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Lethbridge Herald, The (Newspaper) - May 28, 1974, Lethbridge, Alberta 12-THE LETHiRlDQC HlftALD May 1974 RECOMMENDATIONS OF POWER COMMITTEE. FUTURE POWER NEEDS After some very considerable study by the Committee formed by Council for the purpose of ascertaining the future Power needs of the City and the means of supplying those this Committee Is now In a position to make Its recommendations. Based on the report initially provided us by our consultants C. H. 2M based on our own studies and discussions with all of those and based on the public hearing and the concerns expressed to this Committee by members from all segments of the City of the Committee has come to the unanimous conclusion that we should provide all of our future Power requirements by buying the same from Calgary Power and that we should cease the operation of our own Power Plant at some appropriate future date. It follows that there will have to be some dis- position of the Power Plant and the assets it represents and this will be discussed later in this letter. During the course of our the City Mr. Allister was also involved and summarized his own views and made certain recommendations to the Power Study Committee. These recommendations are contained in his letter to myself as Chairman of that Committee dated the 14th of May of 1974. That letter is attached as Appendix A to our recommendations. After a careful study of the letter the Committee was of the view that the position taken by the City Manager coincided with the view that the Power Study Committee itself held. This Committee therefore adopts in total the recommendations and comments made by our City Manager. Perhaps further comment Is warranted in regard to the recommendations of the City Manager. we would all agree that our initial desire was that a plan something in the order of the proposed Plan D should be thoroughly considered as we felt that we should like to maintain some of our own power generating facility. In addition to the reasons given for rejecting that alternative by the City the Committee itself is of the view that there are other reasons for not accepting that position. Perhaps one of the main reasons is that in the event that we continue to generate our own we will find ourselves in the position of being at the mercy of unpredictable power requirements by the electrical users of the City of Leth- bridge. If our needs were to sky-rocket we could not cope with them without buying more power from Calgary undoubtedly at a rate that would not be beneficial to the City. On the other if our needs for some reason or other fell far below our present predic- then we would be stuck with equipment that we could not efficiently use. An additional reason not stated by the City Manager is that in any Plan D is predicated upon our being able to purchase used equipment at a reasonable price at the appropriate time. This of course is a very dangerous as- sumption to make and one that we do not think should be made at this particular time and for these reasons along with those expressed by the City Plan D rejected. Another major concern was of course the human element. We were seriously concerned about the jobs of our present City employees but after thorougn discussions witn Power and after discussions with the members of our City we are satisfied that the majority of those people presently employed by the Electrical Power Generat- ing facility will be retained in our Water Works that those with seniority who wHI not stay on in the Water Works Department will be taken if they by Calgary Power at no loss to them in either pay or job security. There are six employees who may not be taken on by Calgary Power but when these six employees were hired in very recent it was on the clear understanding that their jobs may very well disappear in the event that Calgary Power provided all of our generating needs and these persons took the jobs on that basis. That brings us then to the question of the disposition of our Power Plant. Calgary Power had made an initial offer of something in the order of Six Hundred Thousand Dollars for the purchase of the Power Plant. This has subsequently been re-negotiated and the net result is that we will obtain a price that will be in excess of'One Million Dollars. At- tached to my letter of recommendation as Appendix B is the offer of Calgary Rower under date May 1974. Attached to that letter are various documents setting forth the basis upon which this offer is made. In calculating what we will be getting for the power we have also as Appendix to these recom- mendations a communication under date May 9th. That communication Indicates that the price to be paid for the Generating Plant is Seven Hundred and Fifty Thousand Dollars and that will be paid in cash. In addition Calgary Power has agreed to provide all metering costs at a third point of delivery valued at Fifty Thousand Dollars. This was not the case In the previous offer. the land and buildings will be returned to the City when the Plant goes out of use and a conservative value of that Is One Hundred and Forty Two Five Hundred Dollars. In the increased property tax payable by Calgary Power over the projected two years life of the plant will be Sixty Thousand Dollars and the net increase of the Pro- vincial Discount will be something in the order of Two Hundred Thousand that too being a conservative estimate. Another very important consideration is the question of Power service reliability. This again caused the Committee to be very concerned. after discussions