Facilities – Salvage
In this decision, the AUC denied applications from ENMAX Power Corporation (“EPC”) to salvage equipment from the ENMAX No. 32 Substation (the “Substation”) and to replace that equipment at another substation.
Introduction and Background
EPC explained that the Substation flooded in June 2013 and stated that the City of Calgary’s Land-Use Bylaw (the “Bylaw”) prevents the construction or expansion of buildings within floodways. EPC identified an arc flash hazard from the outdoor switchgear at the Substation that poses a safety concern to employees at the Substation.
EPC applied to the AUC to salvage equipment from the Substation and to replace that equipment at either a new substation, designated as ENMAX No. 45 Substation, or at the existing ENMAX No. 31 Substation. The applications were registered on October 9, 2020, as applications 25934-A001 to 25934-A004.
EPC proposed two alternatives to replace the salvaged substation equipment. The preferred alternative was to construct a new substation, ENMAX No. 45 Substation, in the community of Shepard Industrial near Quarry Park and to connect that substation to existing Transmission Line 138-31.84L by constructing approximately 800 meters of double-circuit 138-kilovolt (“kV”) transmission line. The cost of this alternative was estimated to be $62.6 million. In the second alternative, EPC proposed to expand the existing ENMAX No. 31 Substation for an estimated cost of $68.2 million.
Based on similar projects, EPC estimated the cost of the new switchgear, a new structure to house the switchgear, and other associated costs to be approximately $8.5 million. It did not provide a detailed cost estimate for replacing the switchgear on-site at the Substation.
EPC further submitted that it would likely pursue decommissioning the Substation in the long term. It provided cumulative present value calculations of its preferred option, inclusive of the flood mitigation and the eventual salvage costs, and for decommissioning the entirety of the Substation now. ENMAX assumed that for its preferred option, the remainder of the Substation would be salvaged in 2058 and calculated the cumulative present value of the revenue requirement to be approximately $64.8 million. It calculated the cumulative present value to decommission and relocate the entire Substation now to be approximately $79.6 million.
The AUC found that EPC did not provide enough evidence to demonstrate that either option was in the public interest.
The AUC recognized that a safety issue exists at the Substation and that equipment needs to be salvaged and replaced at some point in time to eliminate the identified hazard. Further, while the AUC understood EPC’s reluctance to install new equipment at a substation within a floodway, it had issues with that position when EPC proposed to install further flood mitigation and plans to leave equipment at the Substation. It noted that EPC had upgraded this substation in 2012-2013 while aware of the flood risk. The AUC questioned the need to spend significant capital to relocate substation equipment to an alternate site at the time of this proceeding.
The AUC clarified that the safety issue related to arc flashing could be solved by new switchgear moved to an indoor location, and at the existing site, this would cost approximately $8.5 million. The AUC was not satisfied that EPC has adequately explored options to install the equipment on-site to resolve the safety issue, which, according to EPC’s estimates, would cost approximately $55 million less to ratepayers than any other options it applied for.
EPC commented on the Bylaw, submitting that it restricts its ability to construct or expand a building at the existing site. However, EPC stated that it could not speculate on how the City of Calgary would view the prohibition on expanding the footprint of the existing building. It also indicated that transmission lines and substations might be exempt from Part 17 of the Municipal Government Act, under which the Bylaw is enacted. The AUC found that, because EPC relied on the Bylaw restrictions to justify its alternative, it should have taken steps to confirm if the Bylaw applies. The AUC expected EPC to submit documentation of its discussion with the City of Calgary on this matter, which could have clarified the City of Calgary’s understanding of the applicability of the Bylaw.
The AUC considered EPC’s statement that it would not be prudent to make a major investment in a substation that is located in a floodway and that was completely isolated by water during the 2013 flood. But it did not believe that $8.5 million to resolve a safety risk on-site constitutes a major investment in these circumstances. Because the alternatives presented by EPC are approximately $55 million more expensive, a more thorough investigation into what is in the public interest is required. Further, EPC’s statement did not adequately consider the mitigations it implemented in 2012 and 2013 and since the 2013 flood or the mitigations it is proposing to make in the future. Nor does it consider any additional upstream mitigations that have been implemented or that are being considered that would help to mitigate flood risk at the Substation. The AUC noted that EPC was aware of the flood risks to the Substation when it applied for upgrades in 2011 but considered that upgrading the Substation at the existing location was the preferred option while indicating that it would investigate mitigation measures to protect substation equipment from the high-water levels of a flood.
The AUC denied the applications.