IN THE MATTER OF section 119.03 of the National Energy Board Act (the “Act”), and in accordance with section 9 of the National Energy Board Electricity Regulations made thereunder;
AND IN THE MATTER OF an application by the Saskatchewan Power Corporation (“SaskPower”) for a permit authorizing SaskPower to export electricity at points on the international boundary between Canada and the United States for the purpose of providing emergency assistance to neighbouring jurisdictions in the United States.
EMERGENCY POWER AND ENERGY EXPORT PERMIT APPLICATION
1. SaskPower hereby respectfully requests that the National Energy Board (the “Board”) grant a permit for the export of electricity at points on the international boundary between Canada and the United States, subject to the following terms and conditions: i. The term of the Emergency Power and Energy Export Permit shall commence on the date of issuance and shall be for a period of 10 years; ii. The quantity of energy that may be exported under the Emergency Power and Energy Export Permit shall not exceed 150 megawatts firm over any 60 minute period.
2. SaskPower is the principal supplier of electricity in the Province of Saskatchewan. SaskPower is a Provincial Crown Corporation incorporated under The Power Corporation Act (Saskatchewan) with its head office at 2025 Victoria Avenue, Regina, Saskatchewan, Canada S4P 0S1. SaskPower provides electric power to more than 439,000 customers over approximately 152,000 km of transmission and distribution lines within a service area of about 652,000 square km. SaskPower has 3,056 MW of installed generation capacity and purchases approximately an additional 454 MW from independent power producers with facilities within Saskatchewan.
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3. SaskPower is engaged in the generation of power from predominantly thermal sources and the transmission, distribution and sale of such power to wholesale and retail customers within Saskatchewan. SaskPower does not own or control any electric power generation or transmission facilities within the United States and does not have a furnished electric power service area within the United States. The power and duties of SaskPower are established by legislation, specifically The Power Corporation Act (Saskatchewan).
4. The Board’s approval of the emergency power and energy sale transfer permit being applied for herein will enable SaskPower to operate in parallel with its neighbours and to continue to fulfill its reliability obligations. When commercial remedies cannot be exercised in a timely manner, this will enable SaskPower to provide emergency assistance to jurisdictions in the United States, to the extent practical, as required by SaskPower pursuant to its reliability and interconnection standards.
5. Whenever situations render it necessary, in coordination with neighbouring control areas, SaskPower will facilitate electricity transfer to those jurisdictions requiring emergency assistance. The emergency energy quantities that SaskPower may be required to export to other jurisdictions are established based on, among other things, the needs of the entity or utility outside of Saskatchewan and the capability of the SaskPower system to deliver the energy reliably. Generators within the SaskPower-administered market are called upon to produce additional output and selected to supply the required quantities based on the most economic offerings. Generators are compensated based on the actual energy quantities they inject into the market, including any emergency energy export quantities that SaskPower requires.
Page 2 6. The actual rates, terms and conditions for emergency services provided are consistent with non-discriminatory access principles and are outlined in an Adjacent Balancing Authority Emergency Assistance Agreement between SaskPower and the Western Area Power Administration, Upper Great Plains Region (“WAPA”) dated December 4, 2007. Energy transactions under the Adjacent Balancing Authority Emergency Assistance Agreement are conditional on a number of items, including the granting of a permit by the Board to SaskPower respecting the sale transfer of emergency power and energy at points on the international boundary between Canada and the United States. WAPA is a Federal agency of the United States of America, acting by and through the Administrator, Western Area Power Administration, Department of Energy, an agency under the laws of the United States of America.
Reference to emergency energy sharing is also set out in the Adjacent Reliability Coordinator Coordination Agreement between SaskPower and the Midwest Independent Transmission System Operator, Inc. (“MISO”) dated October 7, 2008. Energy transactions under the MISO agreement are conditional on a number of items, including the granting of a permit by the Board to SaskPower respecting the sale transfer of emergency power and energy at points on the international boundary between Canada and the United States.
7. In support of this Application, SaskPower submits the following information as required by Section 9 of the National Energy Board Electricity Regulation and the Board’s Memorandum of Guidance.
(a) the names of the applicant and any authorized representative of the applicant and their mailing address, address for personal service, telephone number and any other telecommunications numbers of the applicant or the authorized representative of the applicant.
Page 3 Applicant:
SASKPOWER Law, Land, Regulatory Affairs 3W, 2025 Victoria Avenue Regina, Saskatchewan S4P 0S1 Facsimile: 306.566.3113 Telephone: 306.566.3111 Attention: General Counsel
Authorized Representative of SaskPower:
SASKPOWER Transmission Services SCC c/o 2025 Victoria Avenue Regina, Saskatchewan S4P 0S1 Facsimile: 306.566.3479 Telephone: 306.566.2949 E-Mail: transmission_services@saskpower.com Attention: Supervisor
Export and Import Reporting Contact Information:
SASKPOWER Transmission Services SCC c/o 2025 Victoria Avenue Regina, Saskatchewan S4P 0S1 Facsimile: 306.566.3479 Telephone: 306.566.2949 E-Mail: [email protected] Attention: Lynda Gamble, Supervisor
Cost Recovery Contact Information:
SASKPOWER Transmission Services SCC c/o 2025 Victoria Avenue Regina, Saskatchewan S4P 0S1 Facsimile: 306.566.3479 Telephone: 306.566.2949 E-Mail: [email protected] Attention: Lynda Gamble, Supervisor
Page 4 (b) a description of the applicant's power system, a copy of the applicant's latest annual report and, if applicable, the applicant's most recent publicly available generation or development plan.
SaskPower provides electric power to more than 439,000 customers over approximately 152,000 km of transmission and distribution lines within a service area of about 652,000 square km. SaskPower has 3,056 MW of installed generation capacity and purchases approximately an additional 454 MW from independent power producers with facilities within Saskatchewan.
A copy of SaskPower’s most recent Annual Report is attached as Exhibit “A1”. A copy of SaskPower’s 10-Year Transmission Development Plan is attached as Exhibit “A2”. A map showing SaskPower’s generation and transmission lines, and the point of interconnection of the international power line is attached as Exhibit “B”.
(c) a proof of publication of the notice.
A Notice of Application and Direction of Procedure (NOA/DOP) is being published on or about December 26, 2009 in the Canada Gazette, in both English and French. The Notice of Application and Direction on Procedure (NOA/DOP) will also be published in the following Saskatchewan daily newspapers:
The Regina Leader-Post; The Saskatoon StarPhoenix; and Gravelbourg Tribune (French).
The form of NOA/DOP is attached as Exhibit “C” and proof of publication will be forwarded following publication. In accordance with the Memorandum of Guidance, a copy of the tear sheet with the NOA/DOP as published will be sent promptly to the Board or in accordance with any Board Directive thereof.
SaskPower also is serving a copy of the Notice of Application and Direction of Procedure upon the following utilities in adjacent jurisdictions:
• Western Area Power Administration • Basin Electric Power Cooperative • Alberta Electric System Operator • ATCO Electric • Midwest ISO • Manitoba Hydro
Page 5
(d) the name of each person or agency outside Canada to be supplied with electricity and the nature of the business carried on by the person or agency or, if that information is unknown at the time of the application, a brief description of the markets to be served.
The agencies and utilities outside Canada that SaskPower is obliged to provide with emergency power and energy assistance, to the extent practical, whenever a state of emergency is declared in their jurisdiction and when commercial remedies cannot be brought to bear in a timely manner (e.g., during suspension of their market) are as follows:
(i) Western Area Power Administration, Upper Great Plains Region (“WAPA”) - WAPA is a Federal agency of the United States of America, acting by and through the Administrator, Western Area Power Administration Department of Energy, an agency under the laws of the United States of America. WAPA serves as the Balancing Authority in an area that includes transmission operators, electric utilities, and other utilities, including the American State of North Dakota transmission system.
(ii) Midwest Independent Transmission System Operator, Inc. (“MISO”) - MISO is a non-profit regional transmission organization that provides industry consumers with unbiased regional grid management and open access to the transmission facilities under MISO's functional supervision. MISO also operates as a Reliability Coordinator for a region that is adjacent to SaskPower.
(e) in the case of a sale transfer, the period for which the permit is sought and, for each year in that period, an estimate of the following quantities, namely.
(i) the maximum quantity of firm power export and import;
SaskPower is seeking a 10-year export permit to facilitate emergency power requirements. To the extent practical, SaskPower seeks to provide emergency assistance across any and all international power lines under its control and for which the Board has, or will issue a Certificate of Public Convenience and Necessity, or Permit. Over a wide range of operating conditions, the estimated firm power that may be exported is 150 MWs over any 60 minute time period.
(ii) the maximum quantity of combined firm power and interruptible power export and import,
Page 6 150 MWs firm over any 60 minute time period.
(iii) the maximum monthly and annual quantities of firm energy exports and imports, and
150 MWs firm over any 60 minute time period.
(iv) the maximum monthly and annual quantities of interruptible energy exports and imports;
150 MWs firm over any 60 minute time period.
(f) in the case of an equichange transfer, storage transfer, adjustment transfer or carrier transfer, a statement of the annual quantities of energy for exportation and for importation for each class of transfer for the period for which the permit is sought;
Not Applicable
(g) a copy of any electricity transfer agreement that covers the proposed exportation of electricity;
The agreements covering emergency power and energy export assistance are as follows:
1. WAPA - Adjacent Balancing Authority Emergency Energy Assistance Agreement (see attached Exhibit “D”); and
2. MISO - Adjacent Reliability Coordinator Coordination Agreement between SaskPower and the Midwest Independent Transmission System Operator, Inc. (see attached Exhibit “E”).
(h) where no agreement exists, a statement of
(i) the estimated maximum duration of specific exports and the basis for that estimation, and
Not Applicable
(ii) the period of time for which the permit is sought and the basis for the selection of that period of time;
Not Applicable
Page 7 (i) a list of the international power lines over which the applicant proposes to export or import electricity, setting forth in respect of each line
(i) the number of the certificate or permit issued by the Board,
SaskPower proposes to export Emergency Energy over the transmission lines for which the National Energy Board has issued a Certificate of Public Convenience and Necessity, EC-III-19 dated June 22, 1979 and subsequent Amendment dated October 21, 1982. See attached Exhibit “F”.
(ii) the name of the holder of the certificate or permit,
Saskatchewan Power Corporation
(iii) the name of the owner of the power line outside Canada,
Basin Electric Power Cooperative
(iv) the voltage level and operating designation of each circuit, and
B10T (Boundary Dam to Tioga) is a three-phase circuit line insulated for 230 kV, 60 hertz operation.
(v) the maximum power transfer capability of each circuit and the basis for that limit;
The estimated total normal simultaneous transfer capability of the major power circuit interconnecting Saskatchewan and North Dakota, USA is approximately 150 MW. The transfer capability of this line is based on the rating of the phase-shifting transformer operating between Saskatchewan and North Dakota. Total transfer capability of this circuit is normally a function of, among other things, its security operating limit and ambient conditions.
SaskPower seeks to provide emergency assistance and seeks flexibility to export electricity and power across any and all international power lines under its control and for which the Board has issued, or will issue a Certificate of Public Convenience and Necessity, or Permit. Since all of the major power lines between Saskatchewan and North Dakota would be operated in parallel, it is appropriate to consider a single emergency power and energy sale transfer permit for this logical grouping of lines.
Page 8
(j) the total simultaneous power transfer capability under normal operating conditions for all of the international power lines listed in accordance with paragraph (i) and the basis for that limit; The estimated total normal simultaneous transfer capability of the major power circuit interconnecting Saskatchewan and North Dakota, USA is approximately 150 MW. The transfer capability of this line is based on the rating of the phase-shifting transformer operating between Saskatchewan and North Dakota. Total transfer capability of this circuit is normally a function of, among other things, its security operating limit and ambient conditions.
(k) a description of the approvals required for the importation of electricity into the United States, and a statement respecting the current status of the approvals; In the MISO and WAPA agreements attached there is a condition that SaskPower receive a Presidential Export Permit from the United States Department of Energy. SaskPower now understands that this permit is not required by the United States of America, The Department of Energy Office of Fossil Energy-Authorization to Transmit Energy to Canada and for Expedited Action. As the permit is not required, the parties plan to enter into amending agreements to waive this condition.
(l) a description of the provincial approvals that are required to be obtained by the applicant, and a statement respecting the current status of the approvals; SaskPower is not required to obtain any additional approvals for the provision of emergency assistance to neighbouring jurisdictions beyond the Board’s emergency power and energy sale transfer permit. SaskPower’s authorization to engage in such activities is enshrined in legislation, specifically The Power Corporation Act (Saskatchewan).
(m) a description of the review process applicable to each provincial approval that must be obtained, including
(i) a description of any public consultation provided for under the review process, and
See SaskPower’s response to part (c) above.
(ii) a schedule for the review process;
See SaskPower’s response to part (c) above.
Page 9 (n) whether new or modified facilities will be required to effect the proposed exportation of electricity and, if applicable, a detailed description of those facilities; None
(o) the adverse environmental effects resulting from the proposed exportation of electricity, and the measures to be taken to mitigate any of those environmental effects; There will be no environmental effects resulting from the applied-for permit since there are no new or modified facilities required to effect the proposed exportation of electricity.
(p) a description of any adverse effects that the proposed exportation of electricity could have on the operation of any power system in neighbouring provinces; None (q) where the application specifies the terms and conditions of the proposed exportation of electricity, a description detailing the manner in which the applicant;
(i) has informed those persons who have declared an interest in buying electricity for consumption in Canada of the quantities and classes of service available for sale, and
SaskPower operates in conjunction with neighbouring systems to fulfill its reliability obligations. SaskPower is the Balancing Authority for Saskatchewan and is in constant communication with all directly connected systems in Canada and the United States.
SaskPower will serve a copy of the NOA/DOP on all interconnected utilities.
(ii) has given those persons who have demonstrated an intention to buy electricity for consumption in Canada after having been so informed, an opportunity to purchase electricity on terms and conditions, including price, as favourable as the terms and conditions specified in the application; See section 7(q)(i) above.
(r) where the application does not specify the terms and conditions of the proposed exportation of electricity a description, including supporting documentation, detailing the manner in which the
Page 10 applicant
(i) will inform those persons who declare an interest in buying electricity for consumption in Canada of the quantities and classes available for sale, and
N/A
(ii) will give those persons who demonstrate an intention to buy electricity for consumption in Canada after having been so informed, an opportunity to purchase electricity on terms and conditions, including price, as favourable as the terms and conditions of the export. N/A
ADDITIONAL INFORMATION REQUIREMENT PURSUANT TO APPENDIX III OF THE MEMORANDUM OF GUIDANCE
1(a) whether any new facilities are required in regard to the Applicant’s proposed electricity exports, and a detailed description of those facilities;
None
(b) whether modifications to existing facilities would be undertaken in regard to the Applicant’s proposed electricity exports, and a detailed description of those modifications;
None
(c) whether there would be any changes to the operation of existing facilities in regard to the Applicant’s proposed electricity exports, and a detailed description of those changes;
None
(d) the adverse environmental effects of the new facilities, modifications or changes in operation described in (a), (b) and (c); and
None
(e) any measures to be taken to mitigate the adverse environmental effects described in (d).
Page 11 None
2 If the Applicant is unable to provide information in response to any of 1 (a) to (c) the Applicant should explain why not, and if it will be able to provide this information at any time in the future, and if so, when.
N/A
WHEREFORE, in consideration of the forgoing, SaskPower respectfully requests that the Board consider this application expeditiously and approve the request for the emergency sale transfer export permit.
RESPECTFULLY SUBMITTED ON THIS 17TH DAY OF DECEMBER, 2009
~~ Name: Michael J. Harmel Title: Senior Legal Counsel Saskatchewan Power Corporation
Page 12 Exhibit “A1” SaskPower Annual Report 2008
11 SaskPower PowerinQ lhe lulU'"
Page 13 FRONT COVER The energy of strategic planning and partnerships
In a year of record new service applications, customer connects and peak load, SaskPower continued to develop a well-balanced corporate strategy that will secure our electrical infrastructure and the confidence of our customers.
Doug Opseth, Supervisor, joined his colleagues in Supply Development to launch a new procurement process that is cultivating opportunities for private ownership and investment in new generation facilities. It’s just one example of our company’s efforts to empower partners, customers and employees in shaping our shared future. STRATEGIC DIRectIOn Vision People, innovation and partnerships . . . powering Saskatchewan to a bright future.
Mission Safe, reliable and sustainable power for our customers.
Values Responsive, respectful, progressive and accountable in everything we say, do and offer.
Priorities 1. Proud and productive employees. 2. Loyal and satisfied customers. 3. Dependable and secure infrastructure. 4. Strong environmental stewardship and performance. 5. Prudent financial management and growth.
CORPORATE PROFILe As the principal supplier of electricity in Saskatchewan, SaskPower serves more than 460,000 customers and manages $4.5 billion in assets. We have a team of over 2,500 permanent full-time employees located in 71 communities.
Our company operates three coal-fired power stations, seven hydroelectric stations, four natural gas stations and two wind facilities with an aggregate generating capacity of 3,172 megawatts (MW). SaskPower also has purchase agreements with the Meridian cogeneration Station, cory cogeneration Station, SunBridge Wind Power Project and nRGreen Kerrobert, Loreburn, estlin, and Alameda Heat Recovery Projects. total available generation capacity is 3,641 MW.
SaskPower maintains more than 156,000 kilometres of power lines, 52 high voltage switching stations and 182 distribution substations. We also operate three wholly-owned subsidiaries — northPoint energy Solutions, SaskPower International and SaskPower Shand Greenhouse. STRATEGIC PROGRESS OuR yeAR At A GLAnce
At our company, five new Strategic Priorities are guiding SaskPower’s ongoing quest for innovation and service excellence.
1. Proud and productive employees. • corporate Diversity Strategy developed and rolled out. • Respectful Workplace Policy launched. • Leadership succession planning and skill-specific training initiatives continue. • Deployment of new P25-compliant mobile radio dispatch system concluded in southern half of the province.
2. Loyal and satisfied customers. • Record $103 million spent on new customer connects. • Record 16,162 new service applications. • First full year of Service Delivery Renewal Program completed. • Over 200,000 compact fluorescent light (cFL) bulbs distributed in communities across Saskatchewan. • Geothermal and Self-generated Renewable Power Loan Program introduced. • Funding for energy efficiency for new Homes Rebate Program and net Metering Program enhanced.
3. Dependable and secure infrastructure. • Record peak load of 3,194 megawatts (MW). • Integrated supply and transmission plan development begins. • Wind Power Integration and Development unit formed. • comprehensive north American electric Reliability corporation audit conducted. • three 5-MW waste heat recovery units commissioned. • contracts for the installation of 94 MW of natural gas-fired generation at the ermine Switching Station awarded. • natural gas-fired units of 105 MW at Queen elizabeth Power Station and 141 MW at a location near north Battleford planned. • Red Lily Wind Power LP 25-MW power purchase agreement finalized, with commissioning expected in 2011. • $125-million major upgrade of Poplar River Power Station unit #1 concluded. • La Ronge corridor 72-kilovolt (kV) line rebuild completed. • Pelican narrows 110-25 kV substation constructed.
4. Strong environmental stewardship and performance. • One of the first and largest fully integrated carbon capture and sequestration demonstration projects in the world announced. • environmental Screening System evaluates environmental impacts and legal requirements for unprecedented number of projects. • national environmental stewardship award for emissions control Research Facility received from industry peers. • Groundbreaking fish and fish habitat protocol agreement established. • united nations sustainability award for SaskPower Shand Greenhouse programming received.
5. Prudent financial management and growth. • Operating income of $92 million and dividends of $46 million. • Per cent debt ratio of 60.7%. • new Independent Power Producer solicitation process launched. • Over $1-billion spent on Saskatchewan goods and services. $200
STRATEGIC RESULTS 151 150 FInAncIAL AnD OPeRAtInG HIGHLIGHtS 131
FInAncIAL InDIcAtORS 100 93 97 92 85 (in millions) 2008 2007 change 66 59 61 Revenue $ 1,489 $ 1,469 $ 20 50 46 Operating costs1 1,397 1,318 79 Operating income1 92 151 (59) net income 64 138 (74) 0 Dividends 46 97 (51) 04 05 06 07 08 capital expenditures 422 280 142 OPERATING INCOME AND DIVIDENDS (in millions) Gross long-term debt 2,578 2,565 13 I OPERATING INCOME I DIVIDENDS
$1,600 18,500 Operating return on equity2 5.9% 10.1% (4.2)% 1,385 Return on equity3 4.2% 9.3% (5.1)% 1,356 4 1,269 18,000 Per cent debt ratio 60.7% 59.7% 1.0% 1,181 1,200 1,132 1. Operating costs and operating income are non-GAAP measures, whose nearest GAAP measures are 17,500 total expense and net income respectively. Operating costs and operating income provide management and shareholders with measurements of operating performance which are readily 800 comparable from period to period. Refer to the non-GAAP measures section on page 55 of the 17,000 Management’s Discussion & Analysis for further discussion of these items. 400 2. Operating return on equity = (operating income)/(average equity), where average equity = [(equity 16,500 advances + retained earnings – unrealized natural gas risk management activities at year-end) + (equity advances + retained earnings – unrealized natural gas risk management activities at previous year- 0 16,000 end)/2]. 0404 05 06 07 08
3. Return on equity = (net income)/(average equity), where average equity = [(equity advances + retained SASKATCHEWAN ELECTRICITY SALES earnings at year-end) + (equity advances + retained earnings at previous year-end)/2]. I SASKATCHEWAN ELECTRICITY SALES (IN MILLIONS) I SASKATCHEWAN ELECTRICITY SALES (GWh) 4. Per cent debt ratio = (debt)/(debt + equity), where debt = (long-term debt + current portion of long- term debt – debt retirement funds – cash and cash equivalents). $600 20,800 554 20,600 478 478 459 463 SASKPOWeR SuBSIDIARIeS’ net IncOMe 20,400 400 (in millions) 2008 2007 change 20,200 SaskPower International $ 21 $ 19 $2 20,000 northPoint energy Solutions 18 13 5 19,800 200 19,600 OPeRAtInG StAtIStIcS 19,400 0 19,200 (GWh) 2008 2007 change 0404 05 0606 07 0808 Saskatchewan electricity sales 18,192 17,923 269 FUEL AND PURCHASED POWER exports 409 851 (442) I FUELANDPURCHASEDPOWER(INMILLIONS) Total electricity sales 18,601 18,774 (173) I GROSSELECTRICITYSUPPLIED(GWh)
Gross electricity supplied 20,480 20,571 (91) Line losses (1,879) (1,797) (82) Net electricity supplied 18,601 18,774 (173) electricity trading purchases 1,861 1,909 (48) Line losses (48) (12) (36) Electricity trading sales 1,813 1,897 (84)
One gigawatt hour (GWh) is equivalent to the energy consumed by 125 typical houses in one year.
2008 CAPITAL EXPENDITURES – $422 million I GENERATION 49% I OTHER 9% I TRANSMISSIONAND DISTRIBUTION 42% CONTENTS
IntRODuctIOn SaskPower subsidiaries 51 Letter of transmittal/Minister’s Message 01 Off-balance sheet arrangements 52 chair’s Message 02 Related party transactions 52 President’s Message 04 Analysis of critical accounting polices and estimates 53 Future accounting policy changes 55 non-GAAP measures 55 OuR yeAR AnD StRAteGIc PRIORItIeS Risk management 55 Setting a powerful strategic course 07 Proud and productive employees 08 cOnSOLIDAteD FInAncIAL StAteMentS & nOteS Loyal and satisfied customers 10 Dependable and secure infrastructure 12 Report of Management 62 Strong environmental stewardship Auditors’ Report 63 and performance 15 consolidated statement of income Prudent financial management and growth 17 and retained earnings 64 consolidated statement of financial position 65 consolidated statement of comprehensive income 66 cORPORAte GOVeRnAnce consolidated statement of accumulated other the governance structure of our company 19 comprehensive (loss) income 66 evaluating our governance performance 21 consolidated statement of cash flows 67 notes to the consolidated financial statements 68 MAnAGeMent’S DIScuSSIOn & AnALySIS Five-year financial summary 88 Five-year revenue statistics 89 Introduction 30 Five-year generating and operating statistics 90 Key performance drivers and targets 32 Results from operations 36 Discussion of quarterly results 45 SySteM MAP 91 Financial condition 46 Liquidity and capital resources 47 Outlook 50 MINISTER’S MESSAGE
It continues to be an exciting, rewarding time in our Crown sector for CIC and its 12 subsidiary Crown corporations.Three Crowns were recognized for excellence in diversity by Macleans magazine. In addition, six Crowns were among Saskatchewan’s Top 15 Employers for 2009, as selected by the editors of Canada’sTop 100 Employers. I take pride in the fact that our Crowns’ workforces reflect our communities and are recognized as exceptional places to work.
For SaskPower and its employees, 2008 was very much a year spent at the vanguard of a growing provincial economy. Record customer connects, new service applications and peak load provided strong evidence of the re-energized economic environment within Saskatchewan’s borders. SaskPower responded by successfully meeting the unique needs of customers large and small, all the while continuing to focus on a mission of providing safe, reliable and sustainable power.
My priority for the future remains the same: to ensure that Saskatchewan’s Crown corporations remain publicly owned and provide LETTER OF TRANSMITTAL high quality services at a low cost.This is a promise our Government Regina made to the people of Saskatchewan, and it is a promise we will keep.A March 2009 current theme in the Crown sector that I expect to continue is growth. By that I mean the changes required within the Crowns to sustain and support Saskatchewan’s economic momentum.These changes range from To His Honour investing in new infrastructure to expanding various services in line with The Honourable Dr. Gordon L. Barnhart, S.O.M., PhD the demand from both our residential and business communities. Lieutenant Governor of Saskatchewan Our new Saskatchewan First investment policy for the Crowns also Province of Saskatchewan reflects this theme.The policy recognizes that our growing economy presents increasing opportunity for investing in our own province.We will continue to move in that direction. Sir: We understand that readily available and affordable energy remains at the I have the honour to submit herewith the Annual foundation of maintaining current and future economic growth.As a Report of the Saskatchewan Power Corporation for the result, in 2009 SaskPower will make the single largest investment in year ended December 31, 2008.The report includes the history — $954 million — in our province’s electrical system.With more financial statements for the year in the form approved than $8 billion in projected spending to 2018, we are steadfastly by the Treasury Board, duly certified by the auditors of committed to the long-term revitalization and expansion of our electrical Saskatchewan Power Corporation, all in accordance infrastructure.We believe the resulting strategically-directed expenditures with The Power Corporation Act. will go a long way toward securing the future of families, farms and I have the honour to be, Sir, your obedient servant, businesses throughout Saskatchewan. As you will see in this report, our Crown sector is financially healthy and ready to meet the challenges and opportunities of the coming years.
