NSP cools to natural gas, burns more oil2/25/2013
The high cost of natural gas has Nova Scotia Power burning more oil at the Tufts Cove power plant in Dartmouth this winter.
Wayne O’Connor, executive vice-president of operations, said Friday the utility resumed using heavy fuel oil last month when it was the less expensive fuel.
“Natural gas still was the main fuel,” O’Connor said in an interview. “But we were able to introduce oil on certain days, for certain hours, to avoid those really, really high-priced natural gas events.”
Nova Scotia Power hasn’t burned heavy fuel oil, also called Bunker C, at Tufts Cove very much over the past few years.
Gas has been at rock-bottom prices up until the fall, when higher demand in New England, coupled with production problems from Nova Scotia’s offshore, starting driving up the cost.
O’Connor said the utility continues to juggle the fuel mix at the Dartmouth plant this month.
Nova Scotia Power’s fuel and purchased power costs were 42 per cent higher in January than expected, according to monthly report filed with the provincial regulator.
The utility spent $68.1 million on fuel and power purchases in January, according to a filing made public Friday by the provincial Utility and Review Board. The forecast, made in June, was $47.9 million.
Higher demand for electricity because of cold winter weather is one of the main reasons for the $20.2-million extra cost. The other is the higher price of natural gas.
Nova Scotia Power usually gets most of its gas under contract from the Sable Offshore Energy Project. But the gas field has been operating at 65 per cent capacity since a flow-line problem was discovered last fall.
The utility has been forced to rely on higher-price, short-term purchases until the problem is fully fixed in the spring.
Market prices have also been driven up because of further delays with the startup of Encana Inc.’s Deep Panuke project. That operation is now expected to begin production in midsummer.
O’Connor said Nova Scotia Power is also importing more electricity this winter to help meet demand.
“It’s a benefit to customers. It’s cheaper than generating it ourselves.”
That electricity, which is surplus power from New Brunswick, Quebec and New England, is also costing more these days because the price is tied to natural gas, he said.
Nova Scotia Power said its unpaid fuel bill last month, taking into account revenues and other adjustments, was $14.5 million. The utility had expected a $3.3-million shortfall.
O’Connor said it is too soon to say what, if any, impact January’s cost overrun would have on rates, since fuel costs vary each month.
A Halifax energy consultant said Nova Scotia Power’s decision to cut costs by burning more oil last month makes sense.
“They more than likely made the right economic decision,” said Todd McDonald, president of Energy Atlantica. “There were significant periods of time where it was cheaper to burn oil than natural gas.”
Other big natural gas buyers in the region were doing the same thing, he said.
McDonald said gas prices were “pretty crazy” on the Boston market in January, ranging from about $7 per million British thermal units to a high of $45 per mmBtu.
“That would be the most volatile winter I’ve ever seen in my 13 years of doing this.”
Higher demand in New England, coupled with supply problems in that region and Atlantic Canada, are to blame, he said.
McDonald said gas prices are starting to moderate and are expected to be in the vicinity of $7 per mmBtu through to the fall.
(The Chronicle Herald)