City looks to shell out for its own multi-million dollar substation
By Timothy Schafer
The city will be pulling on its reserves to help fund a new $5.6-million substation construction in order to reduce its power purchasing costs.
City council granted the early budget approval of $500,000, to be funded from capital reserves (gas tax reserve), for city staff to proceed with the design of the estimated $5.6-million electrical substation.
The project cost was significant and Coun. Julia Butler was hesitant to approve the funding of it, since the cost of a $50,000 feasibility study was not included in the project estimate.
“I think on a decision on such a large amount of money, that information needs to be included here for council’s debate and discussion … and it needs to be made available to the public so they can see why we’ve made this decision,” she said.
She wanted the decision tabled. However, council ignored Butler’s concern and instead voted on approval for the project to go ahead.
Grand Forks Electrical (GFE) is currently a wholesale distribution customer of FortisBC. But if GFE owned its own substation it would become a wholesale transmission customer of FortisBC, meaning its power purchasing rates would drop — power purchased at transmission rates is lower than at distribution rates.
According to a city staff report to council, the annual power purchase expense for Grand Forks is around $3 million per year.
“A cost reduction of even a few percent can turn into substantial savings,” read a city staff report to council.
Although GFE would still purchase just as much energy as a transmission customer as it did as a distribution customer, a restructured purchasing rate would mean the GFE would be paying 86 per cent as a transmission customer compared to the distribution rate.
In the 2016 capital plan city council approved $50,000 for a feasibility study to look at becoming a Fortis transmission customer. The study found owning a substation has attendant capital and operating costs.
“Fortunately, Nelson Hydro has experience with building and operating substations comparable to what would be needed in Grand Forks,” the study found.
Currently, the Nelson Hydro Rosemont Substation has been used as reference to compare to a future Grand Forks Substation.
The study also found that any additional capacity required to be put into a substation in the future was relatively low in cost since the basic footprint components remain relatively unchanged (fencing, buildings and concrete) while electrical capacity increases.
A station capacity of 15,000 kVA was determined to be sufficient to serve the load growth of Grand Forks for the next 30 to 40 years, the study found.
The high cost estimate for construction ($5.6 million) was based on the “Nelson experience” of building the Rosemont Substation which was placed in service in 2014.
In doing a cash flow analysis for the self-funding project, a city staff report indicated that the project had a “positive net present” value.
“(A)nd for a reference case of $5,500,000 capital cost at 3.5 per cent financing with a rate differential of 86.2 per cent and a discount rate of three per cent that the project will improve the electric utility operating performance by an average of $242,477 per year over the first 30 years,” the report noted.
The station would likely need significant rebuild or replacement at about 50 years of age.