Utilities are navigating a rapidly changing landscape, and Hydro is leading the charge as the Province works towards meeting Canada’s goal for a net-zero electricity sector by 2035. While there are decisions still to be made to prepare for the transformation, commissioning of the Labrador Island Link, the final piece of the Lower Churchill Project, is a significant accomplishment towards meeting these goals.
Below, you will find answers to some commonly asked questions we are hearing about our newest provincial asset.
What does it mean to say “The Labrador Island Link is commissioned?”
“Commissioning” means the project is ready for operation—essentially, construction has been completed. It also means that the project has met requirements under both the project’s financing and revenue agreements.
How would Hydro know this requirement has been met and can therefore consider the Labrador Island Link commissioned?
This must be very clear – Hydro alone does not confirm the requirements are met. Commissioning of the Labrador Island Link was achieved through extensive engagement with and collaboration between:
• Hydro’s engineering and construction management teams;
• the Newfoundland and Labrador System Operator, acting independently;
• the Independent Engineer, representing the financing parties; and
• the Lenders Representative, acting on behalf of the financing parties.
We have been working with these parties for years to ensure the technical requirements outlined in the formal agreements would be met and verified through robust testing. These parties are knowledgeable subject matter experts who are well versed in all the major and minor details required by the agreements. Throughout the process, all parties reviewed the various stages of progress including the most recent testing results. Following the last round of 700 MW tests, all parties confirmed that the requirements of the agreements were met. This was acknowledged through the issuance of various commissioning and asset acceptance certificates.
What steps are involved in getting this final commissioning confirmed?
The process to get to this stage took time, and it was important that it wasn’t rushed. There were a number of recent steps that were instrumental in confirming commissioning.
First, was the successful completion of a rigorous testing process which was developed in consultation with the vendors, internal engineering staff and oversight by the Newfoundland and Labrador System Operator and Independent Engineer. Our team put the Labrador Island Link through its paces and the system performed as expected in each and every test, and on April 8, 2023 it passed the final high-power test. This was a necessary step to proceed with project commissioning in accordance with both the project financing and revenue agreements.
Second, the Newfoundland and Labrador System Operator, acting independently, after witnessing testing and early operations, concluded that the Labrador Island Link demonstrated acceptable performance to enable commissioning and was satisfied that the assets would support reliable system operation.
Next, the Independent Engineer concluded a formal review process to confirm that the technical specifications outlined in the project financing agreements required to achieve commissioning have been achieved. This was a necessary part of the final commissioning process with our project partners, including the Federal Government.
The final step was acknowledged by the Lenders Representative that commissioning occurred on April 14, 2023, through the issuance of a Commissioning Confirmation Certificate.
Together with the previously commissioned assets, the Muskrat Falls Generating Station and the Labrador Transmission Assets (2021), commissioning of the Labrador Island Link also marks the successful commissioning of the entire Lower Churchill Project.
What happens next?
Now that the Labrador Island Link is commissioned, it’s been released for service to the Newfoundland and Labrador System Operator for regular operation. As with all our generation and transmission assets, actual operating levels on the Labrador Island Link fluctuate throughout the day depending on load requirements. Our plan is to operate the Labrador Island Link up to 700 MW for the coming months, as required to meet domestic demand and export requirements, in coordination with our network of generation assets.
What does an average day look like using the Labrador Island Link?
As with all our generation and transmission assets, actual operating levels on the Labrador Island Link fluctuate throughout the day depending on load requirements. With our new assets in the mix, typically more than 90 per cent of all electricity is generated is through renewable sources.
On a typical day this past April, Island demand hovered around 1,100 MW. Approximately 95 per cent was supplied by hydroelectric generation assets with major contributions from Bay D’Espoir, Cat Arm and Muskrat Falls (via the Labrador Island Link). There was one Holyrood Thermal Generating Unit online typically adding approximately 50 MW of generation for Island customers—less than 5 per cent of Island demand. During the summer, Holyrood is typically brought offline. During that period, 100 per cent of generation will be from renewable sources with excess energy being exported to Nova Scotia and Quebec.
