The Atlantic provinces have struggled for years to develop a regional electric power relationship that could serve the interests of the four provinces. Their efforts have been a record of frustration and failure.
The reason is simple: No province and no provincial utility wants to cede even the slightest bit of ownership and authority to a regional entity. They dislike the concept of a regional energy market that might allow outside suppliers to transform their traditional, provincial markets.
Attempts to copy the U.S. open-power policy market have essentially gone nowhere. The result is four small, separate provincial markets, where utilities look to the New England market as a place to expand.
Even that concept presents problems for development because New England utilities, except those in Vermont, no longer purchase power; and the market there emphasizes the kind of short-term power purchases that offer more uncertainty than Canadian suppliers are likely to find attractive.
In addition, power flowing from, say, the Lower Churchill project in Labrador could be subject to four separate transmission charges before it could be delivered to a New England customer. The end-use price could include wires charges in Newfoundland and Labrador, Nova Scotia, New Brunswick and New England. This rate stacking is called “pancaking.”
The challenge thus remains to find a way to improve the regional electricity outlook.
Rather than an ambitious attempt to create a U.S.-style market, with suppliers competing on price, it might be advisable to take a step back to the New England approach that preceded the regional market.
At that time, New England had a power pool with a central operator whose principal jobs were to ensure reliability and to enable utilities to supply their customers at the lowest possible cost.
An Atlantic power pool could do the same thing. Each utility would continue to own and control its generators. Each would continue to own and be paid for its transmission lines.
New England eventually found a way to eliminate pancaking, which had previously meant that power flowing from Connecticut to Maine had to pay four separate transmission charges.
A single transmission tariff was created for the region, making the power pool the sole customer of each of the utility transmission owners. Each was guaranteed it would be paid its costs, including a profit for the investor-owned utilities. Their total costs were combined, producing a single rate.
This single rate, higher for some utilities and lower for others, was phased in over several years. It is called a “postage stamp” rate, because like a stamp, users pay the same charge no matter the distance between supplier and customer.
As for power supply, the power pool operator would look at the cost of fuel for each generator connected to the system and use the least expensive mix to meet the regional requirement for electricity. In any given hour, some utilities could find themselves buying power produced elsewhere or selling to others. The operator settled accounts.
This system encouraged the replacement of old, inefficient generation by new, lower-cost resources. Customers benefited and suppliers could renew their power supply, knowing that efficient resources would be dispatched and produce income.
The key characteristic of this system was that each utility remained under its traditional control and could operate its generation, transmission and distribution much as it always had.
There was one other major plus. The regional system became more reliable because the power pool operator could require that any connected resource have sufficient transmission capacity to reach any part of the region and that there were sufficient reserves. In a pinch, it could bring units into service to meet immediate needs.
Previously, reliability was the responsibility of each utility. The power pool made reserve sharing a reality.
In Atlantic Canada, such a system could help each province and utility improve its situation without ceding its traditional control over the supply and distribution of electricity. Regulation in each province could remain unchanged, though provincial authorities could ensure that participation in the power pool was neutral and beneficial.
Power pool decisions could be made only when there was unanimity.
An Atlantic power pool could facilitate the use of Lower Churchill power from Labrador throughout the region. It could help with the process of replacing outmoded generating units in Newfoundland and Nova Scotia. It could enable the increased use of renewable resources that might otherwise impose too much risk on any single utility.
Significantly, it could avoid the need to create a regional market with all its complexity and potential cost. Deals would continue to be arm’s-length arrangements between utilities and could be longer term than markets usually allow. Customers would benefit because the grid would carry the lowest cost mix at any time. Power supply would be priced based on the cost of fuel rather than the amount asked by the supplier.
Most important, an Atlantic power pool could provide customers with greater reliability at a reasonable cost.
Gordon L. Weil is the author of AIMS publications on regional electric matters. He is a former chair of the U.S. national organization of state energy agencies and Maine Public Advocate. He chaired the negotiations for a single New England transmission tariff.