No formal talks for 'energy transactions' with Nova Scotia, says Nalcor

Nalcor Energy says it has not yet engaged in formal discussions with Emera about moving energy between Newfoundland and Labrador and Nova Scotia, but says all options are being considered as construction on the Maritime Link and the Muskrat Falls project continues.

"As project partners we have discussed potential ways to facilitate the movement of electricity between jurisdictions that would be of mutual benefit," a Nalcor spokesperson wrote in a statement to CBC News.

Connecting Nfld. to North American grid

History was made May 7 when the first of two subsea high-voltage electricity cables was pulled ashore at Point Aconi, N.S., marking a milestone in efforts to connect the power grids in the two provinces, and thereby connecting the island of Newfoundland with the North American power grid for the first time.

The $1.7-billion Maritime Link across the Cabot Strait is being built by Nova Scotia-based Emera, and is scheduled to be completed by the end of this year.

It's being built to carry electricity generated at the 824-megawatt hydroelectric project at Muskrat Falls in Labrador to Nova Scotia, but some big questions remain unanswered.

Muskrat Falls is behind schedule and is not expected to reach full generation until sometime in 2020, according to a Nalcor official. This meansthe Maritime Link, with its capacity to transmit 500 megawatts, opens the door to other power distribution opportunities in the interim.

The president and CEO of Emera Newfoundland and Labrador, Rick Janega, more than hinted at that this week in his comments to the media.

"We're quite confident as soon as the Maritime Link is in service there will be energy transactions between Nova Scotia Power and Newfoundland Hydro. Both utilities have already identified opportunities to save money and exchange energy between the two provinces," Janega said.

Importing electricity from the Maritimes?

So what are those energy transactions? How will they save money?

CBC asked Nalcor, Newfoundland and Labrador's Crown-owned energy corporation, for an explanation, and the costly Holyrood thermal generating station is usually part of the equation.

In a statement, Nalcor said it will continue to assess "potential opportunities and options for our province's surplus power once the Maritime Link, as well as transmission assets currently under construction, are in service."

These options include importing electricity from Nova Scotia Power, a subsidiary of Emera, or some other utility in the Maritimes, but only if it makes financial sense and can be purchased cheaper than power generated at Holyrood, which burns roughly 18,000 barrels of oil a day at peak production.

Nalcor CEO Stan Marshall alluded to this at the corporation's annual meeting in March.

"If we can buy power and bring it into the island cheaper than Holyrood, we're going to do it," Marshall told reporters at the time.

And no one is ruling out the possibility that excess electricity from Newfoundland and Labrador could be exported using the Maritime Link, with Nalcorofficials saying they will make decisions based on the best interests of ratepayers.

It's also possible that power from the iconic Upper Churchill hydroelectric project in Labrador will begin flowing into the island for the first time in mid-2018, when the new Labrador-Island transmission link in completed.

Most of the power from the Upper Churchill is sold at reduced rates under contract to Hydro-Quebec, but Nalcor could more like will, if you study the numbersuse some surplus power that is currently sold on the North American spot market to dramatically reduce fuel costs at Holyrood.

Marshall said in March that Nalcor earns about two cents per kilowatt hour on the spot market, while power generation at Holyrood costs roughly 12 cents.

He said gross savings could amount to $160 million annually.

"It's a happy circumstance," Marshall said at the time.

Significant changes coming

Either way, it's a certainty that the next eight to 18 months will bring significant changes to the power distribution system in Newfoundland and Labrador.

The 1,100-kilometre Labrador-Island Link is about three-quarters complete, and the switch could be flipped on the Maritime Link within seven months.

A new 230-kilovolt transmission line from the 600-megawatt hydroelectric generating station at Bay d'Espoir to the western Avalon Peninsula will also be completed by year's end, at a price tag of nearly $300 million.

It will provide additional reliability and capacity to the Avalon Peninsula, where most of the province's population, and therefore electricity demand, is concentrated.

All this, of course, has ratepayers on edge.

Marshall has predicted that electricity rates could double once the province starts paying for the nearly $11.4 billion in construction and interest costs to build Muskrat Falls.

He has repeatedly said he's exploring every possible way to mitigate those increases.