Since the final set of tests in April 2023, the average export to Nova Scotia exceeds 200 MW and only dropped below 150 MW for six hours in total over the two week period following testing. Further, the Labrador Island Link has been delivering more than 400 MW on average in that same period with no major change in deliveries during the daytime versus overnight.
I’ve heard people say the Labrador Island Link isn’t ready? Is this true and what does that mean for commissioning?
Commissioning means that the Labrador Island Link is ready for reliable operation and has met the requirements outlined in both the project financing agreements and revenue agreements. As is typical with any major project, there are some non-critical items (“punchlist items”) that remained outstanding at the time of commissioning.
These items were reviewed by all stakeholders who acknowledged that although necessary to address, the issues did not prevent commissioning and do not affect the safe and reliable operation of the Labrador Island Link. As part of the commissioning process, and throughout technical discussions over the past months and years, every step was taken to ensure there would be no risk to reliable operation until the punchlist items were addressed.
This is a new asset and we are monitoring performance closely, as we do with every one of our assets, no matter the age, and every asset has a regular maintenance plan. The same applies to software. Similar to the software powering your phone there will continue to be routine upgrades.
I heard recently that another version of software was required. What does this mean?
The version of software installed on the Labrador Island Link that was required for commissioning contained all the required functionality for the Labrador Island Link to operate reliably and each function was fully tested. Newly commissioned assets typically have some deferred items that need to be addressed (referred to as “punchlist” items) at some point in the future but do not affect the operation of the asset. All project partners agree to defer those items, a process which has been part of the project agreements from the beginning.
The commercial agreements with our Contractor have for several years contemplated a final version of software to address miscellaneous non-critical punchlist items.
The requirement for a version of software to address minor punch list items has been communicated to our project partners and to the PUB. The new software version will allow for the resolution of software the remaining “punchlist” items. The next version is expected to be installed in the coming months. The minor fixes contained in the next version are not critical to the reliable operation of the asset, and therefore, were not required to commission the Labrador Island Link.
Are you still burning fuel at Holyrood? Is there still a plan to retire Holyrood?
In 2022, we served customers with more than 90 per cent of our energy coming from renewable sources.
We have been working to reduce the amount of energy generated at Holyrood, which means we are trying to reduce the amount of fuel burned. Even in the Labrador Island Link’s uncommissioned state in 2022, the Labrador Island Link helped reduce fuel burning at Holyrood with deliveries to Island customers. We expect this to improve in 2023 now that the Labrador Island Link has been commissioned and more energy can be delivered.
As we’ve stated for many years, we plan to keep Holyrood in-service while we monitor the Labrador Island Link’s reliability and determine if, and how much, “back-up supply” may be required.
Until these questions are answered, and to ensure we have a good understanding of how the Labrador Island Link will behave, we will keep Holyrood available. We believe this is the right path forward to ensure we continue to meet our customer’s expectation for reliable service.
Was the Labrador Island Link intended to transfer up to 900 MW? If so, why was it only tested to 700 MW?
Yes, the Labrador Island Link is planned to carry up to 900 MW, and we plan to complete testing up to 900 MW next winter season. It’s important to note that the functionality required for operating at 700 MW is the same as is required at 900 MW—there is no new software functionality required for operations above 700 MW. This is why it’s acceptable to consider the software commissioned as all functionality has been tested for commissioning purposes with completion of the recent 700 MW testing.
It’s also important to understand that assets would rarely be operated at maximum capacity—it would be rare to operate the Labrador Island Link at levels up to 900 MW, even in winter. We have dozens of assets we call upon to supply customer load. Deciding exactly what supply sources are on at any time involves many different considerations, such as how much water is in various reservoirs across the province, what units should be online for reliable supply purposes, or if any units are out of service for planned or unplanned reasons. This means the Labrador Island Link was never intended to be operated at its maximum level 24 hours a day, 365 days a year.
It’s an important resource, but customers should understand that it is only one component of our fleet of resources and will be used at different levels and times as deemed appropriate by the Newfoundland and Labrador System Operator to meet customer demand and export requirements.
Why do we hear about only some of what is happening behind the scenes at Hydro?
We are committed to communicating with the people of the province as much as possible – you’re why we’re here. It can be a complicated industry but it’s one we feel passionate about and we are so pleased when residents want to learn more.
