REGINA — The head of SaskPower says the corporation expects revenue of $15 million to $20 million a year from its carbon-capture plant if it keeps operating well.
SaskPower had to pay $7.3 million in penalties to Cenovus Energy (TSX:CVE) last year because the plant wasn't operating enough to deliver all the captured carbon dioxide promised to Cenovus.
"In 2015, there were what was called shortfall payments made to Cenovus because of our inability to meet the contractual amount," SaskPower president and CEO Mike Marsh said Thursday while releasing the utility's annual financial report.
"We still earned revenue in 2015. I think that's the important part, and the revenues more than offset the shortfall payments."
Marsh says SaskPower made $15.1 million in revenue from CO2 sales in 2015-2016.
The report notes that the carbon-capture facility, located at the Boundary Dam coal-fired power plant in Estevan, "faced technical and mechanical issues due to design and construction deficiencies, which prevented the plant from achieving an acceptable level of reliability and performance."
It was forced off-line several times in 2015, including for nearly all of September and October.
However, Marsh said the facility is "operating well" and on track to capture 800,000 tonnes of carbon dioxide this year.
"And we don't expect to be paying any shortfall penalties as long as the plant continues to operate," he said.
Saskatchewan relies heavily on coal for power. Forty-six per cent of the province's fuel came from coal in 2015.
SaskPower announced plans last November to have up to 50 per cent of power come from renewable sources by 2030.
A proposed wind farm near Chaplin, about 200 kilometres west of Regina, is not part of that 50 per cent target. But it was learned Thursday that the private company looking to build the facility is being told by the Ministry of Environment to find another location.
"Chaplin was originally supposed to be online, part of it, in 2015, but online in 2016. There's been a delay in the approval of that site," said Marsh.
"The project is still going forward, it's our understanding. But I think there's certain sensitive areas (where) the original site was and I believe they're looking at alternate sites at the present time."
The proposed site was near a migratory bird route and sanctuary.
It was also announced Thursday that SaskPower was selected to build and operate a new 350-megawatt combined cycle natural gas power generation facility in Swift Current. It's scheduled to come into service in October 2019.
The financial update shows a net income of $26 million for the Crown utility.
Marsh says SaskPower spent $1.2 billion maintaining or upgrading its electrical system in 2015-2016 and will spend nearly a billion dollars in each of the next two years as well. He said all that work means rate hikes down the road "are inevitable."
SaskPower is asking the Saskatchewan Rate Review Panel for a rate increase of five per cent effective July 1 and another five per cent effective January 1.
Marsh suggested the rate could be lower in the next fiscal year, but could be close to five per cent again for 2018-2019.
"We certainly try to balance the need for capital investment with the desire to keep rates as low as possible."