I am pleased to present SaskPower’s 2008 Annual Report.
Honourable Ken Cheveldayoff Minister of Crown Corporations
Honourable Ken Cheveldayoff Minister of Crown Corporations
SASKPOWeR AnnuAL RePORt 2008 1 CHAIR’S MESSAGE Strategic thinking By any measure, 2008 was an exceptional year. Faced with unprecedented growth in Saskatchewan, extraordinary demands were placed on SaskPower’s infrastructure and services. Meanwhile, in tandem with increased fuel and purchased power expenses, rising operating costs resulted in a decline in operating income to $92 million. Still, our company met the challenges it faced.We were able to declare $46 million in dividends to the Crown Investments Corporation of Saskatchewan while powering our province’s growing economy.
Going forward, continuous improvement and service excellence are top of mind.We see ourselves as a fundamentally important part of the infrastructure necessary to sustain economic growth in our province. Our long-term goal is to become one of Canada’s leading utilities through outstanding performance in a variety of areas — customer service, dependable infrastructure, environmental responsibility, financial management, employee satisfaction, safety, and community involvement.We are making great strides on many fronts. However, we have much to accomplish in the months and years ahead.
ANAGGRESSIVEPLAN with our Strategic Priorities. Specific measures provide us In the business world, companies can’t count on luck. with yearly targets in areas such as employee engagement, Successful outcomes hinge on an energetic corporate culture customer satisfaction, new generating capacity, Demand Side and rigorous preparation. During the year, our Board of Management, and return on equity. Directors, senior management, and employees spent a great deal of time discussing, analyzing and revising our corporate ANENTERPRISINGVISION strategic direction. Our goal — to design a winning formula In addition to introducing our company’s new Strategic for addressing an array of challenges that range from preparing Priorities, we have added partnerships to people and our future workforce to meeting the need for cleaner sources innovation as primary ingredients in meeting our vision: of electricity. “Powering Saskatchewan to a bright future.”Whether it be through alliances with the private or public sectors, As a result of our collaborative efforts, we are entering 2009 collaboration will be critical in enhancing our financial with a new Strategic Plan that will make us a stronger capacity, facilitating risk sharing, as well as providing access to company.At the heart of our blueprint for the future is a set cutting-edge technologies and expertise. of five Strategic Priorities that will drive our immediate success and help us build toward the achievement of our A newly-launched generation procurement process is long-term vision: providing a more streamlined and open approach to finding private sector partners to provide peaking and base load 1. Proud and productive employees. generation.We have also introduced a Wind Power Integration 2. Loyal and satisfied customers. and Development Unit to study and assess the effect of wind 3. Dependable and secure infrastructure. power on the provincial system.This group invited developers 4. Strong environmental stewardship and performance. with experience in wind monitoring to participate in a 5. Prudent financial management and growth. Saskatchewan Wind Data Study that will feed the We are enhancing the transparency of our company’s activities development of a Wind Power Deployment Strategy in 2009. by tracking our progress through a new Corporate Balanced Meanwhile, we’re continuing to source as many goods and Scorecard. Presented in the Management’s Discussion and services as possible though Saskatchewan companies. In 2008, Analysis section of this annual report, it is directly aligned SaskPower purchased over 73% of all requirements from
2 SASKPOWeR AnnuAL RePORt 2008 “We have a clear strategy and a set of targets that will position us to continue to deliver safe, reliable, sustainable and affordable power while becoming even more customer driven and entrepreneurial.”
within our borders while also developing a new policy to employees. I would like to recognize them for bringing the promote more involvement by Aboriginal businesses. characteristics of SaskPower’s values statement to life: responsiveness, respectfulness, progressiveness, and A FIRM FOUNDATION accountability. I would also like to thank my fellow Board Our company’s balance sheet remains strong. SaskPower has a Members, our shareholder, customers, and partners as we per cent debt ratio of 60.7%, one of the lowest among prepare our company for tomorrow. government-owned utilities in Canada. In the future, we will strive to generate enough revenue to support the revitalization of our company while simultaneously delivering on our commitment to maintain regionally competitive rates.
To augment our primary Saskatchewan-based revenue stream, we will look to our subsidiary NorthPoint Energy Solutions to develop a growth strategy to further build on its success in energy trading. However, in line with the Government of r. . '; .:::-:, ~ .... ~ Saskatchewan’s policy of focusing within Saskatchewan for .. ' capital investments, our other subsidiary — SaskPower Joel Teal International — has been wound down. Chair, Board of Directors
ABRIGHTFUTURE When it comes to SaskPower, the outlook is positive.We have a clear strategy and a set of targets that will position us to continue to deliver safe, reliable, sustainable and affordable power while becoming even more customer driven and entrepreneurial.
However, our fortunes are not just dependent on goals and measures. In fact, our future is almost solely dependent on our
SASKPOWeR AnnuAL RePORt 2008 3 PRESIDENT’S MESSAGE Strategic initiatives In 2008, SaskPower experienced yet another year of firsts. A record peak load of 3,194 megawatts (MW) was achieved, a record 16,162 new service applications were received, and a record $103 million was spent on customer connects.
These firsts allowed for an impressive demonstration of our company’s true strength — our employees.Their dedicated response to tremendous growth in demand for our services occurred throughout all areas of SaskPower.As always, they kept our system online through numerous extremes. From engineering an aggressive timeline for the addition of new generating units to battling severe weather and protecting facilities from forest fires, our employees were unwilling to fail.
DYNAMIC GROWTH provincial target of reducing greenhouse gas emission levels. During this unparalleled year, Saskatchewan electricity sales How we address these challenges will play a large role in increased to 18,192 gigawatt hours and we added 8,293 new shaping the company we are to become. customers. In 2009 and beyond, our company’s resilience will As we add new supply and rebuild old infrastructure we have continue to be tested.We realize the economic situation of the opportunity to create a new SaskPower — one that is our province and customers will remain fluid.As a result, we even more sustainable.We are committed to balancing the will have to be highly adaptive. need to introduce cleaner sources of energy while maintaining While we continue to execute plans to meet the recent security of supply and financial stability. growth in demand for electricity, we will also need to Our strategies will centre on private and public partnerships revitalize much of our generation, transmission, and that strengthen our company’s knowledge base, flexibility in distribution infrastructure.With that in mind, in the next year making choices, and economic foundation. SaskPower’s new capital expenditures are expected to jump to a record $954 competitive generation procurement process will ensure we million — more than double the previous high. meet peaking needs in 2011 and base load needs beginning in In addition to developing a new corporate Strategic Plan that 2012 by partnering with private sector developers. ensures we are aligned with the direction sought by our new In our industry, environmental progress begins with exhaustive Board of Directors and shareholder, the year also saw research and development. In 2008, our Emissions Control enhanced preparation targeting specific areas of our business. Research Facility (ECRF) at Poplar River Power Station was We are taking a longer-term financial outlook for planning recognized with the Canadian Electricity Association’s purposes, which allows us to better anticipate and prepare for Environmental Commitment and Responsibility Program future challenges while we seek to maximize cost efficiencies. Stewardship Award. Meanwhile, we are also engaged in long-term integrated transmission and generation supply planning that will define a Our ECRF is acknowledged as a leading North American roadmap for Saskatchewan electricity system and shape our centre for the study of mercury emissions control.The facility capital requirements. is also evaluating technology related to carbon dioxide, sulphur dioxide and nitrogen oxides. SaskPower’s aggressive research INNOVATIVE TECHNOLOGIES, into the future of fossil fuels continues in other areas, with our company assessing the potential development of one of the PARtneRSHIPS AnD PROceSSeS first and largest fully integrated carbon capture and Emissions are a critical issue for SaskPower.We recognize the sequestration demonstration projects in the world at Boundary leadership role we must take in supporting the Government of Dam Power Station. Saskatchewan’s Go Green Program and in meeting the
4 SASKPOWeR AnnuAL RePORt 2008 “As we add new supply and rebuild old infrastructure we have the opportunity to create a new SaskPower — one that is even more sustainable.”
In the future, the kinds of generation we consider will be of initiatives.These include a Performance Management lower and non-emitting sources, such as the three 5-MW Program, Respectful Workplace Policy, Diversity Strategy, waste heat recovery units added to our system this year in Succession Planning Program and expanded supervisory partnership with NRGreen Power.We will also continue training. working closely with customers to reduce demand by 100 megawatts by 2017 through a growing number of AN ENERGETIC RESULT programs under our SaskPower Eneraction Demand Side Recent Canadian Electricity Association public attitudes Management umbrella. research shows SaskPower scoring higher overall customer satisfaction than the national average.The trust that all of our LEADERSHIPANDTEAMWORK customers demonstrate in our company is something on Our focus on customers also extends to enhancing the quality which we will continue to build. of their experience with our company. Our Service Delivery Our ongoing success is not the result of a singular Renewal Program is redesigning and modernizing SaskPower’s achievement or a particular individual. Instead, it is the business processes and will involve significant investments in consequence of an enterprising company-wide strategy and technology to achieve efficiency and service improvements. team of many that includes employees, partners and customers. The spike in customer requests during this extraordinary year The challenges associated with growth and revitalization will caused us to speed the internal examination of our processes be omnipresent in 2009. However, we are ready to capitalize to ensure we could support our developing economy.A on the opportunities those challenges present. significant change involves our policy for connecting to our transmission system. Because of streamlining, large customers are experiencing a much quicker turnaround time for receiving cost estimates and construction start times are being accelerated.
Throughout all of the rapid change occurring at SaskPower, people remain our number one Strategic Priority.We are putting into place significant building blocks that will strengthen our employees’ work experience by addressing concerns emerging from engagement surveys.And we are Pat Youzwa preparing our present and future workforce through a number President and Chief Executive Officer
SASKPOWeR AnnuAL RePORt 2008 5 6 SASKPOWeR AnnuAL RePORt 2008 Setting a powerful strategic course
not every journey requires a map. But when the success of your business directly impacts the quality of life for an entire province, it’s essential to have a sound strategy. And that plan must allow you to adapt to changing conditions while delivering responsible growth, innovative solutions and service excellence.
In 2008, our company continued to hit a number of new marks — record peak load, record customer connects and record service applications. All are reflective of an unprecedented operating climate of expansion and revitalization.
SaskPower’s new Strategic Plan provides us with the clear avenue needed to meet present and future challenges. It outlines a 10-year trajectory that provides a common route for achieving our company’s long-term vision by using a combination of people, innovation and partnerships to power Saskatchewan to a bright future. And it provides us with the means for measuring progress as we strive to meet our mission of providing safe, reliable and sustainable power to our customers.
SASKPOWeR AnnuAL RePORt 2008 7 The road ahead: Strategic thinking that leads to a strategic outcome
Our strategic path is redefined each year, with input from our employees, executive and the Board of Directors. It is also aligned with the direction of the crown Investments corporation and Government of Saskatchewan. Presently, five new Strategic Priorities are providing us with a definitive and dynamic central focus as we work to become one of canada’s most progressive utilities.
STRATEGIC PRIORITY 1 PROuD AnD PRODuctIVe eMPLOyeeS Everything our company achieves springs from the efforts of the dedicated people that drive our day-to-day operations.As a result, we are placing a primary emphasis on our current and future personnel.We will build on a proud past by cultivating a workforce that is highly skilled, responsive, passionate, and committed to preserving the trust people invest in us.
During 2008, our company continued to direct significant In response, we are continuing with a variety of initiatives. attention to improving employee engagement.Typically, The Supervisory Essentials course, which includes an online engaged employees say positive things about their company, support tool, is mandatory for all in-scope and out-of-scope want to keep working for their company and strive to do their supervisors.The curriculum aligns with the feedback received best work so that their company succeeds. In comprehensive from employees.Training includes communication, coaching, surveys, SaskPower employees have identified areas with the goal setting and recognition. greatest potential for improvement: senior leadership, Employee engagement surveys have also identified the need for recognition and performance management. an enhanced work environment.As a result, our company
8 SASKPOWeR AnnuAL RePORt 2008 David Gwilliam, Supervisor, Recruitment
Strategic human resource initiatives — including Succession Planning and a Performance Management Program — are helping develop SaskPower’s future workforce.
developed and introduced a new Respectful Workplace Policy employees. Meanwhile, targets for diversity attraction and in collaboration with our two unions — the International retention were exceeded for a second straight year, while Brotherhood of Electrical Workers Local 2067 and partnerships were announced with the Saskatchewan Indian Communications, Energy and Paperworkers Local 649. Institute of Technologies and Saskatchewan Abilities Council Guidelines underscore the need to create an environment Partners in Employment. where the values of respect, trust, fairness, integrity, Protecting the safety of our employees is also a key to making consideration, acceptance and dignity lead all actions. In SaskPower a preferred place to work. Our Safety Management support of the new policy,respectful workplace training has System is registered under the demanding OHSAS 18001 been developed and is required for all employees. standard. In addition, ongoing communication, training and a With almost one-third of SaskPower’s workforce projected to comprehensive set of policies and standards are designed to retire within the next 10 years, effective employee recruitment, support the belief that all accidents are preventable. retention and development remains critical. Leadership SaskPower is continuing to partner with the Royal Canadian succession planning, workforce planning and skill-specific Mounted Police on the creation of a P25-compliant mobile initiatives — such as the Engineers-In-Training Program and communications radio dispatch system, with implementation Powerline Apprenticeship Program — are all contributing to now complete in the southern half of the province. Because the strengthening of our company’s human resources. our company uses radio as the primary means of SaskPower is also moving closer to creating a workforce more communication and dispatch for service and trouble calls, the representative of the communities we serve. During the year, a security and reliability of the new system will be integral as we new corporate Diversity Strategy was developed and concentrate on enhancing employee safety. introduced by senior leaders at 10 events throughout the province.The strategy calls for the creation of a culture of inclusion that recognizes and values the abilities of all
SASKPOWeR AnnuAL RePORt 2008 9 25,000,000 Kilowatt hours saved per year due to SaskPower energy Performance contracting Service projects.
STRATEGIC PRIORITY 2 LOyAL AnD SAtISFIeD cuStOMeRS As a company we exist for one simple reason — to fulfill our commitment to provide safe, reliable and sustainable power.Today,we recognize that we must meet the challenge of rising customer expectations and the revitalization of an aging SaskPower infrastructure.As a result, we are focusing on making it easier for customers to do business with us and providing service that is convenient and responsive.
In 2008, SaskPower completed is first full year of the Service Our Power Savings advertising campaign also educated Delivery Renewal (SDR) Program, a multi-year initiative that customers about CFLs, as well as how to manage their power is transforming the way we do business. It involves a redesign costs and help the environment by switching to ENERGY of the way we interact with customers. From the initial point STAR® qualified appliances.A Seasonal LED Exchange of contact to the final delivery of service, the program involves Program also ran at 33 retail stores, with residents encouraged a multi-million dollar investment in processes, technology, to bring in old incandescent strings in exchange for a coupon people and management practices. SDR will result in to be used toward energy efficient LED replacements. Over improved communication with customers and a higher overall 24,000 old inefficient light strings were collected and 12,000 level of productivity,as well as enhanced timeliness, consistency, LED light string coupons distributed. choice and reliability of service. Our company’s Energy Performance Contracting (EPC) A strengthened Demand Side Management (DSM) Program at Service is also part of SaskPower Eneraction. It assists our company is also expected to increase overall customer commercial and institutional customers in reducing energy- satisfaction. SaskPower Eneraction — a portfolio of energy related operating costs through efficiency upgrades. In 2008, efficiency,conservation and load management programs — is EPC contracts were signed with Prince Albert Parkland Health leading the way.In addition to targeting residential customers, Region and Sunrise Health Region. In addition, a new the initiative is directed at assisting commercial and industrial contract was signed with the Government of Saskatchewan customers to deliver a total 100 megawatts (MW) of savings Ministry of Government Services. over 10 years. Overall, these new projects will produce $6.5 million in During 2008, our company teamed with 1,100 local construction and $575,000 in annual energy savings. Since the volunteers to deliver over 200,000 compact fluorescent light inception of EPC, service has been provided to 24 projects at (CFL) bulbs in 110 communities throughout Saskatchewan. schools, hospitals, hotels, office buildings and a variety of The estimated annual effect is: 12,000,000 kilowatt hours (kWh) government facilities.To-date, these projects are saving 25 of energy savings; 9,000 tonnes of greenhouse gas (GHG) million kWh per year. reductions; and a 6-MW decrease in demand.
10 SASKPOWeR AnnuAL RePORt 2008 Rebecca Fiissel, Leader, SaskPower eneraction
When it comes to residential customers, our company’s Demand Side Management initiatives focus on home energy efficiency.
SaskPower Eneraction has introduced a Geothermal and Self- working in the areas of education, environment, diversity and generated Renewable Power Loan Program to encourage community involvement (culture, sports and recreation). smaller-scale, environmentally responsible generation. Eligible During the year, contributions helped to fund and support homeowners and farm customers can receive a loan for up to hundreds of events, activities and initiatives across the province. $25,000 for installing a geothermal system, as well as a loan of SaskPower is a presenting sponsor of Skills Canada up to $25,000 for installing a renewable system. Saskatchewan, a partnership of business, labour, education, SaskPower is also promoting its funding enhancements of the government and students that works to promote the existing provincial Energy Efficiency for New Homes Rebate development of technology and trade-based skills.We also Program and Net Metering Program. Net metering allows continued alliances with the Saskatchewan Institute of Applied customers who generate their own electricity to feed excess Science and Technology’s Electrical Engineering Technology power back to SaskPower’s system and bank credits to offset Program, the University of Saskatchewan’s technology-based future electricity use. Only environmentally friendly SCI-FI Girl Power Program, and the University of Regina technologies are eligible, and include wind, solar, low impact Faculty of Engineering. hydroelectric, biomass, flare gas and heat recovery. When it comes to the environment, our company is a primary Meanwhile, we continue to make it easier for customers to do supporter of the Saskatchewan Environmental Society’s business with us by expanding our online service options — Destination Conservation Saskatchewan.The program brings such as the MyPower Account. In 2008, our company also together students, teachers, administrators and custodians to launched the New Connects Financing Program. It assists new learn about energy conservation and waste reduction in their residential customers whose electricity connection costs schools. During the year, SaskPower also partnered with the exceed $1,000 and commercial customers where connection Saskatchewan Waste Reduction Council, Nature Saskatchewan costs exceed $5,000.The financing options are intended to and Stewards of Saskatchewan. enhance convenience and affordability.In most cases, billing Our company also continued its support of numerous diversity and payments are included on a customer’s electricity bill. and community initiatives, including: Saskatchewan Summer While our mandate stresses the need to consistently improve Games, Saskatchewan First Nations Winter Games, Special the service we provide, we also feel it critical to support the Olympics Saskatchewan, theYWCA’sWomen of Distinction communities where our customers live.Through a Corporate Awards, National Aboriginal Day,and the Saskatoon and Contributions Program with an annual operating budget of Regina Dragon Boat Festivals. over $1 million, we partner with non-profit organizations
SASKPOWeR AnnuAL RePORt 2008 11 156,661 Kilometres of transmission and distribution lines in service.
STRATEGIC PRIORITY 3 DePenDABLe AnD SecuRe InFRAStRuctuRe At SaskPower, we have an extensive province-wide infrastructure that supplies electricity to a vast and wide-ranging geographic service area. Rapid load growth coupled with the need to revitalize many aging assets means our company’s infrastructure will continue to undergo a major transformation.We are reviewing a myriad of options through our ongoing supply,transmission and distribution planning processes. Where prudent, we will strive to extend the life of existing infrastructure.We will also ensure that we select the most reliable and environmentally,technologically,economically advantageous future additions while developing a significant role for private sector partners.
Within Saskatchewan, we are presently experiencing a growing experience and financial capabilities of proponents to develop, demand for electricity.Load is expected to increase by own and operate electrical generation facilities.The second approximately 40% in the next 10 years.As a result, SaskPower stage consists of a Request for Proposal (RFP) and subsequent is continuing a multi-decade program of infrastructure renewal evaluation before a final selection is made. that will see the need to replace and build or acquire In 2008, SaskPower began use of the new procurement process approximately 1,700 MW by 2020 and 3,300 MW by 2030. by issuing a competitive RFQ for peaking generation projects In order to optimize generation and network systems, sized between 100 MW and 200 MW to be in service for the SaskPower is developing a fully integrated supply and 2011/2012 winter peak. Of the submissions received, five transmission plan. In addition to enhancing DSM programs, companies were selected to proceed to the RFP stage. future generation sources under consideration include clean Our company also issued a competitive RFQ for between coal, polygeneration, cogeneration, natural gas, imports, 200 MW and 400 MW of intermediate to base load purchased power, nuclear, large and small hydro, and generation to be in service for the 2012/2013 winter peak. renewables such as biomass and wind. Both renewable and non-renewable generation options will be When it comes to partnerships, during the year our company considered. In response, eight proponents were selected to unveiled a new procurement process for private sector respond to a formal RFP. Independent Power Producers (IPPs) designed to ensure In coming years, SaskPower will continue to expand the timeliness, fairness and transparency.The first stage consists of a presence of renewables in our generation portfolio. However, Request for Qualification (RFQ) and is intended to assess the
12 SASKPOWeR AnnuAL RePORt 2008 Brian Mohr, Acting Manager, Sustainable Supply Development
Between 2009 and 2018, our company will invest a projected $8 billion in the provincial electrical system, compared to $1.6 billion in the last five years.
with approximately 172 MW of wind power currently in regarding potential developments on the Fond du Lac River service, we are experiencing grid operating challenges due to and Saskatchewan River. wind’s inherent variability.In response, SaskPower has formed During 2008, SaskPower and NRGreen Power completed the Wind Power Integration and Development Unit (WPIDU) construction of three waste heat recovery units at Alliance to study and assess the effect of wind power on the provincial Pipeline’s compressor stations at Loreburn,Alameda and Estlin. system. One unit was previously commissioned at Kerrobert.Together, The WPIDU has invited developers with experience in wind the four generate 20 MW using waste heat exhaust in a process monitoring in the province to participate in a Saskatchewan that creates no new emissions — enough power to meet the Wind Data Study,which will help determine the benefits and needs of about 20,000 homes. feasibility of building future wind facilities in geographically Our company is also proceeding with plans to install, own and diverse locations. SaskPower will subsequently develop a Wind operate three simple cycle gas turbine facilities.We have Power Deployment Strategy that will address the timing, awarded contracts for the installation of 94 MW of generation ownership and procurement process for new wind power at the Ermine Switching Station near Kerrobert. In addition, a projects. 105-MW facility will be installed at Queen Elizabeth Power This year, our company finalized an agreement with Red Lily Station and a 141-MW facility will also be constructed at a site Wind Power LP to purchase electricity from a 25 MW facility near North Battleford. that will be constructed northwest of Moosomin and Meanwhile, important generation-related refurbishment operational in 2011.The proposal was initially selected in 2006 projects were active during the year.A $125-million upgrade under a previous solicitation to partner with IPPs on projects of Poplar River Power Station Unit #1, which has been in that produce no new greenhouse gas (GHG) emissions. service for 25 years, was completed.The rebuild will increase The Red Lily Wind Power Project will help maintain the unit’s output, reliability and efficiency while maintaining its Saskatchewan’s position as the control area with the highest viability for another 20 to 25 years.A proposed ash lagoon percentage of wind power in Canada. expansion at Poplar River Power Station will add two new SaskPower is also working to establish a Hydroelectric cells with a capacity for 12 million tonnes of storage.At Development Unit to pursue projects under a variety of Boundary Dam Power Station, a spillway upgrade is underway construction and ownership models. Our company is in that will allow the facility to meet new Canadian Dam discussions with First Nation groups and their partners Association Guidelines.
SASKPOWeR AnnuAL RePORt 2008 13 10 Additional megawatts of capacity achieved through rebuild at Poplar River Power Station.
System-wide, our company also remains focused on North from the Timber Cove Switching Station to the Tracey Road American Electric Reliability Corporation (NERC) Regulator, approximately 17 kilometres north of Weyakwin. compliance. Because SaskPower is interconnected to the Construction is also complete on a new 110-25 kV substation Midwest Reliability Organization (MRO) and the Midwest at Pelican Narrows. It is expected to improve service quality Independent Transmission System Operator (MISO), we are and result in fewer disruptions for three communities and obligated to meet developing NERC standards.A the surrounding area. Meanwhile, construction of a new comprehensive SaskPower NERC audit was conducted during 138-25 kV substation at North Battleford is underway. the year and a report is expected in 2009. Our company is also a full partner in a preliminary study examining the technical, In order to ensure reliable electric service in the midwestern environmental and economic feasibility of a 500 kilovolt (kV) area of the province, SaskPower has identified the need for a high-voltage direct current (HVDC) transmission line between new 138-25 kV substation near Hoosier that will be supplied Calgary and Winnipeg that would run across Saskatchewan. by a new 138 kV overhead transmission line from Marengo. Our company is also working on major transmission Rapid economic growth in Saskatchewan in 2008 has also seen connections to supply electricity for new canola crushing SaskPower streamlining design and processes for new facilities nearYorkton. connections. Our company is working on a 138 kV transmission connection to supply a customer’s pipeline In the southern part of the province, SaskPower has selected a facilities near Cabri.We are also developing a 138 kV preferred corridor for the proposed new 230-kV transmission transmission connection to supply an expansion on pipeline line between Poplar River Power Station and the Pasqua facilities near Moosomin. Switching Station east of Moose Jaw.The 160-kilometre transmission line will improve overall power system reliability We are also taking steps to improve electrical service and and help reduce line losses. reliability to northern communities.Work is now complete on a $15.6 million project to rebuild the 72-kV power line serving areas north of Prince Albert, along the corridor to La Ronge.The rebuilt transmission line runs 74 kilometres
14 SASKPOWeR AnnuAL RePORt 2008 134,074 tonnes of carbon dioxide saved by flyash sales.
STRATEGIC PRIORITY 4 StROnG enVIROnMentAL SteWARDSHIP AnD PeRFORMAnce At no time in our company’s history has it been more crucial to balance the growing demand for electricity with the needs of our natural environment. In meeting the challenge, we will continue to pursue the development and introduction of cleaner sources of electricity.We will also continue to promote an internal culture of environmental responsibility while working with our customers to reduce their energy use.