The electricity industry in this province is “regulated”, which means that our work as the Province’s Crown Utility is subject to review and scrutiny by the Public Utilities Board. This includes both large and small projects and covers everything from operational decisions and system performance to capital budgets and customer rates. The Public Utilities Board also allows for other parties to comment and ask detailed questions, as intervenors in the process.
We produce a significant volume of documentation in the form of reports, plans, applications and evidence, all submitted to the Public Utilities Board for review—thousands of pages every year, with some shared through the Public Utility Board’s website. Some of this information is reported to the public by local media. For some of the larger decisions and statuses of our operations, we communicate directly to the public on key aspects of our work through in-person interviews with media, public statements, new releases, and public advisories. We strive to be open and transparent in all we do.
And that is why the Public Utilities Board’s involvement is so important. The regulatory process is meant to have significant oversight of what we do here at Hydro. This is the role of the Public Utilities Board, and they are very qualified to do so. And as necessary, they hire industry experts to bring additional perspective and expertise to support their oversight role.
Hydro welcomes and values these transparent regulatory processes.
Are there any outstanding issues with the synchronous condensers at Soldiers Pond or with winter operation of the Labrador Island Link?
Many components of the Lower Churchill Project, as many of our assets, will be in service for many years. We are working closely with our contractors to ensure these assets meet our expectation for long term reliable operations.
We will continue to thoughtfully investigate and understand these aspects before deciding on the best path forward that ensures these assets are ready to provide reliable service in the long-term.
Currently, all three synchronous condenser units at Soldiers Pond are available for service, aside from regular maintenance interruptions. We are also expecting all investigations relating to the damage of the Labrador Island Link last winter to be concluded by June 2023. Any recommended actions resulting from the investigation will then be implemented over an appropriate period of time.
We will continue report our progress in addressing these items to the Public Utilities Board each month.
Has the total cost of the project changed?
The last piece of information that was needed to determine the final project cost was the confirmation of the official commissioning date under our revenue agreements. Now that all project components have been commissioned, we are preparing the final project cost update reflecting the commissioning date of April 14, 2023 and will provide an update in the coming months.
What is Rate Mitigation and how will work?
Rate mitigation is a term used to describe plans developed and implemented by key stakeholders, including the Federal Government, the Provincial Government and Hydro, to address the impacts of Lower Churchill Project cost recovery on provincial ratepayers. This process has several steps.
1. The first major step was to secure funding to pay the debt servicing costs in the near term. In June 2021, Government announced the issuance of an additional $1 billion in federally guaranteed debt financing and agreement to access $1 billion in federal funding in the form of a Convertible Debenture. This $2 billion is being used to financially restructure the project. This was a major and critical step in the overall rate mitigation plan.
2. The next step involved commissioning the project.
a. Two components of the Lower Churchill Project, the Muskrat Falls Generating Station and the Labrador Transmission assets, were commissioned in late 2021. We began making payments under the Muskrat Falls Power Purchase Agreement in November 2021 and the Public Utilities Board approved a deferral account to set aside these additional costs until the rate mitigation plan was implemented. In March 2023, the Government of Newfoundland and Labrador provided approximately $190 million in rate mitigation funding to avoid these deferred costs that had accumulated up to the end of 2022 from being recovered from customers in the future.
b. The next commissioning step was to formally commission the last piece of the Lower Churchill Project—the Labrador Island Link, which was a condition required to access the $2 billion in funding noted above. With the receipt of the Commissioning Confirmation Certificate for the Labrador Island Link from the Lenders Representative, this is now complete, effective April 14, 2023.
3. The last step in rate mitigation is continuing to work closely with the Government of Newfoundland and Labrador to finalize how rate mitigation funding will be reflected in customer rates. Together, we are working through the complexities to appropriately integrate rate mitigation funding into the current rate setting processes.
The final rate mitigation plan will be reflected in our General Rate Application filing planned for 2024. There are no additional costs related to the Labrador Island Link or Muskrat Falls Generating Station reflected in Hydro’s Application for the July 1, 2023 Utility Rate Adjustment.