Miners support hydro rates as long as supply reliable

Ontario mining companies are bracing themselves for hydro rate increases that could increase the cost of supplying power to their operations next year by as much as 8.6%. But after suffering an unusually high number of power interruptions last winter, officials at Falconbridge Ltd. and Inco (TSE) say they can live with the increases as long as Hydro can guarantee them a reliable power supply.

As the province’s biggest hydro user, Falconbridge is particularly worried about reliable supply. It lost over 100 hours of production at its Kidd Creek and Sudbury operations due to power interruptions last December.

Power shortages that often lasted a full shift made December the worst month Falconbridge staff have ever experienced, said spokesman Richard Laine. Although employees were not sent home during the interruptions, he hinted that Falconbridge may change its policy if the company is faced with similar difficulties in the future.

Unlike Inco, Falconbridge does not generate any of its own power and an interruptible power clause in Falconbridge’s hydro contracts allowed Ontario Hydro to reduce the company’s power supply to minimum levels during a particularly cold Christmas season. Other big hydro users like Denison Mines (TSE) and Rio Algom (TSE) are also vulnerable to power shortages.

“The absolute availability of electricity is at least as critical if not more critical than problems posed by the cost increases,” said Laine. “If they (the rate increases) help to provide us with an adequate and reliable source of energy, it will be worthwhile.

The rate increases are designed to cover the cost of starting up two units at the $12.5-billion Darlington nuclear power station and to upgrade environmental standards at aging hydroelectric stations around the province.

The rate hikes will add about $4.5 million to Inco’s $50-million- a-year hydro bill. Laine declined to say how much Falconbridge will be affected.

In addition to the rate increases, Hydro said it wants to spend $61 billion over the next quarter of a century on a number of new generating facilities including 10 nuclear units at two plant sites.

Ontario Hydro is also planning to spend $3 billion over the next 10 years to promote energy conservation.

According to Dane MacCarthy, Ontario Hydro’s vice-president of energy management, the 25-year plan covers a range of activities including more energy efficient lighting.

Also to be considered is a more favorable discount rate for companies that include the interruptible power clause in their hydro contracts.

Badly needed, according to the province’s largest power users, the new measures could be stalled by an environmental assessment review, for which hearings get under way this September.

“Because of hearings, it could be up to four years before Hydro can put a shovel in the ground,” MacCarthy told The Northern Miner.

However, the new measures were described recently as “too little too late,” by Thornton Lounsbury, president of the Association of Major Power Consumers in Ontario (AMPCO), a body set up to represent 65 of Ontario Hydro’s largest customers.

Lounsbury said Ontario’s demand projections rely too heavily on energy conservation and that the new Darlington nuclear power station, scheduled to start up next year, can only provide sufficient power to cope with growing demand until the mid-1990s.

Inco, Hydro’s second largest customer, is spending $500 million as part of a sulphur abatement program that will require more generating power for a new oxygen plant. According to John Le May, Inco’s manager of maintenance and utilities, initiatives already taken by the company leave little room for more improvement in energy efficiency.

“We are all for conservation, but we would like to see work started on another generating plant,” added Lounsbury, who will spend the next six months preparing to make representations before an environmental assessment of Hydro’s 25-year plan.

At Falconbridge, meanwhile, the company is planning to protect itself against future power shortages by signing a firm power contract. “It will cost more on a kilowatt per hour basis but it should reduce the risk of power cuts,” said Laine.