For SaskPower, emissions control is one of our key areas of The $1.4 billion government-industry partnership between the environmental focus.As a result, a detailed new Emissions Plan Government of Canada, the Government of Saskatchewan, is being created to strengthen the development of SaskPower and a number of private sector and other partners infrastructure strategies. In recent years, our company has proposes to rebuild coal-fired BDPS Unit #3 with CO2 demonstrated significant progress in lowering emissions such as capture technology,and extend its life by approximately sulphur dioxide (SO2), nitrogen oxides (NOx) and particulate 30 years.This project will demonstrate the technical, matter. However, with changing federal regulations and a environmental and economic performance of the clean coal provincial commitment to reduce GHG emissions, we must concept, which could then be used to inform long-term plans make major reductions in the release of carbon dioxide (CO2). for coal-fired generation within SaskPower.The project would reduce GHG emissions by a million tonnes per year while Presently,coal plays a major role in providing base load generating up to 100 MW of power. generation for Saskatchewan because it is economical and secure. However, the future use of coal is dependent on the Participating in a wide range of research and development emergence of new emissions control technologies.We are opportunities will ensure SaskPower is as prepared as possible taking action by leading the development of one of the world’s for future emissions control requirements. Our Emissions first and largest fully integrated carbon capture and Control Research Facility (ECRF) at Poplar River Power sequestration demonstration projects at the Boundary Dam Station has attracted international attention after successfully Power Station (BDPS). determining a process to meet SaskPower’s need for mercury capture.
SASKPOWeR AnnuAL RePORt 2008 15 Hélène Careau, coordinator, environmental Programs
SaskPower’s environmental Screening System, which assists in the evaluation of potential impacts and legal requirements, processed an unprecedented number of projects during the year.
In 2008, the ECRF was selected to receive the Canadian spike in the demand for customer connects in 2008, our ESS Electricity Association’s Environmental Commitment and processed information for an unprecedented number of Responsibility Program Environmental Stewardship Award. projects.The tool was built in-house and uses Geographical SaskPower’s work on emissions research also includes a Information System technology to assist in the evaluation of leadership role in the Canadian Clean Power Coalition, the potential environmental impacts and legal requirements. Weyburn-Midale CO Monitoring and Storage Project, and 2 Our company also believes inter-agency collaboration is the University of Regina’s International Test Centre for CO 2 essential to our success in meeting environmental challenges. Capture. During the year, we established a Protocol Agreement and are When it comes to particulates, we continue to improve the working on implementing an Action Plan agreed to by capture of flyash at our coal-fired plants in order to reach rates SaskPower, Fisheries and Oceans Canada, Saskatchewan as high as 99.5%. In 2008, SaskPower International had a Ministry of Environment and the Saskatchewan Watershed record-breaking year of flyash sales. Over 130,000 tonnes were Authority.The agreement deals with potential fish and fish
sold, equating to a savings of 134,074 tonnes of CO2. habitat issues at our facilities and is the first of its kind in Canada. Beyond emissions, regulatory development is occurring in many other areas of the industry.In a business setting where Another internal milestone occurred during the year when the changes continues to evolve rapidly,our company’s ISO 14001 SaskPower Shand Greenhouse exceeded the distribution of six Environmental Management System provides our company, million seedlings since opening. In 2008, the greenhouse was employees and contractors with the necessary structure to also recognized for its role in the classroom when it was strengthen environmental performance. In addition, our presented with an award from the United Nations Regional Environmental Policy outlines our company’s commitment to Centre of Expertise for Education on Sustainable comply with applicable laws and prevent pollution, while Development.The recognition was received for the SaskPower pursuing continuous improvement. Shand Greenhouse’s Energy and Our Environment Program, which deals with issues surrounding energy use, GHGs and Our Environmental Screening System (ESS) also continues to climate change. play an important role in our day-to-day operations.With a
16 SASKPOWeR AnnuAL RePORt 2008 $422 million capital investment in infrastructure during the year.
STRATEGIC PRIORITY 5 PRuDent FInAncIAL MAnAGeMent AnD GROWtH During the next decade, our company will engage in multi-billion dollar capital expenditures. In order to maintain a solid financial foundation, we will maintain regionally competitive rates while generating enough revenue to support the revitalization of our company.We will also pursue private sector partnerships while exploiting growth opportunities through energy trading.
In 2008, our company spent $422 million to expand and In 2008, an independent Cost of Service methodology review renew our electrical system.These high levels of spending are requested by the Saskatchewan Rate Review Panel was expected to grow,with capital expenditures forecast to exceed completed. It takes place every five years to ensure that each $8 billion from 2009-2018. customer class pays a fair reflection for the total cost of electricity.The Rate Review Panel subsequently SaskPower’s labour and materials costs are rising. Increasing recommended that SaskPower wait to make any changes to fuel costs — specifically higher natural gas purchase Cost of Service design until our company completes further volumes — are also contributing to rising expenses. Recently, research into customer load information. our company has integrated more natural gas-fired generation into our supply mix. In order to enhance long-term economic analysis, our company has expanded the outlook in the SaskPower Business To position SaskPower to navigate the challenges associated Plan from five to 10 years.This is expected to provide an with rising costs, renewal and expansion, our company will improved indication of the impact of financial trends. In order continue to engage in a financial management program that to further enhance corporate transparency and accountability, allows SaskPower to maintain a strong per cent debt ratio.With we have also completed the development of a Chief Executive over 90% of revenue coming from Saskatchewan sales, we will Office (CEO)/Chief Financial Officer (CFO) Certification continue to endeavour to make any necessary rate adjustments Program. Starting in 2009, SaskPower’s CEO and CFO will in a regular and moderate way.Meanwhile, to reduce the annually verify that our company has developed an appropriate impact of any rate increases, our company is continuing to help set of internal controls over financial reporting and that the both large and small customers reduce their electrical controls are working effectively. consumption and power bills through programs like SaskPower Eneraction.
SASKPOWeR AnnuAL RePORt 2008 17 Adele Duczek, Senior Financial Analyst, corporate and Financial Services
In the face of rising capital expenditures, our company’s long-term financial management program is designed to ensure SaskPower maintains a strong per cent debt ratio.
Beginning in 2011, SaskPower will be expected to adopt broaden electricity trading by growing in current and new International Financial Reporting Standards (IFRS) in place of North American markets, while augmenting business lines Canadian Generally Accepted Accounting Principles (GAAP). which could include natural gas trading that optimizes We have commenced a multi-year conversion project that SaskPower's fixed natural gas costs. includes a comprehensive implementation plan. Our company Meanwhile, our company has wound down operations of one has plans to make changes to select processes and systems of our other subsidiaries — SaskPower International (SPI).This before 2010 to ensure transactions are recorded in accordance is consistent with SaskPower’s strategic direction of no longer with IFRS for comparative reporting purposes on the required seeking new external investment opportunities. Responsibilities implementation date. previously held by SPI are being redistributed to other areas of When it comes to corporate growth, SaskPower is well SaskPower. positioned to exploit regional opportunities through energy In order to maximize the financial impact of our operations trading and energy products.We are exploring regional within Saskatchewan, our company has a long-standing opportunities to export Saskatchewan generation using commitment to source as many goods and services from enhanced transmission connections. Meanwhile, subsidiary provincial suppliers as possible. In 2008, SaskPower spent over NorthPoint Energy Solutions continues to act as an energy $1 billion on purchasing Saskatchewan goods and services, marketing agent for SaskPower and is focusing on broadening representing 73% of total purchases.We have drafted an trading throughout North America. Aboriginal Procurement Policy and Procedures, with a key NorthPoint is committed to growth strategies that include an objective to foster and promote business development that is expansion of energy management services for SaskPower to reflective of Saskatchewan demographics. further optimize fuel costs, manage existing and potential new Power Purchase Agreements, and explore future requirements related to emissions management. NorthPoint will also
18 SASKPOWeR AnnuAL RePORt 2008 Corporate governance
At SaskPower, accountability is a key element of our corporate values. As a result, we are committed to the continuous evaluation and strengthening of the corporate governance process at our company. Our goal is to achieve heightened standards of transparency and disclosure while we seek to achieve quality reporting for our shareholder, customers and stakeholders. tHe GOVeRnAnce StRuctuRe OF OuR cOMPAny SaskPower is governed by The Power Corporation Act. It is subject to the provisions of The Crown Corporations Act, 1993, which gives the crown Investments corporation (cIc) of Saskatchewan, the holding company for Saskatchewan’s commercial crown corporations, broad authority to set the direction of SaskPower. In practice, directives are normally in the following forms: cIc crown subsidiary policies applying to all cIc crowns; cIc Board resolutions and directives; and cIc management directives.
Where required by legislation or policy directive, our company submits performance management and investment decisions for review and approval by cIc and cabinet. through its chair, who is an outside Director, the SaskPower Board of Directors is accountable to the Minister of crown corporations. the Minister functions as a link between SaskPower and cabinet, as well as the provincial legislature.
A LeADInG ROLe Our company’s Board of Directors is responsible for the general stewardship of SaskPower. It is accountable for setting direction, monitoring and evaluating achievement, as well as identifying any necessary corrective action for SaskPower. the Board works with management to develop and approve SaskPower’s Strategic Plan, annual budget and Business Plan. It participates in identifying business risks and oversees the implementation of appropriate systems to achieve a balance between risks incurred and potential returns.
SaskPower’s Board of Directors is appointed by the Lieutenant Governor in council pursuant to The Power Corporation Act. the Board consists of nine independent Directors. On January 22, 2008, the Board was dissolved and an interim Board appointed. On February 6, 2008, the interim Board was dissolved and a reconfigured Board appointed.
All Board Members are independent of management, including the chair. the expectations and responsibilities of Directors are outlined in the terms of Reference for a Director. Board Members receive a comprehensive orientation and continuing education. In addition to being subject to SaskPower’s code of conduct Policy, Board Members are also bound by the cIc Directors’ code of conduct. Peer evaluations are completed annually.
Director1 Meetings attended2 1. Directors were appointed February 6, 2008. Joel teal, chair 10 2. there were a total of 10 meetings held in 2008. Bill Wheatley, Vice-chair 10 tammy cook-Searson 6.5 Judy Harwood 10 nick Kaufman 10 Bryan Leverick 10 Al Macatavish 10 Mick MacBean 9 Visit saskpower.com for a full description of SaskPower’s corporate Grant McGrath 9.5 governance practices, including Board and Director terms of Reference.
SASKPOWeR AnnuAL RePORt 2008 19 MAnAGInG By cOMMIttee During the year, the Board gave significant consideration to the strategic direction of SaskPower. Board highlights also included the review of numerous operational, financial, environmental, human resource and governance items. the Board also continues to adopt policies and processes to enable effective communication with the shareholder, stakeholders and the public.
Our company’s Board has standing committees to assist in discharging specific areas of responsibility. Both the Board and Audit and Finance committee regularly have in camera sessions without management present. In 2008, the functions of the Governance committee and Human Resources/compensation committee of the Board were integrated into a single committee — the Governance/Human Resources committee. As a result, the Board now has three standing committees:
Audit and Finance Committee Six meetings Chair: Mick MacBean Members: Bryan Leverick, Grant McGrath and Bill Wheatley the Audit and Finance committee’s terms of Reference mandate the committee to assist the Board in meeting its responsibilities with respect to financial reporting, internal controls and accountability. the committee oversees the risk management reporting of SaskPower and directly interacts with the internal and external auditors. the committee ensures that the Board is provided with financial plans, proposals and information that are consistent with our company’s overall strategic planning and public policy objectives.
During 2008, the committee reviewed annual and interim financial statements, regular risk reporting packages, corporate Balanced Scorecard reporting, the 2009 Business Plan, as well as the Deloitte & touche LLP and Provincial Auditor 2007 summaries. the committee approved the work plan for the Internal Audit Department and monitored quarterly reporting on irregularities. Although there were no significant irregularities in 2008, quarterly reporting enhances and underscores ongoing vigilance in this area.
the committee is also responsible for reviewing proposed capital and operating, maintenance and administration projects that are material from a risk or value perspective prior to referral to the Board. In 2008, the committee assessed several significant projects, ensuring that they were aligned with the strategic direction of our company. these included the possible construction of new generation facilities owned by SaskPower, as well as the procurement of new generation from Independent Power Producers.
Another important initiative for the committee was to review and assess our company’s approach to enterprise risk management. More work in this area is expected in 2009.
Environment, Occupational Health and Safety Committee Three meetings Chair: Grant McGrath Members: Tammy Cook-Searson, Nick Kaufman, Judy Harwood and Mick MacBean the environment, Occupational Health and Safety committee is charged with ensuring that our company proactively addresses safety, health and environmental issues and is in compliance with regulatory and statutory requirements.
During the year, highlights included affirming SaskPower’s environmental Policy, monitoring compliance with mining reclamation plans, reviewing management’s risk criteria for information reporting, reviewing the biophysical impact of wind power generation, as well as tracking changes to federal environmental legislation.
the committee also reviewed the safety component of SaskPower’s Strategic Plan, assessed progress on the implementation of SaskPower’s Safety Management System, monitored incident reporting and approved the establishment of a corporate Safety council to monitor our company’s safety issues.
Governance/Human Resources Committee Three meetings Chair: Bryan Leverick Members: Judy Harwood, Nick Kaufman, Al Macatavish and Bill Wheatley the Governance/Human Resources committee is responsible for the development, review and effectiveness of SaskPower’s corporate governance practices as well as oversight of human resource strategies, programs and practices.
20 SASKPOWeR AnnuAL RePORt 2008 the committee’s governance-related duties include serving as ethics advisor for the Board, monitoring and evaluating overall Board performance on a bi-annual basis, providing guidance on governance issues to Directors, and recommending governance issues for discussion by the Board or committees. In 2008, its activities included reviewing the SaskPower Governance Manual and recommending updates to the execution of Documents Resolution. the committee also reviewed and updated the terms of Reference for the Board chair, committee chairs and Board committees.
Meanwhile, in consultation with both internal and external legal counsel, the committee reviewed the Board’s procedures for identifying and managing Director conflicts of interest. It is expected that the committee will develop and recommend a written protocol for conflicts of interest in 2009.
the Governance/Human Resources committee is also charged with overseeing SaskPower’s human resource strategies, programs and practices. Initiatives during the year focused on performance management initiatives and corporate job evaluation. eVALuAtInG OuR GOVeRnAnce PeRFORMAnce Our company is committed to regularly revisiting key elements of SaskPower’s decision-making processes to ensure they continue to meet best practice standards. As a crown corporation, SaskPower is not required to comply with canadian Securities Administrators (cSA) Governance Guidelines. However, we use these guidelines to benchmark our governance practices.
Our company’s practices are substantially consistent with cSA standards, as set out in the following scorecard:
CSA national policy 58-201 Consistent with SaskPower’s corporate governance practices Part 3 — Corporate Governance Guidelines CSA guidelines?
Composition of the Board 3.1 the Board should have a majority of independent the Board is comprised of nine independent Directors. Yes Directors.
3.2 the chair of the Board should be an independent the chair of the Board is an independent Director. Director. Where this is not appropriate, an independent Director should be appointed to act as "lead Director.”However, either an independent Yes chair or an independent lead Director should act as the effective leader of the Board and ensure that the Board's agenda will enable it to successfully carry out its duties.
Meetings of independent Directors 3.3 the independent Directors should hold regularly All members are independent. scheduled meetings at which non-independent Yes Directors and members of management are not in attendance.
Board mandate 3.4 the Board should adopt a written mandate in which the Board has a written mandate in its terms of it explicitly acknowledges responsibility for the Reference, where it explicitly acknowledges that the Yes stewardship of the issuer, including responsibility Board of Directors functions as a steward of the for: corporation as well as communicating the following:
(a) to the extent feasible, satisfying itself as to the the terms of Reference for a Director state that integrity of the chief executive Officer (the Directors shall require “of themselves and corporate ceO) and other executive officers and that the employees high standards of ethical behaviour…”the ceO and other executive officers create a President and ceO Mandate also places accountability Yes culture of integrity throughout the organization; on that position for ensuring activities and practices of the corporation are ethical and compliant with the law.
SASKPOWeR AnnuAL RePORt 2008 21 CSA national policy 58-201 Consistent with SaskPower’s corporate governance practices Part 3 — Corporate Governance Guidelines CSA guidelines?
(b) adopting a strategic planning process and the Board, working with the executive, provides approving, on at least an annual basis, a strategic direction to SaskPower as a corporation. strategic plan which takes into account, Formally, this is accomplished with the annual among other things, the opportunities and approval of the Strategic Plan in the 4th quarter. risks of the business; SaskPower’s revitalized process involves frequent reviews of strategic direction and issues on a regular Yes basis. this ensures a more rounded and comprehensive examination of the issues and helps assure continuity and familiarity in contrast to the once-a-year approach. Development of the Strategic Plan is a continuous improvement process with further progress expected in 2009.
(c) the identification of the principal risks of the the Board identifies principal risks to the corporation issuer's business, and ensuring the on an annual basis. either directly or through the Audit implementation of appropriate systems to and Finance committee, the Board monitors the corporation’s risk management programs. It also manage these risks; Yes oversees the implementation of risk-management systems. the Audit and Finance committee meets regularly to review reports and discuss significant risk concerns with both the internal and external auditors.
(d) succession planning (including appointing, the Board terms of Reference state that the Board is Yes training and monitoring senior management); responsible for succession planning.
(e) adopting a communication policy for the Pursuant to the Board terms of Reference, the Board issuer; adopts policies and processes to enable effective communication with crown Investments corporation Yes of Saskatchewan (cIc), stakeholders and the public.
(f) the issuer's internal control and management the Board has approved an internal control program. information systems; and SaskPower has documented and evaluated the design of the corporation's internal controls over financial reporting, including the adequacy of its information systems. the corporation has developed a testing program to regularly evaluate the effectiveness of these Yes controls. Starting in 2009, SaskPower's ceO and cFO will annually verify that our company has developed an appropriate set of internal controls over financial reporting and that the controls are working effectively.
(g) developing the issuer's approach to corporate the Governance/Human Resources committee is governance, including developing a set of responsible for and reports to the Board on corporate corporate governance principles and governance matters. the committee also functions as Yes guidelines that are specifically applicable to the ethics advisor for the Board. the issuer.1
the written mandate of the Board should also set out: the Board assumes responsibility for adopting policies and processes to enable effective communication with (i) measures for receiving feedback from the shareholder, stakeholders and the public. to stakeholders (e.g., the Board may wish to facilitate feedback from employees, the Board has establish a process to permit stakeholders to Yes adopted a whistle blower policy. directly contact the independent Directors), and
(ii) expectations and responsibilities of Directors, expectations and responsibilities of Directors, including basic duties and responsibilities with including participation in and preparation for meetings, respect to attendance at Board meetings and are outlined in the terms of Reference for a Director. advance review of meeting materials. Yes In developing an effective communication policy for the issuer, issuers should refer to the guidance set out in national Policy 51-201 Disclosure Standards.
1. Issuers may consider appointing a corporate Governance committee to consider these issues. A corporate Governance committee should have a majority of independent Directors, with the remaining members being "non-management" Directors.
22 SASKPOWeR AnnuAL RePORt 2008 CSA national policy 58-201 Consistent with SaskPower’s corporate governance practices Part 3 — Corporate Governance Guidelines CSA guidelines?
Position descriptions 3.5 the Board should develop clear position In 2008, the Governance/Human Resources descriptions for the chair of the Board and the committee reviewed terms of Reference for the Board chair of each Board committee. In addition, the chair as well as committee chairs. these have been Board, together with the ceO, should develop a approved by the Board. In 2003, the Board adopted a Yes clear position description for the ceO, which President and ceO Mandate. In 2008, the Board includes delineating management's responsibilities. enumerated specific goals and objectives for the ceO the Board should also develop or approve the to form a basis for evaluation and compensation. Lead corporate goals and objectives that the ceO is responsibility for this lies with the Governance/Human responsible for meeting. Resources committee.
Orientation and continuing education 3.6 the Board should ensure that all new Directors the Governance/Human Resources committee terms receive a comprehensive orientation. All new of Reference state that it shall recommend a Director Directors should fully understand the role of the orientation and continuing education policy. In 2008, Board and its committees, as well as the with the appointment of seven new Directors, a contribution individual Directors are expected to comprehensive full-day orientation to corporate issues Yes make (including, in particular, the commitment of and approval processes was designed and delivered by time and resources that the issuer expects from its management. comprehensive briefing binders were Directors). All new Directors should also also provided to new members covering key aspects understand the nature and operation of the issuer's of the corporation’s business. business.
3.7 the Board should provide continuing education In 2008, Directors participated in four separate opportunities for all Directors, so that individuals development sessions sponsored by cIc. these are may maintain or enhance their skills and abilities as designed to ensure Directors stay up-to-date with best Directors, as well as to ensure their knowledge and practice developments in corporate governance. In Yes understanding of the issuer's business remains addition, the corporation provides opportunities to current. participate in site visits and tours. the Board also receives industry-specific briefings as a backdrop for policy and investment decisions.
Code of Business Conduct and Ethics 3.8 the Board should adopt a written code of Business SaskPower has a written code of conduct Policy conduct and ethics (a code). the code should be applicable to Directors, officers and employees. It is applicable to Directors, officers and employees of intended to provide both general and specific the issuer. the code should constitute written guidelines to protect and guide SaskPower personnel standards that are reasonably designed to promote faced with ethical, moral and legal dilemmas during integrity and to deter wrongdoing. In particular, it the course of their employment or in carrying out their should address the following issues: duties. the Board has the responsibility to annually Yes review and, as required, revise the code. In 2006, the Board further strengthened this directive by adopting a whistle blower policy and implementing an anonymous reporting process to help deter wrongdoing. Quarterly irregularity reporting has been implemented to keep the Board informed of compliance issues.
(a) conflicts of interest, including transactions and the code addresses conflict of interest. In 2008, the agreements in respect of which a Director or committee reviewed the Board’s process for executive Officer has a material interest; identifying and managing Director conflicts of interests. It is expected that recommendations will be made to the Board for updating these processes in 2009. In addition, Board members complete and file an annual conflict of interest declaration with the office Yes of the General counsel as well as declare any conflicts on the spot as they may arise in a meeting setting. Board members are also bound by the cIc Directors’ code of conduct.
(b) protection and proper use of assets and Property and inventions are covered in the code as opportunities; well as the appropriate use of business assets. Yes
(c) confidentiality of corporate information; confidentiality is covered in the code, including SaskPower information that contains third party information and personal information about personnel Yes and customers.
SASKPOWeR AnnuAL RePORt 2008 23 CSA national policy 58-201 Consistent with SaskPower’s corporate governance practices Part 3 — Corporate Governance Guidelines CSA guidelines?
(d) fair dealing with the issuer's security holders, Fair dealing is covered in the General conduct customers, suppliers, competitors and Principles section of the code as follows: “SaskPower employees; expects Personnel to conduct themselves…in a manner that is and is perceived to be fair and evenhanded, and to carry on their activities within the scope of their duties and in compliance with applicable Yes laws and this code and Related Policies. the public is entitled to expect and receive…fair and equitable treatment and compliance with confidentiality expectations and laws, whether in the provision of services or in the acquisition of property.”
(e) compliance with laws, rules and regulations; the code requires Directors, officers and employees Yes and to comply with applicable laws and related policies.
(f) reporting of any illegal or unethical behaviour. the Policy on Irregularities Reporting, which is appended to the code, places an onus on employees Yes to report suspected illegal or unethical behaviour.
3.9 the Board should be responsible for monitoring the Governance/Human Resources committee’s compliance with the code. Any waivers from the terms of Reference state that it shall monitor and code that are granted for the benefit of the issuer's report annually to the Board concerning compliance Directors or executive Officers should be granted with the “Director’s code of conduct” and to “review by the Board (or a Board committee) only. and report to the Board on conflict of interest matters Although issuers must exercise their own involving Directors.” judgement in making materiality determinations, there were no waivers granted in 2008 with respect the canadian securities regulatory authorities to code compliance by Directors, Officers or consider that conduct by a Director or executive employees. Officer which constitutes a material departure from the code will likely constitute a "material change" within the meaning of national Instrument 51-102 continuous Disclosure Obligations. national Instrument 51-102 requires every material change Yes report to include a full description of the material change. Where a material departure from the code constitutes a material change to the issuer, we expect that the material change report will disclose, among other things: • the date of the departure(s), • the party(ies) involved in the departure(s), • the reason why the Board has or has not sanctioned the departure(s), and • any measures the Board has taken to addressor remedy the departure(s).
Nomination of Directors 3.10 the Board should appoint a nominating the mandate of the Governance/Human Resources committee. committee as stated in its terms of Reference includes reviewing and recommending qualified potential candidates for the Board. the names of recommended Substantial compliance candidates are submitted by the Board to cIc as shareholder.the appointment and removal of Directors is ultimately the prerogative of the Lieutenant Governor in council, as established by statute.
3.11 the nominating committee should have a written the Board has a written charter in its terms of charter that clearly establishes the committee’s Reference which includes all terms referred to in the purpose, responsibilities, member qualifications, cSA guideline, except authority to delegate to member appointment and removal, structure and individual members and subcommittees and authority operations (including any authority to delegate to to engage and compensate any outside advisor that it individual members and subcommittees), and determines to be necessary to permit it to carry out its manner of reporting to the Board. In addition, the duties. the Board terms of Reference do state that any nominating committee should be given authority committee can obtain the advice and counsel of to engage and compensate any outside advisor Substantial compliance external advisors. However, it states the decision to that it determines to be necessary to permit it to carry out its duties. If an issuer is legally required engage such advisors rests with the Board. by contract or otherwise to provide third parties with the right to nominate Directors, the selection and nomination of those Directors need not involve the approval of an independent nominating committee.
24 SASKPOWeR AnnuAL RePORt 2008 CSA national policy 58-201 Consistent with SaskPower’s corporate governance practices Part 3 — Corporate Governance Guidelines CSA guidelines?
