NEB ... Sea Breeze Juan de Fuca Cable
COMMENT: With this decision, the NEB has just made itself redundant.
Establishing that a project is "necessary" in its review of an application for a "Certificate of Public Convenience and Necessity" is one of the duties of the National Energy Board. This approval of the Sea Breeze Juan de Fuca CPCN, is granted because the Board, in the language of the NEB Act, "is satisfied that the line is and will be required by the present and future public convenience and necessity."
The NEB has made a farce of its regulatory duty.
Sea Breeze itself was the only shipper that expressed interest in using the project, for half the capacity of the transmission system. But Sea Breeze has no power to ship, in either direction, can't buy any in Canada and probably can't find any to buy in the US either, and has no customer on either side of the border.
BC Transmission Corp, BC Hydro and Bonneville Power Authority all took low key positions in the hearing. BPA didn't even bother to file as an intervenor. Yet these organizations are essential to the economic viability of the Juan de Fuca system.
I predict the system will never be built, because it doesn't have economic justification. Readers should note that my success with predictions is, um, limited. But the NEB says that construction "is slated" to start in November 2006.
It is common to attach conditions with a CPCN. In this case, we look at Condition 9 - Compliance Verification, which says:
Sea Breeze shall file with the Board at least one hundred and thirty (130) days prior to the planned start of construction, a table listing all commitments, undertakings and conditions, and the deadlines associated with each.
But this language affords no comfort that the NEB wants to be sure the transmission line won't proceed without at least some real electricity committed to its wires. Information merely needs to be filed. It doesn't say that the information needs to establish any evidence that the line will be used.
The NEB's role in "regulating" this project was merely bureaucratic clutter, without purpose, and certainly without any meaningful value to the public interest.
Note: Those who want to read more extensively into this question, should have a look at Chapter 2 - Need for the Facilities, in the Reasons for Decision. This section summarizes the arguments made by Sea Breeze, the response by Bonneville Power Authority (which in the humble opinion of this writer, completely undermines Sea Breeze's arguments), and then gives the View of the Board - which is copied in full at the end of this article.
7 September 2006
National Energy Board approves International Power Line
CALGARY - The National Energy Board (NEB) today approved Sea Breeze Converter Corporation's application to construct and operate a 150 kilovolt high voltage direct current international power line (IPL) between Vancouver Island and Washington State.
During the hearing, concern was expressed by area fishers that the buried marine cable could possibly become exposed and potentially interfere with fishing operations. As a condition of approval, Sea Breeze was directed to present a plan to the Board on how it would share information with the fishing industry should the cable become exposed and to share standard protocols for lost fishing gear recovery within the cable corridor.
Sea Breeze was further required to develop and file with the Board an operations and maintenance manual that included a public awareness program to keep the public apprised of its activities.
The IPL will extend about 48 kilometres southward from the Town of View Royal, British Columbia to a point on the international boundary in the Strait of Juan de Fuca and from there to a point near Port Angeles, Washington. Approximately 12 kilometres will be buried onshore and the remainder buried under the Strait of Juan de Fuca.
Sea Breeze also proposes to construct a converter station near an existing substation on Vancouver Island. Construction of the proposed IPL is slated to start in November 2006.
This is the first merchant IPL approved by the NEB. Typically, the builders of a merchant line assume the full cost of construction and the owner sells the use of the line to other companies which generate and own electricity and want to use the line to transmit the power.
The NEB is an independent federal agency that regulates several aspects of Canada's energy industry. Its purpose is to promote safety and security, environmental protection, and efficient energy infrastructure and markets in the Canadian public interest, within the mandate set by Parliament in the regulation of pipelines, energy development and trade.
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For a copy of the Board's EH-1-2006 Reasons for Decision: [PDF: 3082 KB]
Excerpt from the Reasons for Decision
Chapter 2 - Need for the Facilities
Views of the Board
As noted by Sea Breeze, this application concerns the first international merchant transmission line to come before the Board for certification. As a merchant line, its owners are at risk for any funds devoted towards its 10 EH-1-2006 development, construction and operation. Economic and financial risks associated with the Project cannot be passed along to utility customers but must be borne by investors.
In making its determination as to whether to issue a Certificate, the Act requires that the Board shall have regard to all considerations that appear to it to be relevant. In this new situation, the Board must ask itself whether an a priori determination of the need for the Project is a relevant consideration, given that if the market does not support the Project, it is unlikely to be built. In addition, if an a priori determination of need is relevant, is the test with respect to the demonstration of need for the Project the same in these circumstances as the test when the risks associated with a project can be passed along to utility customers? More specifically, should this Applicant be required to have contracts for the use of the Project it wishes to develop prior to regulatory approvals being issued?
In the Board’s view, an a priori determination of need is a relevant consideration. In coming to this view, the Board notes that not all costs associated with this Project are financial or economic ones to be borne by the investors in the Project. For example, construction of this Project is likely to result in some level of environmental impact and may impose inconveniences on other people. In order to determine whether the issuance of a Certificate is in the public interest, some assessment of the need for this Project should be undertaken so that it can be balanced against these other burdens.
However, the Board is not persuaded that signed contracts for the use of this Project are required in these particular circumstances. Since the financial risks associated with this Project’s development are borne by the investors, the Board is of the view that an assessment of the extent to which this Project is likely to address market need is sufficient in these circumstances to allow the Board to undertake its regulatory function. Therefore, the Board is of the view that Sea Breeze has demonstrated that the JdFC Project has the potential to respond to market need. In particular, the Board accepts Sea Breeze’s evidence with respect to the potential ability of the Project to support increased transmission transfer capacity across the Canada/U.S. border.
With respect to BPA’s comments, regardless of the reasons why or how congestion has occurred or the terminology used to express this, no party appears to contradict Sea Breeze’s assertion that there is congestion on the intertie in the Pacific Northwest. Though the IPL may not be able to be used to return the Canadian Entitlement, the Board is of the view that the IPL could nonetheless help ease the congestion by providing an additional transmission path between B.C. and the U.S.
the Board's EH-1-2006 Reasons for Decision: [PDF: 3082 KB]