with our own Electrical Department and after receiving some Information from Calgary Power we are of the view that this matter will be one that need not cause our Citizens any concern. Our own Electrical Department has indicated to us that since more power so far as length of time is has been caused by our own Plant being in operation than was caused by Calgary Power. Had we not had our Plant in operation over that period of time and had we been buying from Calgary Power there would have been less time when there would have been power outages. In addition to we have supplied some information from Calgary Power and we attach as Appendix D to our report a copy of that particular informa- tion under date May the 1974. This information was requested by the Power Study Committee of Calgary Power and they were good enough to provide it to us. A further comment should be made and that is with regard to our discussions with various of the Provincial Bodies to which we were directed in considering this matter. Our own view is that it is highly unlikely that we would ever be permitted to build our own power gener- ating facilities under any circumstances and that even if we we would not be able to obtain the necessary financing. Before we could even find out whether or not we could build new we would have to apply to the appropriate Provincial Body and to do that we would have to have Plans and Specifications prepared as to what the proposed Plant would be like and it is our understand- ing that to obtain such Plans and Specifications would cost us something in the order of One Hundred Thousand Dol- lars.-We do not feel that this expenditure is warranted par- ticularly when there appears little chance that our applic- ation would ever be accepted. What we are simply saying is that there is very little choice in this matter and that is our view after giving this as much study as has been done. It is also the recommendaiion of this committee that after presentation of the report to the matter should be laid on the table and the City Clerk be directed to ob- tain sufficient Newspaper space to publish this in- cluding all of the attached Appendices verbatum. We feel in this way that the Citizens of Lethbridge will be made fully aware of our recommendations and the reasons for those recommendations. One very important point to be remembered by the Mem- bers of Council and by the Citizens of Lethbridge is that what we are doing is making recommendations concern- ing the supply of Power. These recommendations in no way effect the ability or the desire of the City to continue to retail Power to its Citizens at the same reasonable profit that has been realized over the past many years. in no way be affecting the Electrical Department's ability to genreate a substantial income as it has in the past for use to the advantage of our citizens. may it be said that these recommendations are the unanimous recommendations of the Power Supply Study Committee. That Committee has done a very large amount of work and I am grateful to them for their support and conscientiousness throughout these rather trying proceedings. Our task is now completed and the matter is placed in the hands of City Council. We trust that after due a decision can be made that will be ac- cepted by the Citizens of Lethbridge which will- be to the long term benefit of this Community. These recommendations are respectfully submitted by the Power Supply Alderman W. Vaughan Hembroff Alderman Vera Alder- man Steve Utilities Director O. P. City Manager A. W. W. Findlay. W. VAUGHAN HEMBROFF APPENDIX MAY 1974 The City of City Alberta. Mr. 0. Utility Director CITY OF LETHBRIDGE GENERATING FACILITIES At the April 10th meeting between the City of Lethbridge Utility Committee and we agreed to provide you with a revised offer for the plant. In the Company is prepared to purchase the City's Generating Facilities for the sum of plus provide metering for the third point of delivery at such time as a substation is commissioned. The other condi- tions of the offer are outlined on the attached proposal dated May 1974. The offer is open until June 1974 and if an ownership transfer date of August 1974 is suggested. I understand there is a possibility the offer could go before the City Council on May 1974 if acceptable to the Utility Committee. We would be pleased to meet with the Committee on either the 14th or 15th to discuss the offer if you wish. Should Calgary Power become the owner and have to assume responsibility for the collective agreement present- ly being it is our suggestion that we have a representative on the bargaining committee. Please advise if you need any further information or wish to meet with us to discuss the offer. Yours very truly E. W. Director of Consumer Services Calgary Power Ltd. May CALGARY POWER LTD. PROPOSAL TO THE CITY OF LETHBRIDGE FOR PURCHASE OF THE LETHBRIDGE GENERATING FACILITIES 1. PURCHASE OF GENERATING Power is prepared to pay the City of Lethbridge. for the Lethbridge generating plant facilities generally described in attached Appendix subject to the follow- ing conditions. a. That arrangements relative to the existing power plant staff as per Appendix B are acceptable. b. That the City agrees not to transfer or otherwise encourage any existing power plant staff to transfer to other phases of their operation untiU after June 1976. c. That the Plant Superintendent continue to be res- ponsible for the operation of the plant under the administration of Calgary Power Ltd. until June 1976 or such other date as is mutually acceptable. The Company would compensate the City on a cost for such involvement. d. That a new agreement for the supply of wholesale power be completed. e. That the necessary conversion of steam driven water pumps within the existing plant be done by the City at their expense. f. That a suitable operating agreement can be com- pleted for the supply of cooling water to the steam turbines and accesss to the steam turbine building. g. That all steam and gas turbine units are in operable condition at the time of transfer. h. That an acceptable property tax rate and assessment can be arranged. 