3.12 Prior to nominating or appointing individuals as A skills and competency evaluation has been the Directors, the Board should adopt a process foundation of the recruitment process in filling involving the following steps: vacancies. the Governance/Human Resources committee regularly reviews the composition and skill (a) consider what competencies and skills the sets of its Directors. A gap analysis is done with a Board, as a whole, should possess. In doing view to identifying candidates with the required so, the Board should recognize that the skill sets. Since seven out of nine Board members Yes particular competencies and skills required for were new to the board at the time of their one issuer may not be the same as those appointment in 2008, a skills and needs assessment required for another. was not completed by the committee in 2008. this will likely be done once the committee Members have had sufficient opportunity to evaluate the current skills of the Board as well as the needs of the company.
(b) Assess what competencies and skills each the Governance/Human Resources committee, with existing Director possesses. It is unlikely that assistance from the corporate Secretary, maintains any one Director will have all the and updates a skills matrix of existing members. As competencies and skills required by the needed, it conducts a gap analysis to identify skills Board. Instead, the Board should be required for future appointments to round out the Yes considered as a group, with each individual Board’s overall skill set. making his or her own contribution. Attention should also be paid to the personality and other qualities of each Director, as these may ultimately determine the boardroom dynamic.
the Board should also consider the appropriate the terms of Reference for the Governance/Human size of the Board, with a view to facilitating Resources committee state that it shall recommend effective decision making. In carrying out each of the size of the Board. Yes these functions, the Board should consider the advice and input of the nominating committee.
3.13 the nominating committee should be responsible Responsibility for recruitment and nomination of new for identifying individuals qualified to become new Board Members is assigned to the Board Members and recommending to the Board Governance/Human Resources committee in its terms Yes the new Director nominees for the next annual of Reference. meeting of shareholders.
3.14 In making its recommendations, the nominating the terms of Reference for the Governance/Human committee should consider: Resources committee require the committee to, (a) the competencies and skills that the Board “Recommend to the Board the size, composition, considers to be necessary for the Board, as a required capabilities and compensation of the Board of whole, to possess; Directors to meet the needs of the corporation.” Yes (b) the competencies and skills that the Board considers each existing Director to possess; and
(c) the competencies and skills each new A review of skills and competencies is the basis for nominee will bring to the boardroom. determining the skill sets needed in filling a vacancy. the Governance/Human Resources committee the nominating committee should also consider ensures that potential nominees understand the whether or not each new nominee can devote Yes requirements of the position and have sufficient time sufficient time and resources to his or her duties and resources to devote to their duties. as a Board Member.
Compensation 3.15 the Board should appoint a compensation All members of the Governance/Human Resources committee composed entirely of independent committee are independent Directors. Yes Directors.
SASKPOWeR AnnuAL RePORt 2008 25 CSA national policy 58-201 Consistent with SaskPower’s corporate governance practices Part 3 — Corporate Governance Guidelines CSA guidelines?
3.16 the compensation committee should have a the terms of Reference for the Governance/Human written charter that establishes the committee's Resources committee incorporate a written charter, purpose, responsibilities, member qualifications, which includes all items referred to in the cSA member appointment and removal, structure and guideline (with the exception of member appointment operations (including any authority to delegate to and removal, which is established by statute). the individual members or subcommittees), and the Board terms of Reference state that any committee Substantial compliance manner of reporting to the Board. In addition, the can obtain the advice and counsel of external advisors. compensation committee should be given However, the terms state the Board, rather than the authority to engage and compensate any outside committee, shall determine the advisability of advisor that it determines to be necessary to engaging external advisors. permit it to carry out its duties.
3.17 the compensation committee should be the Governance/Human Resources committee’s responsible for: terms of Reference state that the ceO’s review is based upon agreed-upon objectives, updated each (a) reviewing and approving corporate goals and year. While ceO compensation was not addressed objectives relevant to ceO compensation, specifically, the committee had the responsibility to Yes evaluating the ceO's performance in light of review and monitor all management compensation those corporate goals and objectives, and and benefit programs. As SaskPower is not a publicly- determining (or making recommendations to traded company, the parameters for ceO the Board with respect to) the ceO's compensation are set by its shareholder, cIc. compensation level based on this evaluation;
(b) making recommendations to the Board with the committee has the responsibility to annually respect to non-ceO officer and Director review and monitor management compensation and compensation, incentive-compensation plans benefit programs and make recommendations to the and equity-based plans; and Board. the Governance/Human Resources committee Yes is also responsible for recommending Director compensation to the Board. cIc, as shareholder, sets Director remuneration.
(c) reviewing executive compensation disclosure the compensation of executive members and all before the issuer publicly discloses this employees earning more than $50,000 per year is information. annually disclosed to the crown and central Agencies committee of the Legislative Assembly, and ultimately the public, through payee disclosure. In addition, the President and ceO — and direct reports — are Not applicable required to file their employment contracts, and any amendments thereto, with the clerk of the executive council pursuant to The Crown Employment Contracts Act.
Regular Board assessments the Governance/Human Resources committee 3.18 the Board, its committees and each individual coordinates the assessment process with the assistance of an external service provider. A peer Director should be regularly assessed regarding Yes his, her or its effectiveness and contribution. An assessment is conducted on an annual basis. A chair assessment should consider: assessment is done in alternating years.
(a) in the case of the Board or a Board Board and Board committee performance evaluations committee, its mandate or charter, and are conducted on a 2-year cycle, per cIc guidelines. Yes
(b) in the case of an individual Director, the Peer evaluations are completed annually. applicable position description(s), as well as the competencies and skills each individual Yes director is expected to bring to the Board.
26 SASKPOWeR AnnuAL RePORt 2008 BOARD OF DIRectORS As at December 31, 2008 Full biographies are available at saskpower.com.
JoelTeal Al Macatavish Chair Winnipeg, Manitoba Saskatoon, Saskatchewan Prior to his retirement in 2000, Al Macatavish was Vice-president of Joel teal is the President of Dundee Developments/Homes by transmission and Distribution at Manitoba Hydro. He has been a Dundee, where he has worked since 1996. Dundee has operations Member of the SaskPower Board of Directors since 2001. Mr. located in calgary, edmonton, High River, Regina and Saskatoon. Macatavish is a Member of the Advisory Board of the Institute of Prior to this, Mr. teal was the President and ceO of Preston technology centre for the Province of Manitoba and for the High- Developments. Voltage Direct current Research centre. Bill Wheatley Mick MacBean Vice-chair Swift Current, Saskatchewan Regina, Saskatchewan Mick MacBean is the founder, ceO, and Director of Diamond Bill Wheatley is Managing Director, chief compliance Officer and energy Services. the business is headquartered in General counsel at Greystone Managed Investments Inc., a local Swift current, where it operates rigs and coiled tubing units in firm with more than $28 billion in assets under management and Saskatchewan and Alberta. Mr. MacBean sits on the Alternative clients across canada. Mr. Wheatley has headed the Greystone real energy Advisory committee for the city of Swift current and is the estate investment team, managed the firm’s operations and Director and chair of the Audit committee for Peyto energy trust, a developed a compliance department. large natural gas producer. Tammy Cook-Searson Grant McGrath La Ronge, Saskatchewan Rosetown, Saskatchewan chief tammy cook-Searson is the first woman to lead the Lac La Grant McGrath is the President and General Manager of Western Ronge Indian Band, one of the largest and most progressive First Sales Ltd. He joined the company as a salesman, became Sales nations Bands in canada. Prior to her present role, she served as a Manager and subsequently took an equity position in the company. social worker and an elected Band councillor for eight years. As an In 2000, Mr. McGrath acquired majority ownership of the business, entrepreneur, chief cook-Searson has owned and operated a which has retail locations in Biggar, central Butte, Davidson, elrose marina since 1993. and Outlook. Judy Harwood Saskatoon, Saskatchewan Directors are paid an annual retainer and per diems: Judy Harwood works for PR Developments of Saskatoon as • the Board chair receives an annual retainer of $11,000 and a Director of Operations for the West Harvest Group of Hotels. She $900 meeting fee. oversees the key operations of five hotels in edmonton, • the Vice-chair and other Board Members receive an annual Lloydminster, Regina and Saskatoon. retainer of $8,000 and a $700 meeting fee. Nick Kaufman • committee chairs receive an $800 committee chair meeting Regina, Saskatchewan fee. nick Kaufman is an Associate counsel at Mccrank Stewart Johnson Barristers and Solicitors in Regina. Mr. Kaufman was the Vice-president of Law at SaskPower from 1989 to 1991. He has also held the positions of Partner and Senior counsel at Rendek Mccrank Barristers and Solicitors and Associate at Balfour Moss. Bryan Leverick Saskatoon, Saskatchewan Bryan Leverick is the President of Saskatchewan-based Alliance energy Ltd. and has been with the company since 1974. Mr. Leverick serves on the electrical trade Advisory Board and the electrical curriculum committee. He is also a Member of the Board of the canadian electrical contractors as Past chairman and a Board Member of the Saskatoon Regional economic Development Authority.
SASKPOWeR AnnuAL RePORt 2008 27 executIVe teAM As at December 31, 2008 Full biographies are available at saskpower.com.
PatYouzwa Grant Ring President and Chief Executive Officer, SaskPower Acting Vice-president and Chief Financial Officer, Corporate and Financial Services Pat youzwa joined SaskPower in 1999 and held a number of President and Chief Executive Officer, executive positions before moving into her current role in 2004. NorthPoint Energy Solutions Prior to joining our company, Ms. youzwa held a number of positions with the public service of the Government of Grant Ring was appointed Acting President and chief executive Saskatchewan, including Deputy Minister of economic Officer of subsidiary northPoint energy Solutions in 2007 and Development and Deputy Minister of energy and Mines. With a Acting Vice-president and chief Financial Officer, corporate and Bachelor of Arts with Honours in economics and a Master of Arts Financial Services, in 2008. the certified Management in economics, she has also run a business consulting company. Accountant and MBA holder previously held the position of treasurer, Financial Services. Prior to joining SaskPower in 1990, Mike Marsh Mr. Ring was employed in various accounting positions in private Vice-president, Transmission and Distribution sector manufacturing and construction. A mechanical engineer and MBA holder, Mike Marsh was Gary Wilkinson appointed Vice-president of transmission and Distribution in 2007. Vice-president, Planning, Environment & Regulatory Affairs He previously held the position of Manager, Business and Financial Planning, as well as supervisory roles in engineering and employed by SaskPower since 1973, Gary Wilkinson was maintenance with Power Production. Prior to joining SaskPower, appointed to his current position in 2007.An electrical engineer, Mr. Marsh was employed in the construction industry in Alberta Mr. Wilkinson was involved in the creation and set-up of and Saskatchewan. subsidiary northPoint energy Solutions and served as its President and chief executive Officer. Mr. Wilkinson has also held Judith A. May a variety of positions in other areas of the company, including Vice-president, Customer Services system operations, decision support, bulk power management, Judith May was appointed to the position of Vice-president of as well as high voltage transmission, generation, and customer Services in 2004. Since joining SaskPower in 1981, she communications and control planning. has served as the Manager of call centres and collections, as well as a series of positions within the customer Services. Appointed January 12, 2009 Holding a Bachelor of Administration, Ms. May has acted as chair of the canadian electricity Association customer council. Sandeep Kalra Vice-president and Chief Financial Officer, Garner Mitchell Finance and Enterprise Risk Management Vice-president, Power Production President and Chief Executive Officer, SaskPower International Appointed February 4, 2009 A registered professional engineer in Saskatchewan, Garner Mitchell has held various positions with SaskPower involving both Tom Kindred business and management responsibilities and spanning areas Vice-president and CIO, Corporate Information and Technology from maintenance, to construction and engineering, to power station operations. Mr. Mitchell served as Vice-president, Project Appointed March 2, 2009 Development and Operations, with SaskPower International before Philip Davies being appointed to Vice-President, Power Production, in 2001. Vice-president, Legal, Land and Regulatory Affairs Michael Monea General Counsel and Assistant Secretary Vice-president, Integrated Carbon Capture & Sequestration Project Kevin Doherty Michael Monea was appointed Vice-president of the Integrated Vice-president, Corporate Relations carbon capture and Sequestration Project in 2008. He holds professional engineer and geoscientist designations, a well as a Salary ranges for SaskPower’s executive team, as of Bachelor of Science. Prior to his role with SaskPower, Mr. Monea December 31, 2008, are: was Senior Vice-president with canada capital energy corporation. He served as executive Director of the Petroleum • President and chief executive Officer: $223,590 to technology Research centre at the university of Regina and has $279,488. held a number of other executive and technical positions in the oil • Vice-president: $161,544 to $237,564. and gas sector.
28 SASKPOWeR AnnuAL RePORt 2008 Management’s discussion & analysis
February 13, 2009 the following is a discussion of the consolidated financial condition and results of the operations of Saskatchewan Power corporation (SaskPower; the corporation) for the year ended December 31, 2008. It should be read in conjunction with the audited financial statements and accompanying notes. the consolidated financial statements have been prepared in accordance with canadian generally accepted accounting principles (GAAP). this MD&A contains forward-looking statements based on the corporation’s estimates and assumptions concerning future results and events. Due to the risks and uncertainties inherent in any forecasted outlook, the actual results of the corporation could differ materially from those anticipated. these risks and uncertainties include natural gas prices; coal and hydro availability; weather; economic conditions; number of customers; and market conditions in other jurisdictions.
SASKPOWeR AnnuAL RePORt 2008 29 IntRODuctIOn cORe BuSIneSS SaskPower is a vertically integrated electric utility dedicated to providing generation, transmission, distribution and retail services to more than 460,000 customers in Saskatchewan. Over 2,500 permanent full-time employees are employed in three business units, four corporate groups and three wholly-owned subsidiaries — SaskPower International, northPoint energy Solutions and SaskPower Shand Greenhouse.
Our company manages more than $4.5 billion in assets, operating or buying supply from a generating fleet that uses a wide range of fuels. As a result, this diversity of sources provides a natural hedge against supply and price volatility, protecting customers from some of the risk inherent in any single fuel.
OuR OPeRAtInG StRuctuRe SaskPower traces its origins to the Saskatchewan Power commission that was founded in 1929. In 1949, our company was incorporated as a provincial crown corporation under the authority and mandate of The Power Corporation Act (the Act). the Act has had a number of modifications over its lifetime. However, SaskPower’s mission — to deliver power in a safe, reliable and sustainable manner — has not fundamentally changed. the Act grants SaskPower the exclusive franchise and obligation within the province (except for the city of Saskatoon and the city of Swift current) to supply, transmit and distribute electricity, as well as to provide retail services to customers. the reseller class of customer is restricted to two cities that retained their municipal franchise — the city of Swift current and the city of Saskatoon.
Our company’s vision, mission and values flow from the Act and SaskPower’s relationship with its parent company, crown Investments corporation of Saskatchewan (cIc). We support the strategic direction provided by cIc. In turn, cIc is responsive to general government direction as articulated in a variety of ways, such as through the annual Speech from the throne, or with formal policy statements. the President and chief executive Officer of SaskPower reports to a Board of Directors appointed by the Lieutenant Governor in council pursuant to the Act. through the chair, our company’s Board of Directors is accountable to the Minister of crown corporations. the Minister functions as a link between SaskPower and cabinet, as well as the provincial legislature.
OuR cAPABILIty tO DeLIVeR ReSuLtS SaskPower’s available generation capacity is 3,641 megawatts (MW). this includes 3,172 MW available from our company’s own assets — three coal-fired stations, seven hydro stations, four natural gas stations and two wind generation facilities.
SaskPower also has an available generation capacity of 469 MW through long-term power purchase agreements. Facilities producing the electricity are the gas-fired cory cogeneration Station near Saskatoon; the gas-fired Meridian cogeneration Station at Lloydminster; the SunBridge Wind Power Project near Swift current; and the nRGreen Kerrobert, Loreburn, estlin and Alameda Heat Recovery Projects.
Our company maintains 156,661 kilometres of power lines (12,311 kilometres transmission and 144,350 kilometres distribution) in Saskatchewan. transmission lines are high voltage lines (over 25,000 volts) that transport large volumes of electricity from generating stations to load centres — cities, towns or large industrial or commercial customers.
Distribution lines are lower voltage lines (under 25,000 volts) that take electricity in smaller quantities to residential users and smaller commercial consumers. the challenge of managing the system is considerable because of the geographic size of the province, location of various sources of generation, and dispersed and relatively small population.
SaskPower has interconnections at the Manitoba, Alberta and north Dakota borders. these provide our company with the capability to import or export electricity to meet higher internal demand or take advantage of export market opportunities. under normal system conditions, the import capability is 300 MW from Manitoba, 75 MW from Alberta and 150 MW from north Dakota. the import from Manitoba and north Dakota is interdependent; the capabilities cannot be achieved simultaneously. the export capability is 225 MW to Manitoba, 153 MW to Alberta and 150 MW to north Dakota.
30 SASKPOWeR AnnuAL RePORt 2008 these interconnection capabilities vary with system conditions, including generation and load level. In compliance with the open access transmission tariff (OAtt), SaskPower is required to compete with other suppliers for access to these interconnections. the OAtt enables competitors to schedule access to our company’s transmission system, allowing them to wheel power through Saskatchewan or sell to SaskPower’s wholesale (reseller) customers. ecOnOMIc BeneFItS FOR OuR PROVInce In 2008, over $1 billion flowed from SaskPower into the 2008 AVAILABLE GENERATION CAPACITY – 3,641 MW provincial economy. this occurred through the procurement of I COAL 46% I WIND 5% over 73% of goods and services from Saskatchewan suppliers; I GAS 25% I OTHER 1% the payment of wages and benefits to employees; the purchase I HYDRO 23% of coal; and the acquisition of electricity from Independent SaskPower uses a diversified portfolio of assets to meet its Power Producers. generation requirements.
Our company’s contributions also included $17 million in grants-in-lieu of taxes payable to local governments, as well as approximately $54 million in coal royalties, water rentals and provincial corporate capital tax payable directly to the Province of Saskatchewan. In addition, we collected $42 million in municipal surcharges for redistribution to 406 cities, towns and villages.
RAte ReVIeW PROceSS electricity pricing in Saskatchewan is subject to review by the Saskatchewan Rate Review Panel (the Panel) with final approval by cabinet. In January 2009, SaskPower submitted a rate application to the Panel requesting a 13.0% system- wide rate increase effective May 1, 2009. the rate increase will provide SaskPower with approximately $125 million of additional revenue in 2009. the Panel will submit its recommendations to the Minister by April 27, 2009. SaskPower’s last rate increase was 4.3% and became effective on February 1, 2007.
InFRAStRuctuRe ReneWAL AnD exPAnSIOn As Saskatchewan’s economy grows, there is an increased demand for power as people invest in the province and make it their home. In response, SaskPower is developing a fully integrated Supply and transmission Plan.
SaskPower has already committed to installing up to 400 MW of simple cycle natural gas turbines as the supply option for the short-term. to ensure long-term support for the province’s economic growth, SaskPower is currently reviewing other supply options. Building on the already diverse mix in the current generation fleet, future options under consideration include clean coal, polygeneration, cogeneration, natural gas, imports, purchased power, nuclear, and large and small hydro and renewables – like biomass and wind. Demand Side Management (DSM) will also continue to play a prominent role. Refer to the risk management section for further discussion.
SASKPOWeR AnnuAL RePORt 2008 31 Key PeRFORMAnce DRIVeRS AnD tARGetS A StRAteGy FOR BuILDInG A LeADInG utILIty At the heart of the SaskPower Strategic Plan is our company’s long-term vision: People, innovation and partnerships . . . powering Saskatchewan to a bright future.
Our five Strategic Priorities that will assist us in achieving SaskPower’s vision over the next five to 10 years are:
1. Proud and productive employees.
2. Loyal and satisfied customers.
3. Dependable and secure infrastructure.
4. Strong environmental stewardship and performance.
5. Prudent financial management and growth.
We measure our ongoing performance against our ability to meet targets specific to each of our Strategic Priorities. the SaskPower corporate Balanced Scorecard is directly aligned with our new Strategic Priorities and their associated activities. cORPORAte BALAnceD ScORecARD 1. Proud and productive employees — A successful future for our company is directly linked to the make-up of our current and future workforce. We strive to ensure our team of employees is dedicated, passionate, innovative and representative of the communities that we serve.
2006 2007 2008 2008 2009 2010 2011 Measures actual actual actual target target target target
employee engagement score (%) • 39 • • 50 50 55
net increase in diversity employees (#) • 63 51 60 80 85 90
Productivity indicator (GWh/Fte) • • • • 7.1 7.5 7.9
Safety Index • • • • 3.0 3.0 2.0
• Denotes that actuals or targets were not available or reported for that time period.
Employee engagement score – this measure focuses on ensuring SaskPower has engaged employees and creates an environment conducive to the continuous improvement of productivity. the intent is to measure engagement levels on a regular basis and to show steady improvement. SaskPower’s 2007 score was 39%, which is well below the targeted level. SaskPower has taken a number of steps to improve on this measure, including the implementation of a new performance management system and the delivery of a standardized training program for all supervisors. there was no engagement score for 2008.
Net increase in diversity employees – SaskPower has established an objective of having a workforce that is representative of Saskatchewan’s population. A diverse employee base is a key part of our company’s strategy to attract and retain a productive workforce. net increase in diversity employees is a measure of the number of employees hired during the year from one of the four designated target groups (Aboriginal people, visible minorities, persons with disabilities and women in under-represented positions). the actual results were below target for the year and declined from the prior year. However, SaskPower expects an improvement in 2009.
32 SASKPOWeR AnnuAL RePORt 2008 Productivity indicator – this is a new measure that deals with the productivity level of employees. continuous improvement in productivity is essential to ensure SaskPower can continue to provide electricity to Saskatchewan residents at reasonable rates. there are several measures SaskPower could use to evaluate its productivity. However, our company has decided to measure productivity as total electricity sales in gigawatt hours (GWh) divided by the number of permanent full-time employees (Fte).
Safety Index – Safety is a critical element in all SaskPower’s operations. In recent years, our company’s safety record has improved, however there are opportunities for further advances. continued improvement in safety processes and practices are essential for the well-being of our workforce and the wider community. the Safety Index is a new measure that evaluates how well SaskPower is performing in relation to its safety targets.
2. Loyal and satisfied customers — SaskPower’s mission is built around serving the people and businesses of Saskatchewan. As our customers’ needs evolve, so must our company. Beyond ensuring dependability, SaskPower will work in partnership with customers to find innovative and timely solutions to address ever-changing service requirements.
2006 2007 2008 2008 2009 2010 2011 Measures actual actual actual target target target target
customer Satisfaction Index (%) * 46 41 7.8 7.0 7.8 7.9 8.0
Reliability System Average Interruption Duration 4.1 4.5 3.8 3.5 3.4 3.3 3.2 Index (SAIDI)
Reliability System Average Interruption 1.7 2.0 1.8 1.7 1.6 1.5 1.4 Frequency Index (SAIFI)
* Starting in 2008, the Customer Satisfaction Index was measured using a 10-point scale.
Customer Satisfaction Index – the customer Satisfaction Index is derived from our annual customer satisfaction survey. Our company is targeting to increase the mean or average satisfaction rating for all customer classes. In 2008, the target was met in all customer classes. Programs such as Service Delivery Renewal (SDR) and DSM are expected to improve average satisfaction levels.
Reliability System Average Interruption Duration Index (SAIDI) – this is a measure of the average service interruption length in hours from a customer’s point of view. this is used to track SaskPower’s performance in responding to outages. the target reflects a normal year for SaskPower. the SAIDI measured a greater length of interruptions than the 2008 target, due largely to the accumulation of a higher number of incidents. However, the results are an improvement over the prior year. to achieve its target, our company is continuing to focus on a number of initiatives, including the Wood Pole Replacement Program and Vegetation Management Program. these programs are designed to reduce outages that are considered controllable.
Reliability System Average Interruption Frequency Index (SAIFI) – this is a measure of the average service interruption frequency from a customer’s point of view. this is used to track the overall performance of SaskPower’s distribution system. the target reflects a normal year for SaskPower. the SAIFI measured a greater number of interruptions than the 2008 target due to adverse weather and equipment failures. However, the results are an improvement over the prior year. As noted above, SaskPower continues to focus on a number of initiatives in an effort to meet its target level of service.
SASKPOWeR AnnuAL RePORt 2008 33 3. Dependable and secure infrastructure — SaskPower has a strong track record of providing reliable service to customers. For our company, dependability begins with a secure supply of electricity, continues by way of a robust grid system and ends with excellence in product delivery.
2006 2007 2008 2008 2009 2010 2011 Measures actual actual actual target target target target
net new capacity additions (MW) • • • • 169 141 100
Renewing Infrastructure Index (%) • • • • 87.6 88.0 88.3
• Denotes that actuals or targets were not available or reported for that time period.
Net new capacity additions – this is a new measure of the increase in the net amount of generation capacity. SaskPower has an ongoing need to replace existing generating infrastructure and increase its capacity — through the building of new plants or through power purchase agreements — to accommodate new growth. the target for 2009 has been set at 169 MW. It relates to the installation of simple cycle natural gas turbines at Queen elizabeth Power Station (105 MW) and ermine (94 MW), offset by the retirement of the Success Power Station (30 MW).
Renewing Infrastructure Index – this is a new measure of the equipment availability of our generation and transmission assets. It demonstrates the effectiveness of SaskPower’s overall asset maintenance strategy.
4. Strong environmental stewardship and performance — SaskPower will cultivate effective environmental stewardship through the prudent use of natural resources and the safeguarding of our air, land and water. We will strengthen our company’s commitment to sustainability by developing and introducing cleaner sources of electricity while lowering emissions and empowering customers to manage their energy use.
2006 2007 2008 2008 2009 2010 2011 Measures actual actual actual target target target target
cO2e emission offsets (kilotonnes) • • • • 0 3,125 3,242
DSM - accumulated savings (MW) • • • • 24 38 46
eneraction - cost of acquired savings ($/kWh) • • • • 0.02 0.02 0.02
customer satisfaction with SaskPower’s • • • • 7.5 7.8 8.0 environmental performance *
* The customer satisfaction with SaskPower’s environmental performance is measured using a 10-point scale. • Denotes that actuals or targets were not available or reported for that time period.
CO2e emission offsets – this is a new measure of the amount of carbon dioxide (cO2) emission offsets acquired to meet obligations within SaskPower’s current generation supply plan.
DSM - accumulated savings – this is a new measure of the progress being made in delivering new DSM programs. It records demand reduction in megawatts at customer sites. the accumulated demand reduction will be achieved through energy efficiency, demand response, customer self generation, and system improvement programs that are designed to achieve energy and demand savings. Program savings will be calculated using an appropriate end-use load factor and the amount of energy savings estimated at the customer site.
