Industrial System Designation – Connection Order
In this decision, the AUC considered an application (the “Application”) from International Paper Canada Pulp Holdings ULC (“IPC”) for an industrial system designation encompassing certain facilities at the Grande Prairie Pulp Mill Complex and for a permanent connection order to connect its power plant to the Alberta Interconnected Electric System (“AIES”). The AUC found that approval of the application was in the public interest.
Background
IPC owns and operates a kraft pulp mill and a 48-megawatt (“MW”) cogeneration power plant at the Grande Prairie Mill Complex (“Mill Complex”). Pursuant to Temporary Connection Order 24935-D02-2019,1 IPC obtained approval to temporarily connect its power plant to the AIES until January 31, 2020.
On October 19, 2019, IPC filed Application 24979-A001 with the AUC requesting (i) an industrial system designation encompassing facilities at the Mill Complex under section 4 of the Hydro and Electric Energy Act (“HEEA”); and (ii) a permanent connection order to connect its power plant to the AIES pursuant to section 18 of the HEEA.
Legislative scheme
HEEA Subsection 4(3) sets out specific criteria for determining whether a project should be designated as an industrial system. Subsection 4(3) provides that before making an industrial system designation under (1) the AUC must be satisfied that:
(a) the electric system includes a generating unit located on the property of the one or more industrial operations it is intended to serve, there is a high degree of integration of the electric system with one or more industrial operations the electric system forms part of and serves, and there is a high degree of integration of the components of the industrial operations;
(b) the industrial operations process a feedstock, produce a primary product or manufacture a product;
(c) there is a common ownership of all of the components of the industrial operations;
(d) the whole of the output of each component within the industrial operation is used by that operation and is necessary to constitute its final products;
(e) there is a high degree of integration of the management of the components and processes of the industrial operations;
(f) the application to the Commission for a designation under subsection (1) demonstrates significant investment in both the expansion or extension of the industrial operations processes and the development of the electricity supply;
(g) where an industrial operation extends beyond contiguous property, the owner of the industrial operation satisfies the Commission that the overall cost of providing the owner’s own distribution or transmission facilities to interconnect the integral parts of the industrial operation is equal to or less than the tariffs applicable for distribution or transmission in the service area where the industrial operation is located.
AUC findings
The AUC considered IPC’s industrial system designation application per the principles and criteria set out in section 4 of the HEEA. In doing so, the AUC described its assessment of each of the criteria found in subsection 4(3).
The AUC was satisfied that subsection 4(3)(a) of the HEEA was met. The Mill Complex includes a cogeneration facility that consists of boilers that create steam used both in the industrial operations of the mill and to drive the 48-MW steam turbine generator. The steam generator, in turn, is used to provide power to the mill’s industrial operations forming a high degree of integration of the electric system with the industrial operations of the Mill Complex.
The AUC found that subsection 4(3)(b) had been met because the industrial operations utilize raw materials to produce a primary product in the form of pulp.
The AUC accepted IPC’s submission that TC Energy’s facilities, although located on-site, were part of a separate industrial operation that utilizes excess steam that would otherwise be wasted. Because TC Energy’s facilities were not included in the proposed industrial system designation, nor required for IPC’s industrial operations, the AUC found that subsection 4(3)(c) had been met.
The AUC considered that the cogeneration plant is reasonably scaled to meet the needs of the mill and accepts that the excess steam produced would otherwise be a waste product were it not being utilized by TC Energy’s facilities. For this reason, the AUC was satisfied that subsection 4(3)(d) had been substantially met.
Subsection 4(3)(e) had been met because IPC owns and operates both the mill and the steam turbine generator. Hence, the AUC found there to be a high degree of integration of management of both the components and the processes of the industrial operations.
The AUC found that significant investment to the extension of the industrial operation and the development of the electricity supply had been met previously when the power plant was initially approved and constructed, thereby satisfying subsection 4(3)(f).
The AUC found that subsection 4(3)(g) was not applicable because the industrial operations do not extend beyond the contiguous property.
Subsection 4(5) gives the AUC the discretion to approve an industrial system designation application if subsections 4(3) and 4(4) have been substantially met and there is a significant and sustained increase in efficiency in a process of the industrial operation by the industrial operation as a result of the integration of the electric system with the industrial operations the electric system forms part of and serves. The AUC found that subsection 4(3) had been met with the exception of subsection 4(3)(d), which it found had been substantially met.
Having considered all of the principles and criteria set out in section 4 of the HEEA, the AUC found that IPC’s proposal substantially met all the principles and criteria for an industrial system designation and also demonstrated significant and sustained increased efficiency.
AUC decision
Pursuant to section 4 of the HEEA and sections 2(1)(d) and 17 of the Electric Utilities Act, the AUC approved the application and an industrial system designation to IPC.
Pursuant to Section 18 of the HEEA, the AUC also approved the permanent connection to connect IPC’s 48-MW power plant to the AIES.
