Although things remain at a standstill for many operations during the global pandemic, that is not the case with two of the largest employers in the region.
In the early days of the pandemic and with the market in decline, Port Hawkesbury Paper (PHP) stopped accepting wood deliveries.
The company said it is an evolving situation and they will continue to monitor and adjust operations as required. They noted that it will not impact deliveries to customers. Deliveries at this time of year are generally reduced due to spring weight restrictions, but as the operation prepared for a scheduled slowdown, PHP was forced to take additional measures.
The decision will directly impact sawmills across the province, a number of whom had been sending their wood and wood chips to the paper mill since the closure of Northern Pulp. After that shutdown, officials with PHP temporarily agreed to take on wood chips and pulpwood from the mainland to help alleviate impacted woodlot operations.
PHP said it wasn’t using any additional wood – they were just buying more wood and now has a “healthy inventory” that can last well into the summer. The company it was a difficult choice as it will impact employees responsible for receiving, but did not want to talk about lay-offs.
Not long after, Nova Scotia Power’s (NSP) largest consumer, the Point Tupper mill, was approved for a “very unique” tariff agreement that would see NSP have control over the mill’s daily operations – amounting to a $20 million per year savings on their electricity bill.
In a decision released March 26, the Nova Scotia Utility and Review Board (UARB) granted an extension on special electricity rates to PHP, which is a 25 per cent decrease under what it would be charged on the same cost-recovery model as all other consumers.
The Extra Large Industrial Active Demand Control (ELIADC) is an annually adjusted, below-the-line tariff allowing NSP to schedule the mill’s power load, and direct PHP to reduce or increase its consumption across the day and throughout the year – according to system conditions and within agreed parameters.
NSP said the tariff will include a “substantial increase” to PHP’s contribution for system costs. By controlling how much electricity PHP uses and when, NSP can better synchronize the mill’s operations with overall electricity demand and manage the real-time costs of electricity generation.
NSP suggested controlling the mill’s usage will save them $6.9 million per year, and PHP will receive one-quarter of those savings, which will reduce their power bill by $1.72 million annually.
PHP consumes about a million megawatts of power each year, which equals roughly 10 per cent of all the electricity produced by NSP.
In order to ensure customers don’t bear the risk of an under-recovery of PHP’s fuel costs, the new tariff ensures that the minimum recovery from PHP will be the actual annual costs to serve plus $4 for each megawatt hour (MWh) of power it consumes. Combined with fuel costs, the mill is projecting to pay around $60/MWh over the next four-years.
The mill’s owners said the new tariff is truly innovative and if managed properly, should provide relatively stable electricity prices to business, while providing significant benefits to the provincial electricity system.
Considering the cuts and reductions going on at companies and businesses around the world, and the fact that a slowdown was scheduled, it was not surprising that Port Hawkesbury Paper would stop wood deliveries for the time being. Hopefully, these deliveries can resume in the coming months once the spread of COVID-19 has been contained and controlled, and the economy resumes.
And while the world waits to start moving again, this intriguing deal reached between two large-scale employers in the Strait area, if successful, could be very significant.
It’s impossible to predict exactly how the agreement will play out in the coming years, but it seems that both sides can benefit, with the paper mill’s power costs and usage controlled, and the provincial utility receiving more money for the provincial power system.
Hopefully that helps the paper mill limit its costs and remain in the Strait area, while helping NSP put much needed work into aging infrastructure.