Eneraction - cost of acquired savings – this is a new measure of SaskPower’s umbrella DSM program that calculates the cost of average annual energy savings.
34 SASKPOWeR AnnuAL RePORt 2008 Customer satisfaction with SaskPower’s environmental performance – this is a new measure evaluating customer satisfaction. As part of the customer satisfaction survey conducted each year, SaskPower will measure customers’ response to the following question: “How satisfied are you with SaskPower operating in an environmentally responsible manner?”
5. Prudent financial management and growth — We believe a consistently strong financial performance is essential to sustain the health of our company and meet obligations to our shareholder. A healthy balance sheet will give SaskPower the flexibility to finance ongoing operations and capital requirements while we strive to deliver rates to all customers that accurately reflect costs and are competitive with other jurisdictions.
2006 2007 2008 2008 2009 2010 2011 Measures actual actual actual target target target target
Return on equity (%) 6.4 9.3 4.2 8.5 8.5 8.5 8.5
Per cent debt ratio (%) 61.0 59.7 60.7 60.8 63.4 65.3 67.4
northPoint growth (%) 44 (27) 42 • 8 8 8
Rates – thermal utilities (%) • • • • ≤110 ≤110 ≤110
• Denotes that actuals or targets were not available or reported for that time period.
Return on equity – this is a measure of net income for the year expressed as a percentage of total equity. the target reflects an appropriate rate of return relative to other canadian electrical utilities. the return on equity was 4.2% in 2008, which was below the target for the year. the net income results are explained in detail in the financial results section of the MD&A.
Per cent debt ratio – this is a measure of debt expressed as a percentage of the total corporate financing structure. the target reflects a prudent level of debt for an electrical utility. the 2008 per cent debt ratio of 60.7% was slightly better than target. the per cent debt ratio is discussed in detail in the financial results section of the MD&A.
NorthPoint growth – this is a new measure of northPoint’s net income growth. northPoint’s growth strategy includes: expanded energy management services for SaskPower; expanded electricity trading in new markets; and natural gas sales and storage optimization.
Rates - thermal utilities – the objective of this indicator is to ensure that SaskPower’s system average rates are less than or equal to 110% of the system average rates for customers served by utilities dependent on thermal generation.
SASKPOWeR AnnuAL RePORt 2008 35 ReSuLtS FROM OPeRAtIOnS (in millions) 2008 2007 change
Revenue Saskatchewan electricity sales $ 1,385 $ 1,356 $ 29 exports 33 57 (24) net sales from electricity trading 17 11 6 Other revenue 54 45 9 Total revenue 1,489 1,469 20
Operating costs Fuel and purchased power 554 463 91 Realized natural gas risk management activities (9) 18 (27) Operating, maintenance and administration 430 416 14 Depreciation, finance charges and taxes 422 421 1 Total operating costs1 1,397 1,318 79 Operating income1 $ 92 $ 151 $ (59) unrealized natural gas risk management activities (28) (13) (15) Net income $ 64 $ 138 $ (74)
Operating return on equity2 5.9% 10.1% (4.2)% Return on equity3 4.2% 9.3% (5.1)%
1. Operating costs and operating income are non-GAAP measures, whose nearest GAAP measures are total expense and net income respectively. Operating costs and operating income provide management and shareholders with measurements of operating performance which are readily comparable from period to period. Refer to the non-GAAP measures section on page 55 for further discussion of these items.
2. Operating return on equity = (operating income)/(average equity), where average equity = [(equity advances + retained earnings – unrealized natural gas risk management activities at year-end) + (equity advances + retained earnings – unrealized natural gas risk management activities at previous year-end)/2].
3. Return on equity = (net income)/(average equity), where average equity = [(equity advances + retained earnings at year-end) + (equity advances + retained earnings at previous year-end)/2].
36 SASKPOWeR AnnuAL RePORt 2008 HIGHLIGHtS SaskPower’s consolidated operating income was $92 million in 2008, a decrease of $59 million from 2007.the decline in earnings was due to $200 a $79 million increase in operating costs, offset by a $20 million improvement in revenue. the operating return on equity was 5.9%, 151 150 compared to 10.1% in the previous year. 131 total operating costs increased $79 million due to a $91 million 100 93 97 92 increase in fuel and purchased power costs, resulting primarily from an 85 unfavourable change in the fuel mix and higher average fuel costs. 66 61 Realized natural gas risk management activities improved $27 million 59 50 46 as SaskPower’s natural gas hedging activities partially mitigated the impact of rising natural gas prices during 2008. Operating, maintenance and administration (OM&A) costs increased $14 million 0 04 05 06 07 08 as a result of rising costs for salaries and benefits, additional pension expense and higher maintenance costs. there was also a combined $1 OPERATING INCOME AND DIVIDENDS (in millions) I I million increase in depreciation, finance charges and taxes over the OPERATING INCOME DIVIDENDS Over the last five years, SaskPower has declared $348 million prior year. in dividends payable to CIC. the $20 million improvement in revenue was attributable to a $29 million increase in Saskatchewan electricity sales; a $6 million increase in electricity trading earnings; and a $9 million increase in other revenue. Saskatchewan electricity sales increased due to higher sales volumes and electricity trading earnings increased due to improved margins. Other revenue rose primarily due to higher flyash sales. the increase in these revenue sources was substantially offset by the $24 million decrease in export revenue as a result of lower sales volumes caused by increased domestic load and transmission constraints. net income was $64 million in 2008, compared to $138 million in 2007.the $64 million net income includes $28 million of unrealized losses on SaskPower’s natural gas risk management activities.
In 2008, SaskPower declared $46 million in dividends payable to cIc, compared to $97 million in 2007.
SASKPOWeR AnnuAL RePORt 2008 37 ReVenue
A. Saskatchewan electricity sales
(in millions) 2008 2007 change Saskatchewan electricity sales $ 1,385 $ 1,356 $ 29
Saskatchewan electricity sales represent the sale of electricity to all customer classes within the province. these sales are subject to the effects of general economic conditions, number of customers, weather and electrical rates.
Saskatchewan electricity sales were $1,385 million in 2008, up $29 million from 2007.there was no system-wide rate increase during the year, and the rise in sales was primarily due to increased sales volumes.
In 2008, electricity sales volumes to Saskatchewan customers were 18,192 gigawatt hours (GWh), up 269 GWh or 1.5% from the previous year. Sales volumes were up in all customer classes with 2008 REVENUE – $1,489 million the exception of farm and reseller customers, where volumes I SASKATCHEWAN I NETSALESFROM ELECTRICITYSALES93% ELECTRICITYTRADING1% were down slightly. I EXPORTS 2% I OTHER 4% Saskatchewan electricity sales make up the bulk of SaskPower’s revenue.
38 SASKPOWeR AnnuAL RePORt 2008 B. Exports
(in millions) 2008 2007 change Exports $ 33 $ 57 $ (24)
exports represent the sale of SaskPower’s surplus generation to other regions in canada and the united States. export pricing is not subject to the rate review process and is at market rates. export sales volumes are dependent on the availability of surplus SaskPower generation, market conditions in other jurisdictions and transmission availability.
exports were $33 million in 2008, down $24 million compared to 2007.the decrease was primarily due to lower sales volumes as a result of increased domestic load and transmission restrictions that limited the availability to export. export sales volumes decreased 442 GWh, compared to 2007.this decline in volumes was partially 2008 EXPORTS BY MARKET – $33 million offset by an increase in the average export sales price, which was I ALBERTA 73% I OTHER <1% approximately $81/megawatt hour (MWh), up $14/MWh from 2007. I MISO 27% Exports are made primarily to the Alberta and MISO markets.
SASKPOWeR AnnuAL RePORt 2008 39 C. Net sales from electricity trading
(in millions) 2008 2007 change electricity trading revenue $ 125 $ 125 $– electricity trading costs (108) (114) 6 Net sales from electricity trading $ 17 $ 11 $6
electricity trading activities, performed by SaskPower’s subsidiary northPoint, include the purchase and resale of electricity and other electricity-related commodities and derivatives in regions outside Saskatchewan. the trading activities include both real time as well as short- to long-term physical and financial trades in the north American market. the trading activities are intended to deliver positive gross margins to SaskPower’s bottom line while operating within an acceptable level of risk.
electricity trading revenues were $125 million in 2008, unchanged from 2007. Despite additional sales to the Alberta market in 2008,
overall trading volumes decreased 84 GWh, as a result of fewer 2008 ELECTRICITY TRADING REVENUE BY MARKET – $125 million trading opportunities in other markets. the decline in sales I ALBERTA 34% I NYISO 4% volumes was offset by an increase in the average sales price, I MISO 23% I PJM 23% which rose to $66/MWh in 2008 from $63/MWh in 2007. I ONTARIO 6% I PACIFIC NORTHWEST 10% SaskPower participates in a number of electricity trading While electricity trading revenues were relatively flat, the gross markets across North America. margin — or net sales after deducting purchased power costs — was $17 million or 14% in 2008, compared to $11 million or 9% in 2007.the relative improvement in the gross margin was due to improved spreads — the difference between the sale price and the purchase price — realized in the Alberta market in 2008.
D. Other revenue
(in millions) 2008 2007 change Other revenue $ 54 $ 45 $9
Other revenue includes various non-electricity products and services. Other revenue rose $9 million to $54 million in 2008. the increase was primarily due to higher flyash sales; rising gas and electrical inspection revenue; and the new grant revenue received from the Federal Government as funding for carbon capture and sequestration. these increases were partially offset by a $1 million decline in the amount received from the Government of canada as part of the Wind Power Production Incentive Program.
40 SASKPOWeR AnnuAL RePORt 2008 OPeRAtInG cOStS
A. Fuel and purchased power
(in millions) 2008 2007 change Fuel and purchased power $ 554 $ 463 $ 91
SaskPower’s fuel and purchased power costs include the fuel charges associated with the electricity generated from SaskPower- owned facilities, energy purchased through power purchase agreements, as well as electricity imported from markets outside Saskatchewan. this electricity is used to serve our company’s Saskatchewan customers, with surplus electricity being sold to markets outside Saskatchewan when favourable conditions exist.
SaskPower’s fuel cost management strategy focuses on the economic dispatch of the generating units that bring the lowest incremental cost units on stream first. In general, this means maximizing hydro and coal generation, which have the lowest 2008 GROSS ELECTRICITY SUPPLIED – 20,480 GWh incremental cost per unit of generation. Hydro generation is I COAL 55% I WIND 3% dependent upon water levels and river flow at SaskPower’s hydro I GAS 19% I IMPORTS 3% facilities and coal generation is a product of the availability of our I HYDRO 20% I OTHER <1% coal plants. Wind generation, the lowest incremental cost source Coal and hydro generation provided nearly 75% of electrical of electricity, cannot be dispatched on a planned basis as it is requirements in 2008. dependent upon wind conditions.
total fuel and purchased power costs in 2008 were $554 million, compared to $463 million in 2007.the $91 million increase was largely due to the unfavourable change in the fuel mix and an increase in the average price of fuel.
the fuel mix is the relative proportion that each fuel source contributes to our total fuel supply. the more energy that is generated from lower incremental cost units such as hydro, coal and wind, the more favourable the impact on fuel and purchased power costs. In 2008, hydro generation volumes decreased by 363 GWh or 8%, as water available to produce electricity at hydroelectric plants had decreased from the prior year. In addition, coal generation was down 256 GWh or 2% in 2008, due to the extensive rebuild that took place at Poplar River Power Station unit #1. coal and hydro generation accounted for 75% of the total generation in 2008, compared to 78% in 2007. the lower coal and hydro availability was replaced with natural gas generation and imports, which are relatively more expensive fuel sources. the change in the fuel mix resulted in an estimated $33 million increase in fuel and purchased power costs.
Adding to the unfavourable change in the fuel mix was an increase in the average cost of fuel issued from SaskPower’s inventory, largely as a result of higher natural gas prices. Average natural gas prices increased approximately $1 per gigajoule (GJ) in 2008 compared to 2007. In addition, coal prices were also up in 2008 as a result of an increase in the various consumer price indices that directly impact SaskPower’s contracted coal price. the increase in the price of natural gas and coal caused an increase in fuel and purchased power costs of approximately $59 million. 2008 FUEL AND PURCHASED POWER – $554 million these unfavourable changes were partially offset by a slight I COAL 34% I WIND <1% decrease in the volume of electricity supplied in 2008. total I GAS 56% I IMPORTS 6% generation and purchased power of 20,480 GWh decreased I HYDRO 3% I OTHER 1% 91 GWh from the prior year. this decrease in demand resulted in Coal and hydro represent 37% of the total fuel and purchased power costs, while providing nearly 75% of electrical an estimated $1 million improvement in fuel and purchased power requirements. costs in 2008.
SASKPOWeR AnnuAL RePORt 2008 41 B. Realized natural gas risk management activities
(in millions) 2008 2007 change Realized natural gas risk management activities $ (9) $ 18 $ (27)
Realized natural gas risk management activities represent the cash impact derived from SaskPower’s natural gas hedging program. currently, our company seeks to hedge up to 50% of SaskPower’s exposure to natural gas. this strategy is intended to mitigate our company’s exposure to market prices and stabilize the fuel and purchased power budget. SaskPower’s long-term natural gas risk management strategy addresses the security of natural gas supply, obtaining suitable market access to liquid markets and managing natural gas price risk.
In 2008, approximately 15 million notional GJ of hedges related to SaskPower’s natural gas consumption settled resulting in $9 million of realized gains for our company. these gains were the product of rising natural gas prices that pushed the market price of natural gas above SaskPower’s hedged rate. As a result, SaskPower received payment on these hedges for the difference between the market price of natural gas and the hedged rate.
C. Operating, maintenance and administration (OM&A)
(in millions) 2008 2007 change OM&A $ 430 $ 416 $ 14
SaskPower’s OM&A expense was $430 million in 2008, compared to $416 million in 2007.this $14 million increase was largely the result of an increase in salaries and benefits; higher maintenance costs; and additional resources directed toward strategic programs.
Salaries and benefits increased $4 million, primarily as a result of general economic increases; job evaluation for members of the communications, energy and Paperworkers (ceP) union; and overall staff increases to address additional work load and new initiatives. there was also a $3 million increase in the corporate pension expense. this was as a result of the discontinuation of the 2008 OM&A – $430 million amortization of a transitional asset that was set up in 2000 upon I SALARIESAND I EXTERNAL SERVICES 25% adoption of the revised pension accounting standards. BENEFITS 53% I OTHER 14% I MATERIALS AND SaskPower experienced an overall increase of $7 million in other SUPPLIES 8% OM&A costs due to an increase in maintenance work performed People costs – salaries and benefits and external services – represent 78% of OM&A expense. on our company’s transmission facilities. there was also an increase in the cost for work on the DSM and SDR initiatives.
42 SASKPOWeR AnnuAL RePORt 2008 D. Depreciation
(in millions) 2008 2007 change Depreciation $ 234 $ 219 $ 15
Depreciation represents a charge to income for the capital $250 expenditures of SaskPower. the capital expenditures are amortized 234 to income on a straight-line basis over the estimated useful life of 219 207 the related asset. Depreciation rates are established based on 200 189 189 periodic depreciation studies.
Depreciation expense amounted to $234 million in 2008, up $15 150 million from 2007.this was due to a $9 million rise in depreciation expense attributable to an increase in the asset base as a result of 100 ongoing capital expenditures. 50 there was also a $6 million increase in asset retirement costs as the result of the write-down in the value of a number of assets 0 that were no longer in service. 04 05 06 07 08 DEPRECIATION (in millions) Depreciation costs have increased steadily as SaskPower continues to add to its asset base. E. Finance charges
(in millions) 2008 2007 change Finance charges $ 153 $ 167 $ (14)
Finance charges include the net amount of interest on recourse and non-recourse debt; interest capitalized; debt retirement fund $200
earnings and changes in the market value of the funds; interest 167 157 161 income; and foreign exchange gains/losses. 153 150 147 Finance charges of $153 million in 2008 were down $14 million from 2007.the decrease was primarily due to lower interest expenses as a result of the refinancing of a portion of 100 SaskPower’s long-term debt at more favourable interest rates.
In addition, there was an improvement in the debt retirement fund 50 earnings as a result of higher returns partially offset by an unrealized loss in the market value of the funds. 0 04 05 06 07 08 FINANCE CHARGES (in millions) Finance charges fell in 2008 mainly due to the refinancing of high cost debt at lower interest rates.
SASKPOWeR AnnuAL RePORt 2008 43 F. Taxes
(in millions) 2008 2007 change Taxes $ 35 $ 35 $–
taxes represent the payment of corporate capital tax to the $50 Province of Saskatchewan and grants-in-lieu of taxes paid to 13 cities in Saskatchewan based on electricity sales earned in accordance with agreements between SaskPower and those 40 34 35 35 cities. 32 30 corporate capital tax and grants-in-lieu of taxes were $35 million 28 in 2008, unchanged from the prior year. 20
10
0 04 05 06 07 08 TAXES (in millions) Tax levels have increased modestly the past five years as a result of the increase in Saskatchewan electricity sales and a growing capital tax base. unReALIzeD nAtuRAL GAS RISK MAnAGeMent ActIVItIeS
(in millions) 2008 2007 change natural gas hedges market value losses (gains) $ 27 $ (2) $ 29 natural gas hedges transitional market value net losses reclassified to net income 1 15 (14) Unrealized natural gas risk management activities $ 28 $ 13 $ 15
unrealized natural gas risk management activities represent the change in the market value of SaskPower’s outstanding natural gas hedges during the year. As of December 31, 2008, SaskPower had outstanding hedges of approximately 20 million notional GJ to fix the price of natural gas on a portion of our company’s anticipated natural gas needs in 2009, 2010 and 2011.the net unrealized market value losses on these outstanding hedges were $27 million in 2008. the losses are the result of a decline in the forward price of natural gas as at the end of 2008. these unrealized losses are subject to volatility based on movements in the forward natural gas market.
the natural gas hedges transitional market value net losses reclassified to net income represent a transitional amount that resulted from the discontinuance of hedge accounting at the end of 2006. this transitional amount was amortized to net income over the life of the natural gas contracts in place on December 30, 2006.
44 SASKPOWeR AnnuAL RePORt 2008 DIScuSSIOn OF QuARteRLy ReSuLtS the following chart outlines the quarterly operating results of SaskPower in 2008: (in millions) Q1 Q2 Q3 Q4 Total
Revenue Saskatchewan electricity sales $ 365 $ 327 $ 336 $ 357 $ 1,385 exports 4 12 12 5 33 net sales from electricity trading –65617 Other revenue 11 12 12 19 54 Total revenue 380 357 365 387 1,489
Operating costs Fuel and purchased power 138 131 136 149 554 Realized natural gas risk management activities 2 (7) (7) 3 (9) Operating, maintenance and administration 102 102 103 123 430 Depreciation, finance charges and taxes 102 104 113 103 422 Total operating costs 344 330 345 378 1,397
Operating income $ 36 $ 27 $ 20 $9$ 92 unrealized natural gas risk management activities 35 32 (80) (15) (28)
Net income (loss) $ 71 $ 59 $ (60) $ (6) $ 64
SaskPower’s Saskatchewan electricity sales to residential and commercial customers are seasonal, with the first and fourth quarters being the strongest periods, reflecting colder weather and fewer daylight hours.
Operating income during the year was fairly consistent during the first three quarters of 2008. In the fourth quarter operating income was lower primarily due to an increase in OM&A expense as a result of the timing of maintenance activities. net income was impacted throughout the year by the unrealized natural gas risk management activities resulting from fluctuations in the forward prices of natural gas.
SASKPOWeR AnnuAL RePORt 2008 45 FInAncIAL cOnDItIOn the following chart outlines changes in the consolidated balance sheet from December 31, 2007, to December 31, 2008: Increase / (in millions) (decrease) Explanation of change cash and cash equivalents $ (78) Refer to consolidated statement of cash flows. Accounts receivable and unbilled revenue (5) Improved collection of current receivables and lower export sales in December. Inventory 2 Increase in maintenance supplies and fuel inventory offset by an increase in the allowance for obsolescence. Risk management assets (2) Decline in the forward price of natural gas. Property, plant and equipment (net) 167 capital additions offset by depreciation expense and asset retirements. Debt retirement funds (25) Redemptions net of installments, earnings and market value adjustments. Other assets (14) Lower defined benefit pension asset and prepaid expenses relating to long-term coal supply agreements. Accounts payable and accrued liabilities 2 Increase in trade payables offset by lower year-end accruals. Accrued interest (6) Refinancing of debt at lower interest rates. Risk management liabilities 25 Decline in the forward price of natural gas. Dividends payable (23) Decrease in net income; reduction in dividend rate. Long-term debt (including current portion) 13 Proceeds from new borrowings net of debt repayments. Other liabilities 20 Increase in estimated cash flows related to asset retirement obligations. equity 14 net income offset by dividends declared to cIc.
46 SASKPOWeR AnnuAL RePORt 2008 LIQuIDIty AnD cAPItAL ReSOuRceS
SaskPower raises most of its capital requirements through internal operating activities and through borrowings from the Saskatchewan Ministry of Finance. this type of borrowing allows our company to take advantage of the Province’s strong credit rating. The Power Corporation Act provides SaskPower with the authority to have outstanding borrowings of up to $5 billion, of which $750 million may be by way of temporary loans. SaskPower also has available credit of $51 million at financial institutions that it can draw upon. the other major sources of financing utilized by our company include non-recourse debt that was issued in 2001 to finance SaskPower’s share of the cory cogeneration Station and $660 million in equity advances that were provided by cIc over 1989–1992 to form cIc’s equity capitalization in SaskPower.
Cash position
(in millions) 2008 2007 change Cash and cash equivalents $6 $ 84 $ (78) cash and cash equivalents were $6 million in 2008, down $78 million from the prior year. the decrease in the cash position was the result of $320 million provided by operating activities, offset by $377 million used in investing activities and a $21 million outflow of cash related to financing activities.
A. Operating activities
(in millions) 2008 2007 change net income net of non-cash items $ 324 $ 373 $ (49) net change in non-cash working capital (4) – (4) Cash provided by operating activities $ 320 $ 373 $ (53)
net income net of non-cash items was $324 million in 2008, down from $373 million in 2007. Despite a $74 million decrease in net income in 2008, operating cash flows were down only $49 million as a result of an increase in non-cash items such as unrealized losses on natural gas hedges. the $49 million decrease from the prior year was primarily the result of higher fuel and purchased power costs. SaskPower’s non-cash working capital also decreased $4 million compared to 2007.
B. Investing activities
(in millions) 2008 2007 change Generation $ 207 $ 107 $ 100 transmission and distribution 177 146 31 Other 38 27 11 total capital expenditures 422 280 142 customer contributions and net proceeds on removal (39) (25) (14) equity investment distributions (6) (9) 3 Reclassification of short-term investment – 2 (2) Cash used in investing activities $ 377 $ 248 $ 129
In order to ensure a safe, reliable, and sustainable supply of electricity for its customers, SaskPower invested $422 million in various capital projects during 2008, compared to $280 million in 2007.the corporation’s capital was invested in the following areas during the year:
• $207 million on generation assets, including $96 million on new simple cycle natural gas turbines; $66 million to extend the life of the 291-MW Poplar River Power Station unit #1; and $16 million on the Boundary Dam Power Station spillway upgrade.
• $177 million on transmission and distribution assets, including $103 million to connect customers to the SaskPower electric system and $6 million to replace aging wooden poles.
• $38 million on other capital assets including vehicles, equipment and computer information and technology assets.
SASKPOWeR AnnuAL RePORt 2008 47 Also included in investing activities were the following: $500 473
• total customer contributions, net of proceeds on removal, 422 were $39 million, up $14 million from 2007. customer 400 contributions are funds received from certain customers for 301 the costs of service extensions. these contributions are 300 285 280 netted against property, plant and equipment and are
amortized over the estimated service life of the related 200 asset. the net proceeds on removal represent the net cash received or paid upon normal disposal of an asset. 100 • In 2008, SaskPower received $6 million in cash distributions
from its equity investment in the MRM cogeneration 0 Station, compared to $9 million in 2007. 04 05 06 07 08 CAPITAL EXPENDITURES (in millions) I GENERATION I OTHER I TRANSMISSION ANDDISTRIBUTION SaskPower has invested nearly $1.8 billion in its capital infrastructure over the last 5 years.
C. Financing activities
(in millions) 2008 2007 change net proceeds from new borrowings $ 13 $ 38 $ (25) net debt retirement fund redemptions (installments) 35 (23) 58 Dividends paid (69) (76) 7 Cash used in financing activities $ (21) $ (61) $ 40
In 2008, $21 million of cash was used for financing activities, compared to $61 million in 2007. the $21 million outflow of cash was made up of the net proceeds from new borrowings plus debt retirement fund redemptions net of installments less dividend payments to cIc.
Long-term debt
(in millions) 2008 2007 change Gross long-term debt $ 2,578 $ 2,565 $ 13 Less: current portion of long-term debt (7) (340) 333 Total long-term debt $ 2,571 $ 2,225 $ 346
Per cent debt ratio1 60.7% 59.7% 1.0%
1. Per cent debt ratio = (debt)/(debt + equity), where debt = (long-term + current portion of long-term debt – debt retirement funds – cash and cash equivalents).
SaskPower's gross long-term debt position was $2,578 million at December 31, 2008, up $13 million from December 31, 2007.the rise in gross debt was the result of the following:
• On April 2, 2008, SaskPower, through the Saskatchewan Ministry of Finance (General Revenue Fund), borrowed $250 million of long-term debt at a premium of $3 million. the debt issue has a coupon rate of 4.75%, an effective interest rate of 4.67% and matures on June 1, 2040.
48 SASKPOWeR AnnuAL RePORt 2008 • On December 19, 2008, SaskPower borrowed an $3,000 additional $100 million from the Saskatchewan Ministry of 2,515 2,565 2,578 Finance. the debt was issued at par with a coupon rate of 2,500 2,467 4.71% and maturity date of June 1, 2040. 2,181 2,000 • SaskPower repaid $337 million of long-term debt with
interest rates ranging from 7.70% to 10.31%. 1,500 • through its subsidiary, SaskPower International, 1,000 SaskPower repaid $3 million of non-recourse debt.
