Last night’s (2012-12-17) annual meeting of Parry Sound Hydro Corporation and subsidiaries provided considerable information on current operations and future plans. After months of my queries asking what was going on with respect to an investment in upgraded power generation capacity, some answers were provided last night. That’s a good start.
First, some basic information about Parry Sound Power, or more correctly Parry Sound Hydro Corporation:
- There are in fact four separate companies; this was required by the province some ten years ago when there were major changes in the power supply sector. The companies are:
- Parry Sound Power, which is responsible for delivering power to its customers. That includes responsibility for meters, power lines and such.
- Parry Sound Energy Services, which to date has been responsible for water heater rentals, tree trimming, and through the end of the year billing services for Parry Sound’s water services (more about this later).
- Parry Sound PowerGen, which is responsible for power generation and watershed management.
- Parry Sound Hydro Corporation (HoldCo), which is the parent and consolidates the operating statements of the other three companies.
- Last year the consolidated companies reported a net income of $47,761 in 2011 (profit after taxes), an increase of about $3,000 over 2010.
- Last year Parry Sound PowerGen generated about $350,000 in energy revenue, and is on target to generate about $400,000 this year. The increase in revenue is largely related to improved pricing rather than increased generation. In 2011 the power generated amounted to about 4.9 million kilowatt hours (kWh) of electricity. That is the same as 4.9 Gigawatt hours (GWh) of electricity, and while the power output in total is more than enough to power Doc Brown’s DeLorean in Back to the Future (it needed 1.21 GW), it would need to deliver that amount of energy in a millisecond, not several months.
- Parry Sound Hydro Corporation is one of the smaller power companies in the province but it is not the smallest. Here’s a link that provides information concerning Ontario’s power generating stations.
- Parry Sound PowerGen has rights and responsibilities for a watershed that covers about 1,000 square kilometers (102,300 hectares). Here’s a link that provides more information on the watershed.
- Parry Sound Power is subject to provincial regulations that ‘require’ it to induce their customers to reduce the consumption of electricity. It’s an interesting situation. In theory a company that sells electricity would make more money by selling more electricity. At the same time though the province wants to see reduced consumption not only to reduce the potential impact of the associated pollution, but to also limit the amount of additional generation capacity that needs to be built. So the local energy distributors are provided with an incentive to make more money by reducing their sales of electricity. Any bet that the province will be increasing electricity and energy prices to reduce consumption if we don’t start cutting back? It’s a strategy that for the most part works with gasoline and cigarette consumption.
- There will be about $180,000 returned to Parry Sound Power customers over the next year or so. This amount reflects the amount that was charged to customers in excess of recently revised provincial requirements. The rebate will be calculated as a function of electricity usage. I estimate it means a rebate of about $60 per customer; less for the smaller users (residential customers) and more for larger users (companies).
At last night’s meeting the chairs of the various companies provided an update on their company’s operations. BDO Canada, LLP the company’s auditor, presented an overview of the financial performance for 2011. Some interesting information was provided concerning operations as well as my information about a possible investment in additional power generation capacity. The key points as I understood them were:
- Parry Sound Energy Services will merge its operations with Parry Sound PowerGen. This should result in reduced costs and is due in part to the loss of the billing service business they provided for Parry Sound’s water services. Presumably there will then be three companies remaining, Parry Sound Power, Parry Sound PowerGen and the parent, Parry Sound Hydro Corporation.
- There are plans to increase the power generating capacity of the River Street facility. This is a project that has been discussed, researched and analyzed for more than a decade, and may start to be realized in 2013. Some key points that were expressed last night:
- The current installation, a single turbine capable of generating 1.2 MW (megawatts), will be replaced with two separate installations (two separate pen stocks and turbines) that would have a total power generating capacity of 3.2 MW ( 2 x 1.6 MW). That means at peak they could provide enough power to light thirty-two thousand, 100 watt light bulbs. In theory at least, this raises potential energy generation, and revenue, by about 180%, not quite tripling current capacity. In practice of course it is unlikely that all of the extra generating capacity will be realized because of variable flow. At the very least though it will be possible to capture the considerable energy that is currently ‘spilled’ over the dam because the current installation cannot handle that flow volume.
- The price for the new installation was not discussed during the meeting but my understanding is that it will be on the order of $15 to $20 million. The board indicated that the new installation is expected to cover its capital and operating costs and with time will be an important revenue generator for Parry Sound.
- Income and profit forecasts are based on a favourable tariff rate of $0.125 per kWh, with annual increases, that will be in effect for another 17 years. In my opinion these are reasonable figures to work with and don’t reflect the fiction of the $0.50 kWh plus rates being used to rationalize solar electricity installations.
- Discussions are ongoing to secure financing for the project.
The company financial statements were provided at the meeting last night, and are available to the public upon request.
I expect that there will be more information made available about the power generation upgrade project in the New Year if there are plans to start construction before the summer.
Attendance at the meeting was very poor. Besides the board members, key staff and the auditor who were required to attend, there were Anne and I, Mayor McGarvey, Councillor Horne, and CAO Rob Mens. None of the local press were at the meeting so there is unlikely to be additional coverage of the meeting in the local media, although I expect there will be a follow up by the North Star once this meeting summary is posted. It’s important news that needs to be understood by the community.