2. OPERATION OF the power plant will continue to operate until at least June 1976 following which it could be partially scrapped or put on standby service. The Company recog- nize any reasonable delays on the City's part in pro- viding the additional substation capacity required prior to any such plant shutdown. 3. TITLE TO to final shutdown of the plant and the salvage demolition of all equip- ment and title to all land acquired by the Company in this transaction will revert to the City. 4. THIRD POINT OF Power is prepared to recognize a third point of supply subject to the follow- ing conditions. a. That the third point of supply be at a mutually accept- able location on the west side of the Oldman River. b. That the total cost of the third point of ex- clusive of be borne by the City. The costs of providing the necessary metering would be borne by the Company. 5. rate to be applied to the City's total load would be the applicable standard wholesale rate. APPENDIX A The generating plant and buildings covered by this offer include the following generating Unit Capacity 1 Oerlikon steam turbine 1 Parsons steam turbine 1 Parson steam turbine 1 Brown Boveri gas turbine 1 Brown Boveri gas turbine Date of Installation 1932 1942 1953 1958 1961 This would include boiler control room cranes and all other equipment necessary for the operation of the plant. The land as- sociated with the buildings is shown on Figure 1. Within the buildings included in this transaction are certain items of plant and equipment which are not included in the offer. This involves certain items of electrical cable and equipment which have not been installed and which are located on the ground floor and basement floor of the gas turbine buildings. Also excluded are those items of plant and equipment which are used by the electrical distribution system of the City of Lethbridge or are part of the supply and control facilities of the waterworks. Some such equipment is located both in the gas turbine building and in the steam turbine building. APPENDIX B STATUS OF EMPLOYEES FOLLOWING PLANT CLOSURE Calgary Power Ltd. will make every effort to place at least eight Lethbridge plant employees into vacani positions within Calgary Power's plant and division operations subject to the following a. where Lethbridge plant employees can be trans- ferred to Calgary Power positions and the entry rate is lower than the employee's current rate with the City of Calgary Power will the employee until the rate in his new category sur- passes his current rate. b. where Lethbridge plant employees can be trans- ferred to Calgary Power positions outside the City of Calgary will pay for relocation expenses according to the terms of Its then current moving expense policy. c. where employees fill positions covered by the I.B.E.W. or C.P.E.A. collective the terms and conditions of these agreements will by ne- cessity apply. 1 A REPORT FROM YOUR CITY COUNCIL ON THE FUTURE POWER SUPPLY FOR THE CITY OF LETHBRIDGE APPENDIX OFFICE OF CITY.MANAGER May 1974 Deputy Mayor V. Future Power Supply City of Alberta. Dear CITY OF LETHBRIDGE POWER SUPPLY STUDY I have attended and participated in the study sessions held by the Future Power Supply Committee and in addi- tion I have discussed the power supply problem with individuals learned in financing and others in the electri- cal generation field. In I have read to a limited extent and within my comprehension information on electrical generation. I have concluded and wish to recommend to City Council that the City of Lethbridge discontinue in 1974 the generation of electrical energy and that the existing plant be sold to Calgary Power Ltd. and that all future energy requirements be purchased from Calgary Power Ltd. The following factors influenced me in reaching my 1. The financing of a new generating estimated in 1973 to cost 82V2 million dollars by 1986 would incur a staggering debt. If this sum of money could be borrowed at the debt principal and interest payable during the life of the debenture would total The total accumulated outstanding debt for all purposes of the City as at December 1973 is comprised of in principal and in interest. If by 1986 the normal debt had increased to this together with the electrical generation debt of would accumulate to 692.00. If the. population by 1986 reached the bonded debt per capita would be What a legacy to leave to future taxpayers and electrical consumers. 2. There will be definite serious problems obtaining Provincial authorization to issue debentures of such a magnitude as are required for this project. The Local Authorities Board would have to know the source of financing and determine if the City has the financial ability to service such a debt. At this I would question if the Local Authorities Board would approve debenture borrowing for this project. In addition approvals would have to be obtained from the Energy Resources Board and also the Depart- ment of the Environment. 