As a result of the increase in long-term debt and a reduced cash 500 balance, SaskPower’s per cent debt ratio has risen from 59.7% in 0 2007 to 60.7% in 2008. 04 05 06 07 08 GROSS LONG-TERM DEBT AT DECEMBER 31 (in millions) I GROSSLONG-TERMDEBT Debt levels have been increasing to finance capital expenditures.
Debt retirement funds installments/redemptions
(in millions) 2008 2007 change Debt retirement fund installments $ (24) $ (23) $ (1) Debt retirement fund redemptions 59 – 59 $ 35 $ (23) $ 58
Debt retirement funds are monies set aside to retire outstanding long-term debt upon maturity. SaskPower makes regular contributions to the funds, which are held and invested by the Province of Saskatchewan.
SaskPower made $24 million in contributions to the debt retirement funds on outstanding debt issues as required by the terms of the advances from the Province of Saskatchewan. SaskPower also received $59 million from the redemption of debt retirement funds attached to certain debt issues that were retired in 2008.
SaskPower also earned $10 million in earnings net of market value adjustments (classified as non-cash operating activities) on the debt retirement funds during the year.
Dividends SaskPower pays dividends to cIc based on the cIc Dividend Policy. Dividends were calculated based on 50% of net income excluding unrealized gains and losses on held-for-trading financial instruments. Dividends on each three month period’s net earnings are paid quarterly with a one quarter lag to allow time for the financial statements to be audited before the annual dividend is finalized.
In 2008, SaskPower paid $69 million in dividends which includes dividends declared in the fourth quarter of 2007 and the first three quarters of 2008. For the 2008 calendar year, SaskPower declared dividends of $46 million. the final quarterly installment of $8 million is payable to cIc on March 31, 2009.
SASKPOWeR AnnuAL RePORt 2008 49 Contractual obligations the corporation had the following significant long-term contractual obligations as at December 31, 2008: 2009 2010 2011 2012 2013 Total (in millions) and beyond Long-term debt (including principal and interest) $ 178 $ 174 $ 174 $ 173 $ 5,309 $ 6,008 Debt retirement fund installments 25 25 25 25 465 565 Power purchase agreements 266 277 301 318 5,032 6,194
SaskPower’s financing requirements for 2009 will include the repayment of $7 million of high coupon (7.87 – 9.26%) and non-recourse debt, $171 million in interest payments, $25 million of required debt retirement fund installments, and $266 million in minimum payments under existing power purchase agreements. SaskPower will evaluate the need for additional borrowings throughout the year.
OutLOOK
SaskPower expects to earn $138 million in 2009, resulting in a return on equity of 8.5%. earnings are expected to increase as a result of higher Saskatchewan and export sales, due to the anticipated 13% system-wide average rate increase, an increase in domestic demand and improved export opportunities in other jurisdictions. these increases are expected to be partially offset by higher expenses in 2009. the largest increase will be in fuel and purchased power costs, which are expected to be 18% higher in 2009. the increase is due to an expectation of higher natural gas costs and an unfavourable change in the fuel mix as a result of lower water levels. these earnings expectations are subject to a number of variables including: natural gas prices; coal and hydro availability; weather; economic conditions; number of customers; and market conditions in other jurisdictions.
SaskPower also expects to continue to make substantial investments in its infrastructure, totaling over $8 billion over the next 10 years. capital expenditures in 2009 are forecast to be approximately $954 million. this includes costs for the installation of simple cycle natural gas turbines at Queen elizabeth Power Station (105 MW); ermine (94 MW) and a site near north Battleford (141 MW). It also includes costs to upgrade various transformers and transmission lines and connect new customers to SaskPower’s grid.
50 SASKPOWeR AnnuAL RePORt 2008 SASKPOWeR SuBSIDIARIeS
SaskPower has three wholly-owned subsidiaries: SaskPower International Inc. (SaskPower International), northPoint energy Solutions Inc. (northPoint) and Power Greenhouses Inc. (Shand Greenhouse). each subsidiary prepares and issues separate audited financial statements. the financial activities of SaskPower’s subsidiaries are consolidated within the financial statements of SaskPower in accordance with canadian generally accepted accounting principles (GAAP) as summarized below. Shand Greenhouse grows and distributes tree and shrub seedlings and operates on a break-even basis. the financial results of this subsidiary are not considered to be material and have been not been included in the following chart: (in millions) Assets Revenue Net income 2008 2007 2008 2007 2008 2007 SaskPower International Inc. $ 394 $ 406 $ 55 $ 51 $ 21 $ 19 northPoint energy Solutions Inc. 45 37 133 133 18 13
SASKPOWeR InteRnAtIOnAL SaskPower International was established in 1994 as a wholly-owned subsidiary of SaskPower. SaskPower International currently has an ownership interest in three power generating stations as follows:
• the 228-MW cory cogeneration Station is located at the PcS Potash cory Division. It is jointly owned on a 50/50 basis with AtcO Power. the electricity generated by the facility is sold to SaskPower under the terms of a 25-year power purchase agreement. the steam is delivered to the PcS Potash cory Division for use in its industrial processes.
• the 172-MW MRM cogeneration Station is located at the Athabasca Oil Sands Project’s Muskeg River Mine, north of Fort McMurray, Alberta. It is owned 30% by SaskPower International and 70% by AtcO. the Muskeg River Mine uses all the steam output from the plant and currently uses approximately half of the electricity output. the remaining electricity is sold into the Alberta power grid.
• the 150-MW centennial Wind Power Facility began commercial operations on March 15, 2006. It is located approximately 25 kilometers southeast of Swift current. the electricity generated by this SaskPower International- owned facility is sold to SaskPower under the terms of an interim power purchase agreement.
SaskPower International’s other business line is the marketing and sale of flyash, which is a byproduct of coal burned at SaskPower’s Boundary Dam Power Station and Shand Power Station. the flyash is used in applications such as ready- mixed concrete, concrete block, pipe, paving stones and environmental remediation activities.
SaskPower, announced on December 18, 2008, that it had decided to wind down the operations of SaskPower International as of December 31, 2008. effective January 1, 2009, SaskPower International’s personnel, flyash sales operations and the centennial Wind Power Facility operations were transferred to SaskPower. SaskPower International is continuing as a legal entity to serve responsibilities under existing joint venture partnerships and investments. nORtHPOInt northPoint is a wholly-owned subsidiary of SaskPower. It was formed in late 2001 to meet requirements associated with SaskPower’s OAtt that mandates the separation of transmission and wholesale marketing functions. northPoint has a service agreement with SaskPower to perform generation and load management services, provide electricity export and import functions related to the generation assets of SaskPower, and to manage SaskPower’s natural gas supplies for its natural gas-fired power plants. the generation and load management services include coordinating the economic dispatch of SaskPower’s generation capacity and the dispatch of long-term power purchase agreements on a continuous basis. the electricity export and import functions include the selling of surplus generation to other jurisdictions and purchasing electricity for domestic load when shortfall in supply occurs or lower cost supply is available. Gas management services for SaskPower include coordinating and balancing SaskPower’s natural gas requirements, managing injections to and withdrawals from SaskPower’s natural gas storage assets, and managing natural gas price risk with physical and financial hedging activity. northPoint also acts as a principal in wholesale electricity trading transactions that do not relate to the generation assets of SaskPower. In canada, it operates in Alberta, Manitoba and Ontario. In the united States, it actively participates in markets in the northwest, Mid-continent, and east. northPoint operates mainly under two umbrella trading agreements: Mid-continent energy Marketers Association tariff and Western Systems Power Pool Agreement.
SASKPOWeR AnnuAL RePORt 2008 51 OFF-BALAnce SHeet ARRAnGeMentS the canadian Institute of chartered Accountants (cIcA) recommends that corporations disclose all off-balance sheet arrangements if they have or are likely to have a material current or future effect on the financial condition of SaskPower. SaskPower has the following off-balance sheet arrangements that are considered to be significant.
A. Employees’ future benefits SaskPower provides pension plans for all eligible employees, including a defined benefit pension plan, defined contribution pension plan and other severance plans. the funded status (the difference between the plan assets and accrued benefit obligations) of SaskPower’s employee future benefit plans is not recognized on the balance sheet as at December 31, 2008. under current canadian GAAP,only disclosure of the funded status in the notes to the financial statements is required. In addition, using a measurement date up to three months prior to the balance sheet date is permitted. the measurement date of the latest actuarial valuation used to determine the plan assets and obligations of the various plans was September 30, 2008.
the funded status of the defined benefit pension plan and the present value of the accrued benefits under the other benefit plans are disclosed in Note 28 to the consolidated financial statements.
B. Energy performance contracts energy performance contracts are packages that provide energy savings to certain large commercial customers of SaskPower. the packages are comprehensive facility improvement programs that normally include the installation of new energy efficient equipment, which is intended to pay for itself through energy savings. SaskPower guarantees these energy savings. these guarantees are offset by third party guarantees to SaskPower that ensure the energy savings will be realized.
SaskPower has not recorded an asset or liability in respect of these contracts, as the promised energy savings were being realized on all energy performance contracts as of December 31, 2008. In the event that the energy savings were not being realized, SaskPower would be liable to the customer for the guaranteed savings. A payable to the customer and a receivable from the third party that provided an offsetting guarantee to SaskPower would be recorded on the balance sheet.
the value of the guarantees is disclosed in Note 24(e) to the consolidated financial statements.
ReLAteD PARty tRAnSActIOnS
In October 2008, SaskPower purchased property from Saskatchewan transportation company. this purchase was accounted for as a related party transaction and was measured at carrying value, as the sale was considered to not be in the normal course of operations. As such, the excess of the consideration paid over the net book value of the property was charged to retained earnings.
SaskPower also has a number of routine transactions with various Saskatchewan crown corporations, ministries, agencies, boards and commissions related to the corporation by virtue of common control by the Government of Saskatchewan. these transactions with related parties are settled at prevailing market prices under normal trade terms.
Related party transactions are disclosed in Note 27 to the consolidated financial statements.
52 SASKPOWeR AnnuAL RePORt 2008 AnALySIS OF cRItIcAL AccOuntInG POLIcIeS AnD eStIMAteS
SaskPower’s significant accounting policies are described in Note 2 to the consolidated financial statements. Some of these policies involve accounting estimates that require management to make particularly subjective or complex judgements about matters that are inherently uncertain. Different conditions or assumptions regarding the estimates could result in materially different results being reported. Management has discussed the development and selection of these critical accounting policies with the Board of Directors and the external auditors. the following section discusses the critical accounting estimates and assumptions that management has made and how they affect the amounts reported in the consolidated financial statements.
A. Change in accounting policies
Financial instruments – disclosure and presentation effective January 1, 2008, SaskPower adopted the new cIcA Section 3862, “Financial Instruments – Disclosures,” and Section 3863, “Financial Instruments – Presentation.” these sections replace Section 3861, “Financial Instruments – Disclosure and Presentation.”the impact of implementing these new standards has been disclosed in Notes 21 and 22 in the consolidated financial statements.
Capital disclosures effective January 1, 2008, SaskPower adopted Section 1535, “capital Disclosures.” the new required disclosure regarding what SaskPower defines as capital and its objectives, policy and process for managing capital is provided in Note 23 in the consolidated financial statements.
Inventories effective January 1, 2008, SaskPower adopted Section 3031, “Inventories.”the new accounting standard provides guidance on the method of determining the cost of SaskPower’s inventory; specifies that inventories are to be valued at the lower of cost and net realizable value; and requires the reversal of previously recorded write-downs to realizable value when there is clear evidence that net realizable value has increased. the adoption of this new standard had no material impact on the consolidated financial statements.
B. Depreciation Property, plant and equipment represents 86% of total assets recognized on SaskPower’s balance sheet. Included in property, plant and equipment are the generation, transmission, distribution and other assets of SaskPower. Due to the size of SaskPower’s property, plant and equipment, changes in estimated depreciation rates can have a significant impact on income.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset. the estimated useful lives of the assets are based on formal depreciation studies that are performed every five years, with annual reviews for reasonableness. the estimated useful lives are determined based upon manufacturer’s guidance on asset life, SaskPower’s past experience with similar assets, industry averages and expectations about future events that could impact the life of the asset.
A one-year increase in the average estimated service life of each of the major asset categories of property, plant and equipment would result in a $13 million decrease to depreciation expense in the current year. See Note 2(h) and Note 9 to the consolidated financial statements for additional discussion of SaskPower’s depreciation expense.
C. Asset retirement obligations An asset retirement obligation is a legal obligation associated with the decommissioning of a long-lived asset. SaskPower recognizes asset retirement obligations in the period they are incurred if a reasonable estimate of fair value (net present value) can be determined. SaskPower recognizes asset retirement obligations to decommission coal, natural gas, cogeneration and wind generation facilities in the period in which the facility is commissioned. SaskPower has not recognized an obligation for the transmission, distribution and hydro generation assets as an estimate of their fair value cannot be determined. SaskPower expects to maintain and operate these assets indefinitely.
SASKPOWeR AnnuAL RePORt 2008 53 the fair value of the estimated asset retirement costs is recorded as a liability in other liabilities, with an offsetting asset capitalized and included as part of property, plant and equipment. the asset retirement obligations are increased annually for the passage of time by calculating accretion (interest) on the liability. the accretion expense is calculated using an interest rate that equates to a risk-free interest rate adjusted for the credit standing of the corporation and is included with depreciation expense. the offsetting capitalized asset retirement costs are depreciated over the estimated useful life of the related asset.
the calculations of fair value are based on detailed studies that take into account various assumptions regarding the anticipated future cash flows, including the method and timing of decommissioning and estimates of future inflation.
A 0.5% increase in the credit-adjusted risk-free rate would result in a $5 million decrease to the asset retirement obligation, a $2 million decrease to the asset retirement asset and no material impact on depreciation expense in the current year.
effective January 1, 2008, based on the completion of a detailed asset retirement obligation study, the fair value of the estimated cost to decommission SaskPower’s coal, natural gas and wind generation facilities has been changed. the impact of this change in estimate increased property, plant and equipment and other liabilities by $16 million and had no material impact on depreciation expense in 2008. See Note 2(j) and Note 18 to the consolidated financial statements for additional discussion of SaskPower’s asset retirement obligations.
D. Employees’ future benefits As explained in Note 2m and Note 28 in the consolidated financial statements, SaskPower provides post retirement benefits to employees, including a defined benefit pension plan. the defined benefit pension plan (the Plan), substantially closed to new members since 1977, provides benefits based on the average of the highest five years’ annual pensionable earnings and years of service. Pensions are increased annually at a rate equal to 70% of the increase in the Saskatchewan consumer price index (cPI).
the cost of pension benefits under the Plan are actuarially determined using the projected benefit method prorated on service. It reflects management's best estimates of future investment performance, wage and salary escalation, age at retirement and future pension indexing up to the rate of inflation. Market rates are used to measure the accrued benefit obligation and fair value to measure the pension plan assets. the actual results over the short term may differ greatly from the long-term assumptions. However, the use of long-term financial assumptions to calculate pension expense is considered appropriate due to the long-term financial commitment that a pension plan represents.
An independent actuary calculates defined benefit pension plan costs based on the long-term assumptions described above. In 2008, the actuary calculated pension expense of $11 million compared to $8 million in 2007.this is a non-cash item that is included in operating, maintenance and administration expense on the income statement.
changes in the long-term assumptions, including the anticipated return on plan assets and the discount rates used in determining the benefit obligation and current period service costs, can have a significant impact on the pension costs of SaskPower.
the expected rate of return on plan assets is based upon economic forecasts for the types of investments held by the Plan. the long-term rate of return on plan assets remained at 6.75%, consistent with the prior year. the discount rate is based on the spot yield for high-grade, long-term canadian corporate bonds. the discount rate was increased from 5.75% to 6.25% to reflect the change in bond markets over that period.
A 0.5% increase in both the expected long-term rate of return on plan assets and the discount rate would result in a $3 million decrease in pension expense and a $3 million increase in the defined benefit pension asset recorded in the consolidated financial statements.
E. Unbilled revenue electric revenues are billed on a systematic basis over a monthly or quarterly period for all SaskPower customer classes. At the end of each month, SaskPower makes an estimate of the electricity delivered to its customers since their last billing date. the estimated unbilled revenue is based on several factors including estimated consumption by customer class, applicable customer rates and the number of days between the last billing date and the end of the period. As at December 31, 2008, total Saskatchewan electricity sales of $1,385 million included $59 million of estimated unbilled revenues.
54 SASKPOWeR AnnuAL RePORt 2008 FutuRe AccOuntInG POLIcy cHAnGeS
International Financial Reporting Standards (IFRS) In February 2008, the canadian Accounting Standards Board confirmed that publicly accountable enterprises will be required to adopt IFRS in place of canadian GAAP for interim and annual reporting purposes in fiscal years beginning on or after January 1, 2011, including comparative figures for the prior year. the cIcA is currently deliberating the definition of publicly accountable enterprises as it applies to government entities including SaskPower and its subsidiaries. At this time the final outcome of these deliberations is not determinable and therefore the need for SaskPower and its subsidiaries to adopt IFRS has not been firmly established. However, given the considerable effort required to prepare for the adoption of IFRS within the communicated timelines, the corporation is proceeding under the assumption that adoption of IFRS will be required.
SaskPower has commenced its IFRS conversion project and developed a high level IFRS implementation plan. An external advisor has been engaged to assist with the development of this plan and to perform a detailed review of the major differences between current canadian GAAP and IFRS. At this time, the impact on SaskPower’s future financial position and result of operations is not reasonably determinable or estimated. However based on the analysis to date, the most significant areas of difference are related to the accounting for property, plant and equipment; power purchase agreements; asset retirement obligations; joint ventures; employee future benefits; and financial statement disclosure.
SaskPower has plans to make changes to certain processes and systems before 2010 to ensure transactions are recorded in accordance with IFRS for comparative reporting purposes on the required implementation date. nOn-GAAP MeASuReS
SaskPower evaluates its performance using a variety of measures. Operating costs, operating income and net debt are non-GAAP measures which are not defined under GAAP.these measures should not be considered in isolation or as an alternative to or more meaningful than, total expense, net income and long-term debt as determined in accordance with GAAP as an indicator of SaskPower’s financial performance. these measures are not necessarily comparable to a similarly titled measure of another company.
RISK MAnAGeMent
SaskPower is subject to numerous risks and uncertainties, including the events or conditions identified below. the occurrence of one or more of these events or conditions could have an adverse effect on the achievement of SaskPower’s business objectives or its financial condition.
SaskPower took steps in 2008 to strengthen its risk management capabilities. the chief Financial Officer has been assigned the responsibility of establishing a corporate Risk Office. In 2008, work began on this initiative with the development of an enterprise Risk Management (eRM) Program. Work on this initiative will continue in 2009.
A. Market risk 1. General economic conditions changes in general economic conditions can have an impact on SaskPower’s operations. changes in fuel prices; fuel availability; interest rates; foreign exchange rates; customers’ expansion decisions and electricity consumption; worker migration and skills availability; import availability; and supply chain capabilities will each have an impact on SaskPower.
SaskPower has developed various policies and procedures that are designed to reduce exposure to changes in general economic conditions. these policies and procedures are reviewed and assessed on a regular basis to ensure they continue to be relevant and effective in prevailing economic, market, financial and operating conditions. SaskPower maintains surveillance of events in its business environment and endeavours to anticipate any impacts.
the global economy is currently suffering the most severe financial crisis since the Great Depression. the impact to SaskPower has not been significant to this point due in part to the above discussed policies and procedures. SaskPower continues to monitor provincial, national and world events and their potential impacts.
SASKPOWeR AnnuAL RePORt 2008 55 2. Fuel price variability and long-term fuel supply two of SaskPower’s primary fuel sources are coal and natural gas. A disruption in SaskPower’s energy supply arrangements or in the wholesale fuel energy markets could adversely affect the company’s financial condition or its ability to meet demand.
SaskPower has contracts in place that ensure supplies of coal at negotiated quantities and prices. these contracts are set to expire between 2009 and 2024. SaskPower is currently negotiating an extension to the coal contract set to expire at the end of 2009.
With respect to natural gas, SaskPower enters into shorter-term natural gas supply agreements out as far as 36 months to reduce supply risk. In 2008, SaskPower established a new framework for managing its natural gas exposures, which includes an increased focus on long-term price and supply management.
the impact of changing natural gas prices on SaskPower is mitigated by our energy management policies, which include the use of physical storage as well as physical and financial price management. In accordance with SaskPower’s current Board-approved natural gas risk management program, SaskPower has hedged a minimum of 40% of its forecasted natural gas exposure for 2009. By the end of the 2009, our company is seeking to hedge 50% of its natural gas exposure for 2010 and 25% for 2011. SaskPower is working toward options for the implementation of a long-term natural gas hedging strategy.
As a result of our company’s energy management policies, for every $1.00/GJ change in natural gas market price, there is an approximate $0.50/GJ change in fuel cost to SaskPower. Our company has forecasted its natural gas volume exposure at 36 million GJ for 2009.
3. Foreign exchange SaskPower has exposure to various currencies due to electricity trading activities and the acquisition of goods and services from foreign suppliers. Our company may use a variety of derivative financial instruments, such as foreign currency forward contracts, to manage this risk.
4. Interest rates changes in interest rates can impact SaskPower’s cost of new borrowings required to refinance existing debt or to finance infrastructure renewal and growth. As 100% of our company’s debt is at fixed rates at December 31, 2008, there is no interest rate risk related to existing debt instruments. SaskPower is currently examining its structure to determine if an increased amount of floating rate debt would provide opportunities for lower average borrowing costs.
changes in interest rates may also impact the value of the performance of SaskPower’s defined benefit pension plan. Our company mitigates this risk by investing in a balanced portfolio of fixed income and equity instruments.
B. Aging infrastructure and supply management risk A large portion of SaskPower’s critical assets are near or at the end of their expected service life. Aging assets are increasingly expensive to maintain and operate and may be less efficient than newer technologies. they may also contribute to system reliability risk.
SaskPower has a 10-year plan in place to invest $8 billion to reinforce or replace its aging infrastructure, as well as add new generation and transmission assets. Our company also employs risk and insurance management professionals and maintains appropriate insurance policies to mitigate the impact of losses arising from the operation or failure of its assets.
1. Generation Saskatchewan is experiencing a period of economic growth. Load over the next decade is expected to increase approximately 40%. SaskPower is examining options to respond to this growth. this includes the addition of new generation capability, increased use of partnerships, and other innovative ways to access the electricity needed for the future. these activities are likely to be capital intensive.
56 SASKPOWeR AnnuAL RePORt 2008 current supply planning indicates the requirement for significant new generation starting in 2009. In the short- term, SaskPower is installing a 105 MW simple cycle gas turbine (ScGt) facility at Queen elizabeth Power Station and a 94 MW ScGt facility at the ermine Switching Station near Kerrobert in 2009. SaskPower is installing a third 141 MW ScGt at a location near north Battleford by December 2010. Independent Power Producers are included in the short-term plan through a solicitation which has been issued for 100 - 200 MW of peaking facilities by 2011 and a solicitation for 200 - 400 MW of base load supplies by 2012.
unplanned generation outages that are longer in duration, multiple unplanned generation outages or catastrophic outages could have large economic risks and may result in SaskPower’s inability to serve Saskatchewan’s domestic load. A preventative maintenance program is in place to help limit the number, magnitude and duration of these potential unplanned outages.
2. Transmission and distribution SaskPower’s transmission and distribution system will also require upgrades to existing capacity and expansion of the transmission network to address economic growth. In 2008, SaskPower experienced a 70% increase in customer connect activity as compared to four years ago. As a result, several parts of the transmission and distribution system have been identified for upgrade or replacement.
the ability to handle increased loads is requiring the construction of new 138 kilovolt (kV) and 230 kV transmission lines, as well as the phasing out of 72 kV lines for new developments. Benefits will include reduced line losses, increased amounts of carrying capability, reduced transformer inventories, as well as replacement of some of the oldest transmission assets. In addition, expansion of the network is required in areas such as the far north (north of La Ronge to uranium city) where continued growth is requiring new transmission lines and routing.
Increased loads on the distribution system require upgrading of capacity for substation transformers and the construction of new overhead three-phase lines to serve the new loads into an area. All new rural and most new urban residential services are now served by underground distribution lines, which require extensive planning and engineering to ensure minimal interference with other underground facilities. existing overhead and underground facilities are continually being upgraded as they meet and exceed their design life. they are replaced with new facilities capable of handling much more load.
For the longer term, SaskPower will be investigating emerging distribution automation technologies with a view to integrate the operation and control of the provincial distribution system in order to improve reliability and outage response times for customers. Our company is also investigating and planning for the eventual installation of advanced metering at customers’ residences and business facilities. this will allow customers the ability to better monitor their own energy consumption and will also allow SaskPower the ability to aggregate data and information to enable better operation and control of the system, while facilitating future planning and development of the entire distribution system in the province.
C. Operations risk 1. Labour action A substantial part of SaskPower’s workforce is unionized. the collective bargaining agreements (cBAs) of the International Brotherhood of electrical Workers (IBeW) Local 2067, and the communications, energy and Paperworkers (ceP) Local 649 are due for renegotiation at the end of 2009.
SaskPower proactively deals with any issues that arise under the cBAs through our labour relation staff and processes. Saskatchewan’s essential services legislation requires both the employer and worker representatives to enter into good faith bargaining to develop an essential services plan at least 90 days before the expiration of the current cBAs.
2. Professional and technical skills and retirement eligibility SaskPower’s business is dependent on its ability to recruit, retain and motivate employees. competition for skilled employees in some areas is high and the inability to retain and attract these employees could adversely affect the achievement of business objectives and future operating results. Many of our company’s technical workers will be eligible for retirement by 2013.
SaskPower employs recruitment specialists who actively pursue qualified professionals to fill key positions. Our company enjoys a low employee turnover rate. SaskPower offers competitive compensation and benefits, and other advantages such as leadership training, professional development, succession planning and, a working environment that enables a reasonable work-life balance.
SASKPOWeR AnnuAL RePORt 2008 57 3. Employee and public safety Working on or around high voltage equipment or apparatus has inherent risk. As does work in confined spaces, around large rotating machinery, within high temperature and high pressure environments and at heights or in other potentially dangerous circumstances. SaskPower has extensive policies, procedures and controls in place to minimize the risk of injury by an employee, contractor, or a member of the public. this includes the maintenance of a Safety Management System in compliance with the internationally recognized OHSAS 18001 Standard. SaskPower has established an educational resource and program to help inform the public of the hazards of power lines and delivers this information at public venues around the province. 4. Supply chain SaskPower depends on certain vendors to provide key parts, supplies and services. An interruption in a critical supply chain could disrupt operations and have a material effect on our company’s financial results.
