in computerized methods and information
technologies, system dispatch models, and maintenance and equipment
replacement scheduling systems.
It goes without saying that each new situation creates its own unique
new set of opportunities. Canada’ electrical utility companies have
continued to rely on their traditional suppliers of goods and services for
installing additional generation, transmission and distribution facilities
and for upgrading existing facilities.
However, as the industry has changed in the past decade, utility
companies have changed; through restructuring, through privatization
and by transforming their corporate organizations and cultures from
monopoly suppliers of an essential service to competitive players in an
open market for a commoditized service.
Likewise, the suppliers of goods and services have also transformed.
There are many new organizations that are of central importance to the
industry. Also, the types of goods and services being provided has
certainly changed.
It continues to be an exciting time for the electricity industry. The
Corporate Partners are enthusiastic about the challenge and continue
to play a vital role as full partners in ensuring the Canadian
electric utility industry is dynamic, progressive and competitive in the
North American, as well as the global, marketplace.
Dr. Oskar Sigvaldason
Chair, CEA Corporate Partners Committee
President, Acres International Limited
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33
c e a
n e w s
CEA Appointment Announcements
Stephen G. Snyder, Chair
Stephen G. Snyder, President and Chief
Executive Officer of TransAlta, and
Director of the Corporation, has been
appointed Chair of CEA’s Board
of Directors. Mr. Snyder began his
one-year term as Chair of CEA in
January 2002.
Prior to joining TransAlta, Mr. Snyder
had a successful career with Noma
Industries Limited and General Electric Corporation in Canada and
Belgium.
Between 1978 and 1992, Mr. Snyder held a variety of key positions
with General Electric Corporation, including Managing Director,
Eurolec plc in Brussels (1991-92), President and Chief Executive
Officer of Camco Inc. (1989-91), Vice-President and General Manager,
GE Lighting Canada (1986-89), and a series of increasingly responsible
positions in the marketing division at Camco Inc.
Mr. Snyder has a Bachelor of Science degree in chemical
engineering from Queen’s University and a master’s degree in
business administration from the University of Western Ontario.
Mr. Snyder is a director of Canadian Hunter Exploration and
Canadian Imperial Bank of Commerce, a member of the World
Business Council for Sustainable Development, the Vice Chair of the
Conference Board of Canada and a Trustee for the Conference Board
(US). He is also a member of the Business Council on National Issues,
the World Presidents’ Organization and the Alberta Economic
Development Council. Mr. Snyder serves as the Chair of the United
Way of Calgary and area, and is the former Chair of the Calgary
Zoological Society’s "Destination African" capital campaign.
Michael Costello, Co-Vice-Chair
As of January 1, 2002, Michael Costello,
BC Hydro President and Chief Operating Officer and member of the BC
Hydro Board of Directors began his
term as CEA Co-Vice-Chair.
Mr. Costello joined BC Hydro in
February 1996 as President and Chief
Executive Officer. Prior to his position
at BC Hydro, Mr. Costello was Assistant
Deputy Minister of the Provincial Treasury until 1991 when he was
appointed Deputy Minister of Finance.
34
2 0 0 2
David M. Mann, Co-Vice-Chair
Along with Michael Costello, David
Mann, President and Chief Executive
Officer of Emera Inc. and Nova Scotia
Power, will act as Co-Vice-Chair of the
Association.
Prior to his position at Emera Inc.,
Mr. Mann was Managing Partner at
the law firm Cox Hanson O’Reilly
Matheson in Halifax, Nova Scotia.
Aspects of Power, by Acres
Acres is a key contributor to electricity generation
and distribution projects in some 100 countries around
the world. For 75 years we have played a major role
in hydropower and water management megaprojects;
we inspect, renovate, expand and rebuild all types
of generating plants and systems in North and South
America and in Africa and Asia; we develop alternative
power sources in remote areas and third world countries.
Although we frequently work in partnership with others,
our depth of resources enables us to carry out substantial
projects on a full-scale basis.
Three current projects demonstrate the special skills
which Acres brings to this vitally important industrial
sector. They also suggest answers to some of the immediate
concerns of facility owners and operators in North America.
For every challenge, a well-thought-out and well-executed answer
New coal-burning plant in Southern Alberta –
strategic use of resources
To meet the growing load growth in Alberta, ENMAX and
Fording Coal are building a new thermal plant situated near
Brooks 180 km SE of Calgary. It will make use of an extensive
deposit of low-sulphur coal, and will employ supercritical technology to reduce emissions to the minimum. Three companies
have formed an Acres-led joint venture to design and manage
the procurement for the Brooks Power Project.
Key technologies will be provided by Parsons Engineering
and Colt Engineering will also participate in the project
which will be managed from Acres Calgary office.
New start for decommissioned units –
the renaissance of nuclear power
Bruce Nuclear Generating Station, on the shore of Lake Huron
in Ontario, has new owners, and a new lease on life. A restart
program is underway for two 750MW CANDU units in the
Bruce A station, which has been laid up since 1999. Engineering,
procurement and construction of a large number of individual
modifications is the responsibility of a joint venture between
Acres International, Sargent and Lundy, and E.S. Fox of Niagara
Falls. Following seven months of preparatory work the restart
was formally announced in April 2001; the two units are expected to be back on line by the summer of 2003.
Vista DSS at Bonneville Power Administration–
computer-based management of water resources
Acres Productive Technologies (APT) is currently installing
their widely-used Vista Decision Support System at Bonneville
Power Administration, which administers the Columbia River
Federal Power System in the Pacific Northwest. The Vista
application will cover 39 Federal hydroelectric sites, plus 32
independent sites which use the same watershed. “Columbia
Vista” raises the quality of information available to water
managers, power operations staff, and power marketers, creating opportunities for significant improvements in efficiency
and profitability. It also enables hypothetical system configurations to be built as an aid to strategy development.
If you would like to find out more about Acres International, please contact
Graham Williams at 1235 North Service Road West, Oakville, Ontario, Canada.
Telephone (905) 469-3400, Facsimile (905) 468-3404, E-mail [email protected]
You can also learn more about Acres International by visiting our website at www.acres.com
Engineering for a better world

Electricity Future Electricity Future

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