Power rate hikes are necessary to replace aging infrastructure and add new capacity to meet growing demand and the elevated expectations of consumers.
That was the message presented February 13 to business leaders at the Yorkton Chamber of Commerce monthly luncheon by Mike Marsh, vice president, operations and COO of SaskPower.
In 2013, SaskPower set peak consumption records three times and projections indicate demand will increase by 30 per cent in the next 20 years and 50 per cent by 2050, Marsh said.
Meanwhile, three coal-fired generation plants are scheduled for retirement by 2018, which will result in a deficit of 900 Megawatts. Marsh pointed out these cannot be replaced with similar stations, which would be the cheapest option, because of environmental regulations meaning more costly projects will have to be undertaken.
By 2024 an additional 1,300 Megwatts will be required.
The utility estimates it will have to invest $1 billion per year for the next several years to bring the electrical system up to snuff and has applied for a rate increase of 5.5 per cent for this year and 5 per cent in each of 2015 and 2016.
This amounts to an average increase per month of $4 to $5 for urban residential customers, $7 to $8 for rural residential and $7 to $10 for farm.
It is not just about increasing capacity, however. Marsh said today’s customers are much more demanding and want the system to be reliable, environmentally sustainable and faster response times when outages do occur.
“People take their power seriously,” he said. “People aren’t happy when power’s not there.”
Also, with a growing resource economy, industrial customers are driving summer peak usage to almost the same levels as winter peaks.
Marsh explained to meet future needs, new coal (with carbon capture), gas, hydro, wind, solar and geothermal will all be in the mix.
One thing not currently on the table is nuclear energy. Marsh said from a technical standpoint it is something they would look at.
“If the nuclear industry could come up with a smaller reactor, it might be an option, but it’s a long ways down the road,” he said, acknowledging that it is not just a technical issue, but a political one.
It is not just on the generation and transmission side where money needs to be spent. Marsh noted a significant amount of their distribution network (power lines and poles) was installed in the 1950s and must be replaced. He said the company has already spent $26 million in the rural Yorkton area and $2 million in the city moving, replacing and upgrading power lines.
While rate increases are inevitable, Marsh said the utility is doing everything it can to keep them down. The company intends to save $2 billion over the next 10 years by streamlining processes and working more efficiently.
“We know you work hard for your money and we’re working hard to use it in the right way,” he said.
There are also things customers can do to keep their own consumption down, he said, citing an example of not using air conditioning and a clothes drier at the same time, which is counterproductive. There are many more tips on the company’s website.