SaskPower monitors supplier capabilities on an ongoing basis. We encourage key suppliers to improve their own business continuity and resiliency planning in order to maintain our company’s supply chain integrity.
5. Reliability/interconnection the SaskPower system is interconnected to the north American power grid. It is possible for generating or transmission related equipment or facilities in any part of this system — over which SaskPower may have no control — to cause system instability on the Saskatchewan grid.
SaskPower has to detect and respond to system instability in order to maintain reliability of service. unchecked instability has the potential to propagate service disruptions. Severe instability may damage our company’s generation and transmission assets.
SaskPower system operators continually monitor the performance of the provincial grid and make necessary adjustments to maintain system stability. SaskPower participates in the north American bulk power system as part of the Mid-West Reliability Organization (MRO), which recognizes the interconnectedness of the north American grid and establishes rules and operating standards to protect its integrity. Other members of the MRO are Manitoba Hydro and various electric power providers in eight American states. All have agreed to operate their facilities according to the standards set by north American electric Reliability corporation (neRc) and the MRO, designed to ensure system reliability.
6. Malicious/criminal acts, physical security and cyber security SaskPower utilizes critical information systems on a stand alone and network basis in the conduct of its business. these systems are susceptible to failure and to damage or conversion from their intended use through malicious attack. Our company may be subject to malicious or criminal acts resulting in the theft of or damage to assets.
SaskPower maintains industry standard policies, processes and technical safeguards to ensure only authorized access and use of its information systems. Our company has policies and procedures in place to ensure identified key systems can be recovered or reinstated in the event of an adverse event and system failure. SaskPower maintains hiring, training, operating, security, maintenance and capital programs designed to provide for the safe and reliable operation of information systems.
Our company has various policies and procedures pertaining to the protection of corporate assets and employs a corporate security person who has responsibility for physical security, threat and risk assessment and investigations. In addition, SaskPower uses electronic surveillance and detection methods. Our company maintains reasonable levels of insurance to protect it against theft or vandalism related losses.
D. Construction risk SaskPower has identified the need to invest $8 billion over the next 10 years to maintain, upgrade and expand our company’s infrastructure. there is risk that these projects may not be completed at all, may be completed on materially different terms or timing than initially anticipated, or the intended benefits of the projects may not be realized.
Weather conditions, delays in obtaining or failure to obtain regulatory approvals, delays in obtaining key materials, labour difficulties, skills shortages or other events beyond SaskPower’s control may influence the timing, costs and outcome of planned construction/expansion projects. Public acceptance of new infrastructure projects is an integral part of achieving regulatory approvals. SaskPower routinely undertakes consultations with potentially affected stakeholders in order to increase understanding and foster public acceptance for projects. the failure to complete these projects in a timely manner could adversely affect our company’s ability to meet customers’ growing energy needs.
58 SASKPOWeR AnnuAL RePORt 2008 In 2008, SaskPower commenced a review of current practices regarding procurement; project management; project risk management; capital project approval requirements; and other aspects of managing project risk. this initiative will be substantially completed in 2009 but will be subject to continuous improvement.
E. Credit risk 1. Customer credit SaskPower incurs credit risk each time our company provides electricity to customers for which it will later receive payment. SaskPower has developed a number of payment options for customers in order to reduce late payments and defaults. Our company also uses industry standard accounts receivable aging and collection techniques up to and including the restriction or termination of service to manage accounts receivable balances.
2. Counterparty credit counterparty risk, otherwise known as default risk, is the risk that a counterparty will fail to meet its obligations. SaskPower maintains credit policies that include activity limits, the evaluation of a prospective counterparty’s financial condition, collateral requirements where deemed necessary and the use of standardized agreements that facilitate the netting of cash flows associated with a single counterparty. In addition, we also monitor the financial condition of existing counterparties on an ongoing basis.
3. Customer portfolio Sales to large customers (power accounts and the cities of Swift current and Saskatoon) account for approximately 32% of revenue from domestic sales. the loss of a large, key customer could adversely affect SaskPower’s revenue stream.
SaskPower monitors its customer mix and periodically assesses customer satisfaction for each class of customer. Key Account Representatives are responsible for monitoring assigned customer satisfaction and intentions on an ongoing basis.
F. Regulatory risk 1. Rate regulation process the rates that SaskPower may charge customers are subject to review by the Saskatchewan Rate Review Panel (the Panel) with final approval by cabinet. Based on current rates, the impact of a 1% differential between a requested rate increase and the approved rate is approximately $14 million/year.
SaskPower follows standard accepted regulatory practices in designing rates and operating the system and presents these practices to the regulators in the rate application.
2. NERC compliance requirements the north American participants in the bulk power system, including SaskPower, are subject to the reliability standards developed by neRc. In Saskatchewan, SaskPower is the sole regulatory authority and is working to ensure compliance with neRc reference standards. Failure to comply with the standards could impact our company’s ability to buy and sell electricity in other jurisdictions.
In a wall-to-wall neRc compliance assessment performed in 2008, our company performed very well. In 2009, SaskPower will be coordinating compliance activities across our Business units through a single regulatory oversight responsibility to be established within the company.
3. Compliance with a complex regulatory framework SaskPower is subject to extensive federal, provincial and local government regulations, all of which are subject to change. Failure to comply with rules and regulations pertaining to air quality, water quality, waste management, natural resources, and health and safety may give cause to a number of sanctions such as fines, penalties, administrative costs and even stop work orders. compliance with new laws or the revision or reinterpretation of existing laws may require us to incur additional expenses.
Management believes that the necessary approvals have been obtained — or are in the process of being obtained — and are maintained for our existing operations and that our business is conducted in accordance with applicable laws. the corporate Law department provides knowledgeable interpretations in this regard.
SASKPOWeR AnnuAL RePORt 2008 59 G. Weather/other natural events risk 1. Weather SaskPower’s generation, transmission, and distribution operations are marked by seasonal weather patterns affecting load. Demand for electricity peaks during hot summer months and peaks again during cold winter months.
Adverse weather can affect system performance and reliability. extreme cold can reduce the thermal efficiency of generation units. Generation assets may be damaged by anomalous weather events such as tornadoes or flooding. transmission and distribution systems are largely unprotected and vulnerable to severe weather impacts.
SaskPower develops supply management plans that incorporate experience from dealing with past seasonal peaks, together with long range weather forecasts, maintenance schedules and system performance to meet seasonal needs. At all times, the provincial electric system is controlled by operators who are carefully managing base-load generation, peaking generation and import supplies.
SaskPower has developed emergency response plans and has trained responders at all power stations. these plans are being improved and further integrated as part of an ongoing Business continuity Management Program. transmission and Distribution has developed severe weather and widespread damage response plans and procedures. these plans are also being enhanced and further integrated as part of SaskPower’s ongoing Business continuity Management Program.
2. Hydrologic cycle SaskPower relies on natural water sources for cooling, steam generation, and as a source of energy for hydroelectric generation. If hydroelectric generation is impaired it has to be replaced with more costly natural gas generation or imports.
SaskPower monitors water resources in the province through the Saskatchewan Watershed Authority and optimizes hydro facilities when alternative energy sources (imports) are at peak levels.
3. Epidemic/pandemic disease Since 2004, the international medical community has been warning of the possibility of epidemic or pandemic disease. An epidemic or pandemic of a new or novel virus is likely to result in increased employee absenteeism. Significant numbers of absences may occur during one or more waves of illness. A prolonged and severe event is likely to influence changes in behaviours of employees, suppliers and customers as they try to avoid contact transmission from other people.
SaskPower has developed and is implementing a corporate Pandemic Influenza Response Plan and will continue to monitor international health events.
H. Environmental risk 1. Emissions standards the main shift in understanding environmental risk has been in the increased awareness of the potential causes and consequences of climate change, including the possible causative effect of greenhouse gas emissions.
Recently proposed emission rules will likely require significant sulphur dioxide (SO2) reductions at numerous coal- fired plants. the canada Wide Standard for mercury will also require SaskPower to significantly reduce its mercury emissions by 2010.
In recent years, SaskPower has demonstrated strong environmental performance through its work on lowering emissions such as SO2 and nitrogen oxides (nOx). Reducing emissions of carbon dioxide (cO2), mercury and particulate matter continues to be a matter of intense focus.
2. Hazardous substances Polychlorinated biphenyls (PcBs), asbestos, hydrocarbon contamination and coal tar have been used or produced in the course of operations and are present on properties or in facilities and equipment currently or previously owned by our company. SaskPower has established provisions for the remediation of known and estimable environmental obligations.
Our company is dedicated to improving its environmental performance by demonstrating leadership, operational transparency and ongoing stakeholder engagement. One expression of SaskPower’s environmental commitment is the maintenance of its environmental Management System, which conforms to the ISO 14001 Standard. the requirements to maintain this certification are stringent and are internationally recognized.
60 SASKPOWeR AnnuAL RePORt 2008 Consolidated financial statements & notes
SASKPOWeR AnnuAL RePORt 2008 61 REPORT OF MANAGEMENT
The consolidated financial statements of Saskatchewan Power Corporation (SaskPower) are the responsibility of management and have been prepared in accordance with Canadian generally accepted accounting principles, applied on a basis consistent with that of the preceding year.The preparation of financial statements necessarily involves the use of estimates based on management’s best judgment, particularly when transactions affecting the current period cannot be finalized with certainty until future periods. In management’s opinion, the consolidated financial statements have been properly prepared within the framework of selected accounting policies summarized in the consolidated financial statements and incorporate, within reasonable limits of materiality, information available up to February 13, 2009.The financial information presented in the Management’s Discussion & Analysis (MD&A) and elsewhere in this report is consistent with that in the consolidated financial statements.
Management maintains appropriate systems of internal control which provide reasonable assurance that the Corporation’s assets are safeguarded and appropriately accounted for, that financial records are relevant, reliable and accurate and that transactions are executed in accordance with management’s authorization.This system includes corporate-wide policies and procedures, as well as the appropriate delegation of authority and segregation of responsibilities within the organization.An internal audit function independently evaluates the effectiveness of these controls on an ongoing basis and reports its findings to management and the Audit and Finance Committee of the Board of Directors.
The Board of Directors, through the Audit and Finance Committee, is responsible for ensuring that management fulfills its responsibility for financial reporting and internal control.The Audit and Finance Committee consists entirely of outside Directors.At regular meetings the Committee reviews audit, internal control and financial reporting matters with management, the internal auditors and the external auditors to satisfy itself that each is properly discharging its responsibilities.The MD&A, consolidated financial statements and the external auditors’ report have been reviewed by the Audit and Finance Committee and have been approved by the Board of Directors.The internal and external auditors have full and open access to the Audit and Finance Committee, with and without the presence of management.
The consolidated financial statements have been examined by Deloitte & Touche LLP,Chartered Accountants, as appointed by the Lieutenant Governor in Council and approved by the Crown Investments Corporation of Saskatchewan.The external auditors’ responsibility is to express their opinion on whether the consolidated financial statements are fairly presented in accordance with Canadian generally accepted accounting principles.The Auditors’ Report, which follows, outlines the scope of their examination and sets forth their opinion.
On behalf of management,
Pat Youzwa Sandeep Kalra President and Chief Executive Officer Vice-president and Chief Financial Officer February 13, 2009
62 SASKPOWeR AnnuAL RePORt 2008 AUDITORS’ REPORT
To the Members of the Legislative Assembly of Saskatchewan
We have audited the consolidated statement of financial position of Saskatchewan Power Corporation as at December 31, 2008, and the consolidated statements of income and retained earnings, comprehensive income and accumulated other comprehensive (loss) income and cash flows for the year then ended.These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing standards.Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Corporation as at December 31, 2008, and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.
Chartered Accountants Regina, Saskatchewan February 13, 2009
SASKPOWeR AnnuAL RePORt 2008 63 cOnSOLIDAteD StAteMent OF IncOMe AnD RetAIneD eARnInGS
(in millions)
For the year ended December 31 2008 2007
Revenue Saskatchewan electricity sales $ 1,385 $ 1,356 exports 33 57 net sales from electricity trading (Note 4) 17 11 Other revenue (Note 5) 54 45 Total revenue 1,489 1,469
Expense Fuel and purchased power (Note 6) 554 463 natural gas risk management activities (Note 7) Realized (9) 18 unrealized 28 13 Operating, maintenance and administration (Note 8) 430 416 Depreciation (Note 9) 234 219 Finance charges (Note 10) 153 167 taxes (Note 11) 35 35 Total expense 1,425 1,331
Net income 64 138
Retained earnings, beginning of year 853 808
Change in accounting policy – 2
Related party transactions (Note 27) (1) 2
Dividends (46) (97)
Retained earnings, end of year $ 870 $ 853
See accompanying notes
64 SASKPOWeR AnnuAL RePORt 2008 cOnSOLIDAteD StAteMent OF FInAncIAL POSItIOn
(in millions)
As at December 31 2008 2007
ASSetS
Current assets cash and cash equivalents (Note 12) $6 $ 84 Accounts receivable and unbilled revenue 180 185 Inventory (Note 13) 147 145 Risk management assets (Note 21) 2 4 335 418 Property, plant and equipment (Note 14) Property, plant and equipment 6,930 6,688 Less: accumulated depreciation 3,215 3,088 3,715 3,600 construction in progress 186 134 3,901 3,734 Debt retirement funds (Note 15) 212 237 Other assets (Note 16) 72 86 Total assets $ 4,520 $ 4,475
LIABILItIeS AnD eQuIty
Current liabilities Accounts payable and accrued liabilities $ 168 $ 166 Accrued interest 48 54 Risk management liabilities (Note 21) 39 14 current portion of long-term debt (Note 17) 7 340 Dividends payable 8 31 270 605 Long-term debt (Note 17) 2,571 2,225 Other liabilities (Note 18) 150 130 Total liabilities 2,991 2,960 Equity Retained earnings 870 853 Accumulated other comprehensive (loss) income (Note 19) (1) 2 869 855 equity advances (Note 20) 660 660 Total equity 1,529 1,515 Total liabilities and equity $ 4,520 $ 4,475 commitments and contingencies (Note 24)
See accompanying notes
On behalf of the Board:
Joel teal Mick MacBean chair Director
SASKPOWeR AnnuAL RePORt 2008 65 cOnSOLIDAteD StAteMent OF cOMPReHenSIVe IncOMe
(in millions)
For the year ended December 31 2008 2007
Net income $ 64 $ 138
Other comprehensive (loss) income: net (gains) losses on natural gas hedges in prior periods reclassified to net income in the current period (1) 14 Loss on interest rate swaps (2) – Other comprehensive (loss) income (3) 14
Total comprehensive income $ 61 $ 152
cOnSOLIDAteD StAteMent OF AccuMuLAteD OtHeR cOMPReHenSIVe (LOSS) IncOMe
(in millions)
For the year ended December 31 2008 2007
Accumulated other comprehensive income (loss), beginning of year $2 $ (12)
Other comprehensive (loss) income (3) 14
Accumulated other comprehensive (loss) income, end of year $ (1) $2
See accompanying notes
66 SASKPOWeR AnnuAL RePORt 2008 cOnSOLIDAteD StAteMent OF cASH FLOWS
(in millions)
For the year ended December 31 2008 2007
Operating activities
Net income $ 64 $ 138
Add (deduct) items not involving cash: Depreciation (Note 9) 234 219 natural gas hedges market value losses (gains) (Notes 7 and 21) 27 (2) natural gas hedges transitional market value net losses reclassified to net income (Note 7) 1 15 Debt retirement fund earnings (Notes 10 and 15) (13) (8) Debt retirement fund market value losses (gains) (Notes 10 and 15) 3 (1) Defined benefit pension plan expense (Note 28[b]) 11 8 equity investment income (Note 16) (7) (7) Allowance for obsolescence 3 7 Other 1 4 324 373
Net change in non-cash working capital (Note 25) (4) –
Cash provided by operating activities 320 373
Investing activities Property, plant and equipment additions (416) (275) Interest capitalized (Note 10) (6) (5) customer contributions and net proceeds on removal 39 25 equity investment distributions (Note 16) 6 9 Reclassification of short-term investment – (2)
Cash used in investing activities (377) (248)
(Decrease) increase in cash before financing activities (57) 125
Financing activities Proceeds from long-term debt 353 104 Repayment of long-term debt (337) (63) Repayment of non-recourse debt (3) (3) Debt retirement fund installments (Note 15) (24) (23) Debt retirement fund redemptions (Note 15) 59 – Dividends paid (69) (76)
Cash used in financing activities (21) (61)
(Decrease) increase in cash (78) 64
Cash and cash equivalents, beginning of year 84 20
Cash and cash equivalents, end of year $6 $ 84
Supplemental information: cash paid for interest $ 181 $ 185 cash paid for grants-in-lieu of taxes 17 17 cash paid for capital tax 18 18
See accompanying notes SASKPOWeR AnnuAL RePORt 2008 67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As at December 31, 2008
1. StAtuS OFtHe cORPORAtIOn Saskatchewan Power corporation (SaskPower; the corporation), a provincially-owned crown corporation, generates, purchases, transmits, distributes and sells electricity and related products and services. Founded as the Saskatchewan Power commission in 1929, SaskPower was set up in 1949 and operates primarily under the mandate and authority of The Power Corporation Act.
By virtue of The Crown Corporations Act, 1993, SaskPower has been designated a subsidiary of crown Investments corporation of Saskatchewan (cIc), a provincial crown corporation. Accordingly, the financial results of the corporation are included in the consolidated financial statements of cIc. As a provincial crown corporation, the corporation is not subject to federal income tax, provincial income tax or federal large corporations tax.
2. SuMMARy OF SIGnIFIcAnt AccOuntInG POLIcIeS these consolidated financial statements have been prepared in accordance with canadian generally accepted accounting principles (GAAP). the following accounting policies are considered significant:
(a) Use of estimates the timely preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Significant areas requiring the use of management estimates are described in the following summary of significant accounting policies. Actual results could differ from those estimates, which may impact the actual results reported in future periods.
(b) Consolidation and investments these consolidated financial statements include the accounts of the corporation and its wholly-owned subsidiaries, northPoint energy Solutions Inc. (northPoint), Power Greenhouses Inc. (Shand Greenhouse), and SaskPower International Inc. (SaskPower International). All inter-company transactions have been eliminated on consolidation. Separate audited financial statements are prepared for each subsidiary.
SaskPower accounts for its joint venture interests using the proportionate consolidation method. the corporation accounts for investments over which it exerts significant influence using the equity method. the investment is initially recorded at cost and the carrying value adjusted thereafter to include the corporation’s proportionate share of post acquisition earnings less cash distributions.
(c) Revenue recognition electricity pricing in Saskatchewan is subject to review by the Saskatchewan Rate Review Panel with final approval by cabinet. Saskatchewan electricity sales and exports are recognized upon delivery to the customer and include an estimate of electrical deliveries not yet billed at year-end.
electricity trading revenues are reported on a net basis upon delivery of electricity to the customers and receipt of electricity purchased from external parties. electricity trading contracts are recorded at their fair value (Note 4).
Other revenue includes gas and electrical inspections, flyash sales and wind power production incentives received from the Government of canada. these revenues are recorded upon delivery of the related good or service. Other revenue also includes investment income which is the corporation’s proportionate share of post acquisition earnings on its equity investment (Note 5).
customer contributions are deferred and recognized in income as a credit to depreciation expense over the estimated service life of the related asset.
(d) Foreign currency translation Revenues and expenditures resulting from transactions in foreign currencies are translated into canadian dollars at the exchange rates in effect at the transaction date. Monetary assets and liabilities denominated in a foreign currency are translated using the exchange rate in effect on the balance sheet date. Any resulting foreign currency translation gains and losses are included in the consolidated statement of income in the current period.
68 SASKPOWeR AnnuAL RePORt 2008 (e) Cash and cash equivalents cash and cash equivalents includes short-term investments that have a maturity date of 90 days or less from the date of acquisition. these investments are carried at fair value (Note 12).
(f) Inventory Maintenance materials, supplies and fuel inventory are recorded at the lower of average cost and net realizable value. In establishing the appropriate provision for inventory obsolescence, management estimates the likelihood that inventory on hand will become obsolete due to changes in technology. Materials are charged to inventory when purchased and then expensed or capitalized when installed (Note 13).
(g) Property, plant and equipment Property, plant and equipment is recorded at original cost and includes material, direct labour, overhead costs and interest during construction. the corporation capitalizes interest based on the weighted average cost of long-term borrowings.
costs are capitalized provided there is reasonable certainty they will provide benefits into the future. Significant renewals and enhancements to existing assets are capitalized only if the service life of the asset is increased; physical output, service capacity or quality is improved above original design standards; or operating costs are reduced by a substantial and quantifiable amount. Maintenance and repair costs are expensed as incurred.
customer contributions are funds received from certain customers toward the costs of service extensions. contributions are netted against property, plant and equipment and are amortized over the estimated service life of the related asset.
Assets under construction are recorded as construction in progress until they are operational and available for use, at which time they are transferred to property, plant and equipment (Note 14).
(h) Depreciation Depreciation is calculated on a straight-line basis over the estimated service life of the related asset. the estimated useful life of property, plant and equipment is based on manufacturer’s guidance, past experience and future expectations regarding the potential for technical obsolescence. estimated service lives of the assets are periodically reviewed and any changes are applied prospectively.
the average estimated service life of new assets for the major categories of property, plant and equipment are:
Asset Average service life in years Generation: coal 30 natural gas 24 Hydro 50 cogeneration 30 Wind 20 transmission 35 – 50 Distribution 33 – 40 Other 4 – 50
Depreciation expense also includes the gain or loss on both the complete and partial disposal of assets and accretion (interest) expense on asset retirement obligations (Note 9).
SASKPOWeR AnnuAL RePORt 2008 69 (i) Asset impairment the corporation evaluates its property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable. Factors, which could indicate an impairment exists, include significant changes in the corporation’s strategy or underperformance of assets relative to projected future operating results. An impairment is recognized when the carrying amount of an asset exceeds the undiscounted projected future net cash flows expected from its use and disposal. It is measured as the amount by which the carrying amount of the asset exceeds its fair value. As at December 31, 2008, the corporation determined that there was no impairment of value to its long-lived assets and therefore no write-down was required.
(j) Asset retirement obligations An asset retirement obligation is a legal obligation associated with the decommissioning of a long-lived asset. the corporation recognizes asset retirement obligations in the period they are incurred if a reasonable estimate of fair value (net present value) can be determined. the corporation recognizes asset retirement obligations to decommission coal, natural gas, cogeneration and wind generation facilities in the period in which the facility is commissioned. the corporation has not recognized an obligation for its transmission, distribution and hydro generation assets as an estimate of their fair value cannot be determined. the corporation expects to maintain and operate these assets indefinitely.
the fair value of the estimated asset retirement costs is recorded in other liabilities, with an offsetting asset capitalized and included as part of property, plant and equipment. the asset retirement obligations are increased annually for the passage of time by calculating accretion (interest) expense. the accretion expense is calculated using an interest rate that equates to a risk-free interest rate adjusted for the credit standing of the corporation and is included with depreciation expense. the offsetting capitalized asset retirement costs are depreciated over the estimated useful life of the related asset.
the calculations of fair value are based on detailed studies that take into account various assumptions regarding the anticipated future cash flows including the method and timing of decommissioning and estimates of future inflation. Asset retirement obligations are periodically reviewed and any changes are recognized as an increase or decrease in the carrying amount of the liability for the asset retirement obligation and the related asset retirement cost (Notes 9 and 18).
effective January 1, 2008, based on the completion of a detailed asset retirement obligation study, the fair value of the estimated cost to decommission the corporation’s coal, natural gas, and wind generation facilities has been changed. the impact of this change in estimate increased property, plant and equipment and other liabilities by $16 million and had no material impact on depreciation expense in 2008.
(k) Environmental remediation liabilities environmental remediation liabilities are accrued when the occurrence of an environmental expenditure, related to present or past activities of the corporation, is considered probable and the costs of remedial activities can be reasonably estimated. these estimates include costs for investigations and remediation at identified sites. these liabilities are based on management’s best estimate considering current environmental laws and regulations and the estimates have been recorded at undiscounted amounts. the corporation reviews its estimates of future environmental expenditures on an ongoing basis (Note 18).
(l) Financial instruments SaskPower classifies its financial instruments into one of the following categories: held-for-trading; held-to- maturity; loans and receivables; available-for-sale; and other liabilities. All financial instruments are measured at fair value on initial recognition and recorded on the consolidated statement of financial position. transaction costs are included in the initial carrying amount of financial instruments except for held-for- trading instruments, in which case they are expensed as incurred. Measurement in subsequent periods depends on the classification of the financial instrument.
Held-for-trading financial assets and liabilities are subsequently measured at fair value, with changes in fair value recognized in the consolidated statement of income in the line item to which the financial instrument is related. Available-for-sale financial assets are subsequently measured at fair value, with changes in fair value recognized as other comprehensive income. Financial instruments classified as held-to-maturity; loans and receivables; and other liabilities are subsequently measured at amortized cost using the effective interest rate method.
70 SASKPOWeR AnnuAL RePORt 2008 Derivative financial instruments, including natural gas, export and electricity trading contracts, are utilized by the corporation to manage the exposure to natural gas and electricity price risk. All derivative contracts are recognized as a financial asset or a financial liability on the trade date. the corporation has chosen not to designate its derivative instruments as hedges. As such, all derivative financial instruments are classified as held-for-trading and recorded at fair value on the consolidated statement of financial position as risk management assets and liabilities with subsequent changes in fair value recognized in the consolidated statement of income.
certain commodity contracts for the physical purchase of natural gas have been designated as own-use contracts. SaskPower entered into these contracts for the purpose of physical receipt of the natural gas in accordance with its own expected usage requirements for the generation of electricity. As such, these non- financial derivative contracts are not recorded at fair value on the consolidated statement of financial position; rather, the contracts are accounted for as a purchase at the time of delivery.