3. I have been concerned over the staff of the Power but the Future Power Supply Committee has been assured by Calgary Power officials that the staff not required for the City's Water Plant will be inte- grated into their system or other jobs will be found for them. 4. The advance of technology in the generation field will in my opinion be such that generating equipment purchased now could be antiquated and valueless in the near future. 5. Provincial regulations respecting future generation of power are complex and I question if Lethbridge would be permitted to build outside the City of Lethbridge and utilize coal fields for 6. There appears to be adequate Provincial regulations to control the rates charged by Calgary Power Ltd. to Provincial Municipalities. 7. I believe it is Inevitable that ultimately all commercial power corporations within the Province will be taken over by the Provincial Government and possibly even Municipal Generating Plants. 8. The City would be given adequate protection on delivery of power and the Energy Resources Board for the Province is quite aware of this problem through out the Province. Their future plans endeavor to assure adequate protection to consumers throughout the Province. 9. The report from recommends that the City purchase its full electrical energy requirements. 10. The negotiated selling price of the Plant although not reconcilable to Calgary Power's offer in 1969 is ac- ceptable when other negotiated items such as staff and metering equipment is considered. 11. Future rebates of the should be substantial which will benefit local electrical con- sumers. This rebate is contingent on the purchase of power from Calgary Power and is variable de- pending on quantity purchased. No consideration was given to this rebate in the report. The Power Supply Study Report compiled by did give consideration to the City purchasing base power and in 1977 installing a used'66.4 M.W. Open Cycle Gas Turbine Unit. This proposal appeared to me quite logical and would permit the City to retain ownership of the Power Plant. The consultants refer to this proposal as Plan D. Upon investigating Plan D the following factors convinced me that it was not a logical plan for the City to I Approval from the Energy Resources Conservation Board would be contingent on proof by the City of the EFFICIENCY OF THE PLANT The efficiency of an Open Cycle Gas Turbine is much lower than that of a Steam Turbine. FUEL SUPPLY FOR THE LIFE OF THE PLANT It could be extremely difficult to secure a long term economic gas purchase contract. ECONOMY OF THE PLANT The study shows that Plan D is only slightly more costly than purchasing all power re- quirements. There an incorrect assumption made in these calculations. assumed that the reserve charges would be based on of the City's loa'd. Calgary Power states that in fact with one unit that large in the City's the City would be required to pay for reserve on the existing basis. This would cost the City an additional annually. II Plan D if carried out to 1988 with the installation of a 32 M.W. Used Steam Turbine in 1985 would leave the City's Generating Plant in 1988 in the same pre- dicament as it is now. The City would own an obsolete Plant. HI If the City continues to generate some of its power the favourable bulk purchase rate for power would not be available to the City. Yours A. W. W. FINDLAY City Manager. 2. It is understood that the City will accommodate 15 of the existing staff members in other phases of their operation. It is further understood that 6 staff members were added with the understanding that as a condition of their employment there was no guarantee of per- manent employment. 3. If Lethbridge plant employees cannot be placed within Calgary Power's plant or division Calgary Power in cooperation with the City of Lethbridge and Canada Manpower will assist by way of a Placement in finding suitable alternative employment. 4. Employees transferring to alternative Calgary Power positions will have their past service with the City of Lethbridge recognized for purposes of vacation entitle- ment and salary continuance. Employees transferring to Calgary Power benefit plans will not be subject to the normal 6 month waiting period for new employees. APPENDIX CITY OF LETHBRIDGE May 1. Generating plant purchase price 2. Metering Cost at third point of delivery 3. Net increased Provincial discount over remaining plant life 4. Increased property tax 5. Buildings and land value APPENDIX May 1974 Mr. O. P. P. Eng. Utility Director City of Lethbridge Alberta At Our meeting of April your power committee re- quested information regarding interruptions in power service to the Town of Fort Macleod for the period from January 1966 to December 1973. The following figures are those quoted by myself at the meeting and are taken from our weekly trouble reports for that Total number of interruptions 12 Total hours of interruptions 21.7 Average hours per interruption _ 1.3 Number of years surveyed 8 Average number of interruptions per yr. 1.5 Average hours of interruptions per yr. 2.7 of total hours per year An interesting fact regarding the above figures is that one- third of the interruptions were pre-arranged for the Town or ourselves. This reduces the uncontrolled interruptions to of the total hours per year or 1.9 hours of inter- ruption per year. I am sure that our service to the City of Lethbridge is at a similar level of reliability and should improve with pro- posed changes and additions to our system. Yours very CALGARY POWER LTD. E. C. Chalmers Division Manager OUTLINE OF PROPERTY TO BE ACQUIRED PROPERTY PLAN OF PROPOSED LETHBRIDGE POWER PLANT PURCHASE ;