sqwalk.com: Duke Point project to power Island

Duke Point project to power Island

Andrew A. Duffy and Judith Lavoie
Times Colonist
Thursday, November 04, 2004

It may have a new name, new price tag and lower electrical output, but the Vancouver Island Generation Project appears to have risen from the dead.

B.C. Hydro announced Wednesday that Duke Point Power Ltd., a wholly owned subsidiary of Macquarie Essential Assets, Pristine Power and a group of private investors, is the successful bidder in the call for proposals to provide Vancouver Island with a new source of electricity.

The Duke Point Project, a 252 megawatt, gas-fired power plant to be built at Duke Point in Nanaimo at a cost of $280 million, replaces the supposedly dead-and-buried VIGP -- a 265-megawatt plant Hydro intended to build on the same site at a cost of $370 million.

That project was rejected by the B.C. Utilities Commission as a too large and costly way to make up the Island's energy shortfall, prompting the call for tenders.

"[This] is the best way to provide our customers with the reliable capacity required to meet Vancouver Island's anticipated supply shortfall in 2007," said Bev Van Ruyven, Hydro's vice-president of distribution, noting the undersea cables that run from the mainland and provide the Island with 80 per cent of its power are to be decommissioned that year.

"This is a private company and a less expensive option ... it was the most cost-effective means of getting the minimum required [electricity]. It could just as easily have been a number of smaller projects."

Reaction to the news ranged from relief at Nanaimo city hall to disappointment from some who opposed the original VIGP, and from the community of Gold River, which had pinned its hopes on a proposal for a thermal generating plant in the community's old pulp mill.

Nanaimo Mayor Gary Korpan called approval of Duke Point Power's proposal great news. "It ensures a stable, secure electrical supply for Vancouver Island," he said. "We've had brownouts twice in the last two winters and three years ago we had rolling blackouts -- our economic development plans aren't worth the paper they're printed on if we don't have power."

The economic impact on Nanaimo will be significant, with 200 jobs created during construction, not to mention services sold to the construction crews. The plant itself will provide 15-20 local jobs when it's running, along with more than $900,000 a year in municipal taxes.

Arthur Caldicott, director of the GSX Concerned Citizens Coalition, which has advocated replacement of the undersea cables as the top option, wasn't as enthused.

"Clearly VIGP wasn't [dead] and we didn't really expect it to be dead," Caldicott said. "Of course we're disappointed. We have been critical of the gas-fired strategy for Vancouver Island from the start."

Hydro maintains it's more cost-effective to build on-Island generation than to replace the decaying underwater cables.

Hydro has already invested $65 million in the VIGP on property, permits and turbines, but will recoup $50 million of that in the deal with Pristine.

The announcement that Duke Point Power was the successful bidder prompted accusations from furious Gold River residents that the tender process was skewed in favour of the company, because of the investment Hydro had already made on the Duke Point site. One of the rejected bids came from Green Island Energy Ltd., which planned a thermal generating plant at the former Bowater pulp mill in Gold River.

The village has asked for intervenor status at the utilities commission hearing into the decision and has invited Hydro and provincial government representatives to a public meeting in Gold River Nov. 15. The aim is to convince the commission that Duke Point Power got preferential treatment, and that Green Island can produce clean power more cheaply.

Green Island planned to produce power by burning "biomass": wood, construction waste and pelleted garbage barged in from California. Gold River council had expected the enterprise to be given the go-ahead in addition to the Duke Point project and was shocked to hear the project had been rejected.

"The heartlands of Vancouver Island are in cardiac arrest right now," said Mayor David Lewis. "This is not just a bad decision for Gold River -- it's horrendous for everyone on the Island."

The community has struggled to stay alive since the pulp mill closed six years ago, throwing 400 people out of work. Tax revenue from the mill site plummeted to $300,000 from $1.8 million and the population dropped to 1,400 from 2,000.

Hope appeared last year in the form of Green Island, a company partially owned by pop singer Jewel, which bought the mill site and came up with plans for the thermal generating plant. That spawned interest by other industries that wanted to utilize plant by-products.

Without Green Island, Gold River will have to look at closing facilities such as its pool or rink, Lewis said. "This is devastating. We're all in shock," said the mayor, vowing, however, not to let the community die.

"It may seem far-fetched, but B.C. Hydro has a monopoly and maybe we should look at forming our own Vancouver Island public utility."

Green Island vice-president Sean Ebnet said the company has not yet decided whether to take part in another province-wide B.C. Hydro call for proposals next May. "Right now we don't know whether we will participate in future calls or put up a for sale sign," he said. "We really geared everything to this proposal and we'd invested quite a bit. We were ready to start construction in 2005."

It's estimated Green Island has invested about $20 million in the site.

There was no official word Wednesday on how the gas-fired power plant at Duke Point would be fuelled, but Hydro says it's waiting to hear what happens during B.C. Utilities Commission hearings into Terasen Gas's plan to increase gas supply to the Island.

Van Ruyven says the Terasen project appears to be cheaper than Hydro's controversial $340-million Georgia Strait Crossing (GSX) pipeline.

"They are currently in the regulatory approval process but until such time as we have certainty, we have to keep GSX in the background," she said. "It wouldn't be prudent for us to approve a higher-cost project like that."

Hydro expects the commission's decision by the end of November, the same time the utility intends to file the outcome of the call-for-tender process with the commission.

The commission has said it would expedite its review of the Duke Point plan, meaning the go-ahead or start-over order could come in March.

"We expect mobilization in the spring," said Jeffry Myers, president of Pristine Power, though he said construction won't begin until next fall, with the facility to be operational by May 2007. "It's enough time, but we need to have the bulk of the construction done by late 2006 ... we have built plants of this size in 18 months."

Posted by Arthur Caldicott on 04 Nov 2004