Fair value is the amount of consideration that would be agreed upon in an arm’s length transaction between knowledgeable, willing parties who are under no compulsion to act. Fair value is determined by reference to quoted bid or ask prices, as appropriate, in the active market for that instrument to which the corporation has immediate access. When bid or ask prices are unavailable, the corporation uses the closing price of the most recent transaction of that instrument. In the absence of an active market, the corporation determines fair value based on internal and external valuation models, such as option-pricing models and discounted cash flow analysis, using observable market-based inputs. Fair values determined using valuation models require the use of assumptions including forward natural gas market prices, market volatility and discount factors.
the corporation has elected to record embedded derivatives only for contracts or financial instruments entered into or modified after January 1, 2003. As at December 31, 2008, the corporation does not have any outstanding contracts or financial instruments with embedded derivatives that are required to be separately valued.
(m)Employees’ future benefits the corporation provides pension plans for all eligible employees, including a defined benefit pension plan and a defined contribution pension plan. the defined benefit pension plan (the Plan) is governed by The Superannuation (Supplementary Provisions) Act and Regulations, as well as The Power Corporation Superannuation Act. the defined contribution pension plan is governed by The Public Employees Pension Plan Act and Regulations and certain sections of The Superannuation (Supplementary Provisions) Act and Regulations.
under the defined contribution pension plan, the corporation's obligations are limited to contributions made for current service. When made, these contributions are charged to operating, maintenance and administration expense.
the defined benefit pension plan, substantially closed to new members since 1977, provides benefits based on the average of the highest five years’ annual pensionable earnings and years of service. Pensions are increased annually at a rate equal to 70% of the increase in the Saskatchewan consumer price index (cPI).
the cost of pension benefits under this Plan is actuarially determined using the projected benefit method prorated on service. It reflects management's best estimates of future investment performance, wage and salary escalation, age at retirement and future pension indexing up to the rate of inflation. Market rates are used to measure the accrued benefit obligation and fair value to measure the pension Plan assets. the transitional asset that resulted from the adoption of the canadian Institute of chartered Accountants (cIcA) Handbook Section 3461 and past service costs from amendments to the Plan are being amortized over the average remaining service life of the employees in the Plan. the excess of the net actuarial gain (loss) over 10% of the greater of the benefit obligation and the fair value of Plan assets is amortized over the average remaining service life of the employees in the Plan.
the corporation provides severance plans for all eligible employees, including defined contribution and defined benefit severance plans. under the defined contribution severance plan, SaskPower’s obligations are limited to contributions made for current service. the cost of severance benefits under the defined benefit severance plans is determined using the projected benefit method prorated on service and reflects management’s best estimates of future wages, number of eligible employees and average age at retirement.
SASKPOWeR AnnuAL RePORt 2008 71 the estimated transitional obligation is being amortized over the average remaining service life of the employees in the defined benefit severance plans.
the corporation provides a supplementary superannuation plan for certain management employees who elect to forego their entitlement to banked days off. SaskPower's current period expense is limited to yearly notional contributions to the plan based upon the employee's salary and an amount allocated for interest on the employee's plan balance.
the corporation also provides lifetime superannuation allowances and bridge allowances to employees who chose to retire under various early retirement options. the cost of these benefits is actuarially determined by calculating the present value of all future benefit entitlements (Note 28).
(n) Future accounting policy changes International Financial Reporting Standards (IFRS) In February 2008, the canadian Accounting Standards Board confirmed that publicly accountable enterprises will be required to adopt IFRS in place of canadian generally accepted accounting principles (GAAP) for interim and annual reporting purposes in fiscal years beginning on or after January 1, 2011, including comparative figures for the prior year.
SaskPower has commenced its IFRS conversion project and developed a high level IFRS implementation plan. An external advisor has been engaged to assist with the development of this plan and to perform a detailed review of the major differences between current canadian GAAP and IFRS. At this time, the impact on SaskPower’s future financial position and results of operations is not reasonably determined or estimated. However based on the analysis to date, the most significant areas of difference are related to the accounting for property, plant and equipment; power purchase agreements; asset retirement obligations; joint ventures; employee future benefits; and financial statement disclosure.
SaskPower has plans to make changes to certain processes and systems before 2010 to ensure transactions are recorded in accordance with IFRS for comparative reporting purposes on the required implementation date.
3. cHAnGe In AccOuntInG POLIcIeS Financial instruments – disclosure and presentation effective January 1, 2008, SaskPower adopted the new cIcA Section 3862, “Financial Instruments – Disclosures,” and Section 3863, “Financial Instruments – Presentation.”these sections replace Section 3861, “Financial Instruments – Disclosure and Presentation.”the impact of implementing these new standards has been disclosed in Notes 21 and 22.
Capital disclosures effective January 1, 2008, SaskPower adopted Section 1535, “capital Disclosures.”the new required disclosure regarding what the corporation defines as capital and its objectives, policy and process for managing capital is provided in Note 23.
Inventories effective January 1, 2008, SaskPower adopted Section 3031, “Inventories.” the new accounting standard provides guidance on the method of determining the cost of the corporation’s inventory; specifies that inventories are to be valued at the lower of cost and net realizable value; and requires the reversal of previously recorded write-downs to realizable value when there is clear evidence that net realizable value has increased. the adoption of this new standard had no material impact on these consolidated financial statements.
72 SASKPOWeR AnnuAL RePORt 2008 4. net SALeS FROM eLectRIcItytRADInG (in millions) 2008 2007
electricity trading revenue $ 125 $ 125 electricity trading costs 108 114 $ 17 $ 11
5. OtHeR ReVenue (in millions) 2008 2007
Gas and electrical inspections $ 10 $8 Flyash sales 10 6 Wind power production incentives 5 6 equity investment income (Note 16) 7 7 Grant funding for Integrated carbon capture and Sequestration Demonstration Project 2 – Miscellaneous revenue 20 18 $ 54 $ 45
6. FueL AnD PuRcHASeD POWeR (in millions) 2008 2007
Gas $ 309 $ 255 coal 190 169 Imports 33 18 Hydro 14 15 Wind 3 3 Other 5 3 $ 554 $ 463
Gas costs include the fuel charges associated with the electricity generated from SaskPower-owned gas-fired facilities and the cost of electricity obtained through power purchase agreements with the cory cogeneration Station and the Meridian cogeneration Station. Imports represent electricity purchased from suppliers that produce power outside Saskatchewan. Wind includes the cost of electricity obtained through SaskPower’s power purchase agreement with the SunBridge Wind Power Project. Other includes the cost of electricity obtained through power purchase agreements with nRGreen Kerrobert, Loreburn, estlin and Alameda Heat Recovery Projects.
7. nAtuRAL GAS RISK MAnAGeMent ActIVItIeS (in millions) 2008 2007
Realized natural gas risk management activities $ (9) $ 18 natural gas hedges market value losses (gains) $ 27 $ (2) natural gas hedges transitional market value net losses reclassified to net income 1 15 unrealized natural gas risk management activities $ 28 $ 13
8. OPeRAtInG, MAIntenAnce AnD ADMInIStRAtIOn (in millions) 2008 2007
Salaries and benefits $ 227 $ 220 external services 109 106 Materials and supplies 34 36 Other 60 54 $ 430 $ 416
SASKPOWeR AnnuAL RePORt 2008 73 9. DePRecIAtIOn (in millions) 2008 2007
Depreciation expense $ 232 $ 224 Accretion expense (Note 18) 3 2 Loss on asset disposals and retirements 11 4 Amortization of customer contributions (12) (11) $ 234 $ 219
10. FInAnce cHARGeS (in millions) 2008 2007
Interest on long-term debt $ 170 $ 184 Interest capitalized (6) (5) Debt retirement fund earnings (Note 15) (13) (8) Debt retirement fund market value losses (gains) (Note 15) 3 (1) Interest income (2) (4) Other interest and charges 1 1 $ 153 $ 167
11. tAxeS (in millions) 2008 2007
Grants-in-lieu of taxes to 13 cities $ 17 $ 17 Saskatchewan corporate capital tax 18 18 $ 35 $ 35
In addition to the above, SaskPower collected a municipal surcharge, between 5% and 10% of residential electricity sales, on behalf of 406 Saskatchewan cities, towns and villages from customers and remitted $42 (2007 – $42) to local governments pursuant to Section 36 of The Power Corporation Act.
12. cASH AnD cASH eQuIVALentS (in millions) 2008 2007
cash (overdraft) $ (2) $ (5) Short-term investments 8 89 $6 $ 84
Short-term investments earned interest at a weighted average rate of 3.49% (2007 – 4.50%) per annum.
13. InVentORy (in millions) 2008 2007
Maintenance materials and supplies $ 113 $ 111 Allowance for obsolescence (11) (8) Fuel 45 42 $ 147 $ 145
During the year, $300 of fuel inventory and $114 of maintenance materials and supplies were consumed. there was a provision made to write-down inventory by $4 and no reversal of any prior period write-down occurred during 2008.
74 SASKPOWeR AnnuAL RePORt 2008 14. PROPeRty, PLAnt AnD eQuIPMent (in millions) 2008 2007 Accumulated Construction Net book Accumulated Construction Net book Cost depreciation in progress value Cost depreciation in progress value
Generation $ 3,571 $ 1,751 $ 133 $ 1,953 $ 3,398 $ 1,635 $ 80 $ 1,843 cogeneration 140 27 – 113 139 22 – 117 transmission 695 314 16 397 677 302 18 393 Distribution 2,036 857 9 1,188 1,940 804 7 1,143 Other 488 266 28 250 534 325 29 238 $ 6,930 $ 3,215 $ 186 $ 3,901 $ 6,688 $ 3,088 $ 134 $ 3,734
Included in the above amounts are unamortized reconstruction charges and customer contributions of $300 (2007 – $273).
15. DeBt RetIReMent FunDS (in millions)
A reconciliation between the opening and closing debt retirement funds balance is provided below:
2008 2007
Debt retirement funds, beginning of year $ 237 $ 201 Market value adjustment upon adoption of financial instruments standards – 4 Debt retirement fund installments 24 23 Debt retirement fund redemptions (59) – Debt retirement fund earnings (Note 10) 13 8 Debt retirement fund market value (losses) gains (Note 10) (3) 1 Debt retirement funds, end of year $ 212 $ 237
under conditions attached to certain advances from the Province of Saskatchewan, the corporation is required to pay annually into debt retirement funds administered by Saskatchewan Ministry of Finance, amounts at least equal to 1% of certain debt outstanding. As at December 31, 2008, scheduled debt retirement fund installments for the next five years are as follows:
2009 2010 2011 2012 2013
Debt retirement fund annual contribution $ 25 $ 25 $ 25 $ 25 $ 25
SASKPOWeR AnnuAL RePORt 2008 75 16. OtHeR ASSetS (in millions) 2008 2007
MRM cogeneration Station $ 29 $ 30 Prepaid expense 24 26 Defined benefit pension asset (Note 28[a]) 17 28 Investment 2 2 $ 72 $ 86
MRM Cogeneration Station the corporation has a 30% ownership interest in the MRM cogeneration Station. the 172-megawatt (MW) natural gas-fired cogeneration facility is located at the Athabasca Oil Sands Project's Muskeg River Mine, north of Fort McMurray, Alberta. the cogeneration station commenced commercial operations in January 2003. A reconciliation between the opening and closing equity investment balance is provided below:
2008 2007
equity investment, beginning of year $ 30 $ 32 equity investment income 7 7 equity investment other comprehensive loss (2) – equity investment distributions (6) (9) equity investment, end of year $ 29 $ 30
Prepaid expense this includes prepaid amounts for insurance, licenses and in accordance with long-term coal supply agreements. the prepaid amount is amortized on a straight-line basis over the period of benefit.
Defined benefit pension asset this represents the surplus in the defined benefit pension plan based on long-term assumptions. It does not represent cash or investments held by the corporation outside of the plan.
Investment this represents an investment in Aurora trust Series A Asset-Backed commercial Paper (Aurora). the investment is recorded at its estimated fair value at December 31, 2008 (Note 21).
76 SASKPOWeR AnnuAL RePORt 2008 17. LOnG-teRM DeBt (in millions) 2008 2007
Recourse debt – advances from the Province of Saskatchewan $ 2,475 $ 2,462 non-recourse debt 84 87 unamortized debt premiums net of issue costs 19 16 Gross long-term debt 2,578 2,565 Less: current portion of long-term debt (7) (340) Long-term debt $ 2,571 $ 2,225
the recourse debt is comprised of advances from the Province of Saskatchewan (General Revenue Fund), substantially all of which have annual debt retirement fund requirements. the non-recourse debt is used to finance the cory cogeneration Station. under the terms of this debt, lenders have recourse limited to the Station’s assets.
Recourse debt – advances from the Province of Saskatchewan Effective Outstanding Date of issue Date of maturity interest rate (%) Coupon rate (%) amount September 1, 1989, to September 1, 2009, to 9.15 to December 1, 1989 December 1, 2009 – 9.26 $3 July 20, 1993 July 15, 2013 8.63 7.81 97 December 20, 1990 December 15, 2020 11.23 9.97 129 February 4, 1992 February 4, 2022 9.27 9.60 240 July 21, 1992 July 15, 2022 10.06 8.94 256 May 30, 1995 May 30, 2025 8.82 8.75 100 August 8, 2001 September 5, 2031 6.49 6.40 200 January 15, 2003 September 5, 2031 5.91 6.40 100 May 12, 2003 September 5, 2033 5.90 5.80 100 January 14, 2004 September 5, 2033 5.68 5.80 200 October 5, 2004 September 5, 2035 5.50 5.60 200 February 15, 2005 March 5, 2037 5.09 5.00 150 May 6, 2005 March 5, 2037 5.07 5.00 150 February 24, 2006 March 5, 2037 4.71 5.00 100 March 6, 2007 June 1, 2040 4.49 4.75 100 April 2, 2008 June 1, 2040 4.67 4.75 250 December 19, 2008 June 1, 2040 4.71 4.71 100 $ 2,475
Non-recourse debt Effective Outstanding Date of issue Date of maturity interest rate (%) Coupon rate (%) amount April 26, 2001 March 31, 2009, to December 31, 2025 7.87 7.59 $ 43 April 26, 2001 March 31, 2009, to June 30, 2026 7.88 7.60 39 October 4, 2002 March 31, 2009, to December 31, 2011 Floating B.A.1+margin 2 $ 84
1. A Banker’s Acceptance is an instrument that is created by a non-financial firm and accepted and guaranteed by the bank. this rate is based on the average rates from eight canadian banks with the high and low rates omitted from the average. the margin ranges from 1.0% to 1.375%.
SASKPOWeR AnnuAL RePORt 2008 77 As at December 31, 2008, scheduled principal debt retirement requirements for the next five years are as follows:
2009 2010 2011 2012 2013
Recourse debt $ 3$ –$ –$ –$ 97 non-recourse debt 44444 $7$4$4$4$101
18. OtHeR LIABILItIeS (in millions) 2008 2007
Asset retirement obligations $ 53 $ 34 environmental remediation liabilities 54 54 Other benefit plans (Note 28) 43 42 $ 150 $ 130
Asset retirement obligations A reconciliation between the opening and closing asset retirement obligations balance is provided below:
2008 2007
Asset retirement obligations, beginning of year $ 34 $ 32 Liabilities incurred in the period 16 – Liabilities removed in the period – – Accretion expense 3 2 Asset retirement obligations, end of year $ 53 $ 34
SaskPower estimates the undiscounted amount of cash flows required to settle the asset retirement obligations is approximately $176, which will be incurred between 2009 and 2045. the majority of these costs will be incurred between 2027 and 2036. credit-adjusted risk-free rates between 4.60% and 6.04% were used to calculate the carrying values of the asset retirement obligations. no funds have been set aside by the corporation to settle the asset retirement obligations.
Environmental remediation liabilities environmental remediation liabilities represent expected environmental expenditures related to present or past activities of the corporation.
Other benefit plans Other benefit plans include the liability for a defined benefit and defined contribution severance plan, a supplementary superannuation plan, and various early retirement plans.
19. AccuMuLAteD OtHeR cOMPReHenSIVe (LOSS) IncOMe (in millions) 2008 2007
unrealized losses on interest rate swaps $ (1) $– unrealized gains on natural gas hedges in prior periods – 2 $ (1) $2
20.eQuIty ADVAnceS the corporation does not have share capital. However, the corporation has received advances from cIc to form its equity capitalization. the advances reflect an equity investment in the corporation by cIc.
78 SASKPOWeR AnnuAL RePORt 2008 21. FInAncIAL InStRuMentS (in millions) the following summarizes the classification, carrying amounts and fair values of the corporation’s financial instruments: At December 31 2008 2007
Asset (liability) Asset (liability)
Carrying Fair Carrying Fair Financial instrument Classification4 amount value amount value
Financial assets cash and cash equivalents HFt1 $6 $6 $ 84 $ 84 Accounts receivable and unbilled revenue L&R2 180 180 185 185 Debt retirement funds HFt1 212 212 237 237 Investment HFt1 2222
Financial liabilities Accounts payable and accrued liabilities OL3 $ (168) $ (168) $ (166) $ (166) Accrued interest OL3 (48) (48) (54) (54) Dividends payable OL3 (8) (8) (31) (31) Recourse debt OL3 (2,496) (2,992) (2,480) (3,037) non-recourse debt OL3 (82) (89) (85) (97)
1. HFt – held-for-trading. 2. L&R – loans and receivables. 3. OL – other liabilities. 4. the corporation has not classified any of its financial instruments as either held-to-maturity or available-for-sale.
Fair values are determined as follows:
(a) Debt retirement funds are valued at the closing year-end unit prices received from the Saskatchewan Ministry of Finance;
(b) Investment is valued using an internal valuation technique based on management’s assumptions;
(c) Long-term debt instruments are valued at year-end market prices for the underlying debt issues or, when unavailable, for similar instruments; and
(d) Other financial instruments – including cash and cash equivalents; accounts receivable and unbilled revenue; accounts payable and accrued liabilities; accrued interest and dividends payable – approximate fair value due to the short period to maturity.
Risk management assets and liabilities the following summarizes the market value gains and losses on the corporation’s risk management activities:
2008 2007 2008 market At December 31 Classification Asset Liability Asset Liability gains (losses)
Natural gas contracts two-way collars HFt1 $1$ (3) $4$(4) $ (2) Fixed price swap instruments HFt1 1 (36) – (10) (25) Electricity trading contracts contract for differences HFt1 –––– – Forward agreements HFt1 –––– – $2$(39) $4$(14) $ (27)
1. HFt – held-for-trading.
SASKPOWeR AnnuAL RePORt 2008 79 Fair values are determined as follows:
(a) natural gas derivative option instruments (i.e. collars) are valued based on estimates provided by the financial counterparties;
(b) natural gas swap instruments are valued using an internal pricing model that uses market data, including average forward monthly natural gas prices obtained from financial counterparties; and
(c) electricity trading derivatives, including contracts for differences and forward agreements are valued at year-end market prices.
22.FInAncIAL RISK MAnAGeMent (in millions) Market risk By virtue of its operations, the corporation is exposed to changes in commodity prices, interest rates, and foreign exchange rates. SaskPower may utilize derivative financial instruments to manage these exposures. the corporation mitigates risk associated with derivative financial instruments through Board-approved policies, limits on use and amount of exposure, internal monitoring, and compliance reporting to senior management and the Board.
Natural gas contracts the corporation is exposed to natural gas price risk through gas purchased for its natural gas-fired power plants and through certain power purchase agreements that have a cost component based on the market price of natural gas. As at December 31, 2008, the corporation had entered into financial natural gas contracts to hedge approximately 45% of its forecasted natural gas purchases for 2009, 6% for 2010 and 2% for 2011.
Based on the corporation's December 31, 2008, closing positions on its natural gas hedges, a one dollar per gigajoule (GJ) increase in the price of natural gas would have resulted in a $20 decrease in the unrealized market value losses recognized in net income for the year. this sensitivity analysis does not represent the underlying exposure to changes in the price of natural gas on the remaining forecasted natural gas purchases which are unhedged as at December 31, 2008.
Electricity trading contracts the corporation is also exposed to electricity price risk on its electricity trading activities. electricity trading risks are managed through limits on the size and duration of transactions and open positions, including Value at Risk (VaR) limits. VaR is the most commonly used metric employed to track and manage the market risk associated with trading positions. A VaR measure gives, for a specific confidence level, an estimated maximum loss that could be incurred over a specified period of time. VaR at December 31, 2008, associated with electricity trading activities was $1.
Debt retirement funds Debt retirement funds are monies set aside to retire outstanding debt upon maturity. the corporation is required to pay annually into debt retirement funds which are held and invested by the Province of Saskatchewan – General Revenue Fund. the corporation has classified these investments as held-for-trading and therefore recognized the change in the market value in net income for the period. the impact of fluctuations in market prices related to these investments is not considered significant to the corporation and, therefore, a sensitivity analysis of the impact on net income has not been provided.
Interest rate the corporation is exposed to interest rate risk arising from fluctuations in interest rates on future short and long- term borrowings. Interest rate risk on these expected future borrowings are managed based on the refinancing needs of the corporation using derivative financial instruments when deemed appropriate. the corporation has not provided a sensitivity analysis of the impact of interest rate changes on net income as substantially all of the corporation’s debt is at fixed rates as at December 31, 2008.
Foreign exchange the corporation faces exposure to the u.S./canadian dollar exchange rate primarily through the sale of electricity to customers in the u.S., as well as from the purchase of goods and services that are payable in u.S. dollars. the corporation may utilize financial instruments to manage this risk. As at December 31, 2008, the corporation had no outstanding foreign exchange derivative contracts. the impact of fluctuations in foreign exchange rates on anticipated sales or purchases is not considered significant to the corporation and, therefore, a sensitivity analysis of the impact on net income has not been provided.
80 SASKPOWeR AnnuAL RePORt 2008 Credit risk credit risk is the risk that one party to a transaction will fail to discharge an obligation and cause the other party to incur a financial loss. concentrations of credit risk relate to groups of customers or counterparties that have similar economic or industry characteristics that cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. the corporation does not have a significant concentration of credit risk. the maximum credit risk to which the corporation is exposed as at December 31, 2008, is limited to the fair value of the financial assets recognized as follows: Financial assets December 31, 2008 cash and cash equivalents $6 Accounts receivable and unbilled revenue 180 Risk management assets 2 Debt retirement funds 212 Investment 2 $ 402
(a) cash and cash equivalents include short-term investments that have a maturity date of 90 days or less from the date of acquisition. Short-term investments are invested in accordance with Board-approved credit policies and limits in respect to short-term investments. the credit risk related to these investments is considered low.
(b) Accounts receivable and unbilled revenue is diversified among many residential, farm and commercial customers primarily throughout Saskatchewan. the following reflects an aging summary of the corporation’s customer accounts receivable balances for both electricity and non-electricity sales at December 31, 2008: December 31, 2008
current $ 171 30 – 59 days 6 60 – 89 days 3 Greater than 90 days 2 $ 182 Allowance for doubtful accounts (1) customer down payment (5) Miscellaneous receivables 4 $ 180
the allowance for doubtful accounts is reviewed quarterly based on an estimate of outstanding amounts that are considered uncollectible. Historically, the corporation has not written-off a significant portion of its accounts receivable balances.
(c) SaskPower is also exposed to credit risk arising from derivative financial instruments if a counterparty fails to meet its obligations. the corporation maintains Board-approved credit policies and limits in respect to its counterparties.
(d) Debt retirement funds are on deposit with Province of Saskatchewan - General Revenue Fund and invested as the Minister of Finance may determine. At December 31, 2008, the Minister has invested these funds primarily in Provincial government and Federal government bonds with varying maturities to coincide with related long-term debt maturities and are managed based on this maturity profile and market conditions. As such, the related credit risk associated with these investments as at December 31, 2008, is considered low.
SASKPOWeR AnnuAL RePORt 2008 81 (e) the investment in Aurora trust Series A Asset-Backed commercial Paper (Aurora) was purchased on May 31, 2007, with a maturity date of August 31, 2007. As a result of market concerns about asset-backed commercial paper in canada and the united States that resulted in the inability of the non-bank trust administrators to refinance maturing borrowings, SaskPower did not receive the principal it had invested in Aurora at maturity. the Pan-canadian Investors committee, which was established to restructure the affected asset-backed commercial paper, announced on January 21, 2009, that the restructuring had been completed. As a result, the Aurora investment has been converted to longer-term interest paying notes, which will be paid off as the underlying assets mature. the investment is recorded at its estimated fair value at December 31, 2008, and is recognized in other assets on the statement of financial position.
Liquidity risk Liquidity risk is the risk that the corporation is unable to meet its financial commitments as they become due or can do so only at excessive cost. SaskPower manages cash resources based on financial forecasts and anticipated cash flows. the following summarizes the contractual maturities of the corporation’s financial liabilities: Contractual cash flows Carrying Contractual 0 – 6 7 - 12 1 - 2 3 - 5 More than Financial liabilities amount cash flows months months years years 5 years
Accounts payable and accrued liabilities $ 168 $ 168 $ 168 $–$–$–$– Accrued interest 48 48 48 –––– Risk management liabilities 39 39 39 –––– Dividends payable 8 8 8–––– Recourse debt 2,496 5,817 34 86 164 590 4,943 non-recourse debt 82 143 5510 28 95 $ 2,841 $ 6,223 $ 302 $ 91 $ 174 $ 618 $ 5,038
Management believes its ability to generate and acquire funds will be adequate to support these financial liabilities.
23.cAPItAL MAnAGeMent (in millions) the corporation’s objectives when managing capital are to ensure adequate capital to support the operations and growth strategies for the corporation. SaskPower raises most of its capital requirements through internal operating activities and through funds obtained by borrowing from the Saskatchewan Ministry of Finance. this type of borrowing allows the corporation to take advantage of the Province of Saskatchewan’s strong credit rating. The Power Corporation Act provides the corporation with the authority to have outstanding borrowings of up to $5,000 of which $750 may be by way of temporary loans. SaskPower also has available credit of $51 at financial institutions that it can draw upon.
the corporation’s capital structure consists of gross long-term debt net of debt retirement funds and cash and cash equivalents; and equity, excluding accumulated other comprehensive (loss) income. the corporation monitors its capital structure using the per cent debt ratio. the long-term per cent debt ratio target is 60%. the per cent debt ratio is calculated as net debt1 divided by total capital as follows: December 31, 2008
Gross long-term debt $ 2,578 Debt retirement funds (212) cash and cash equivalents (6) Total net debt1 2,360
equity advances 660 Retained earnings 870 Total capital $ 3,890
Per cent debt ratio 60.7%
1. net debt is a non-GAAP measure, whose nearest GAAP measure is long-term debt.
the per cent debt ratio at December 31, 2008, was 60.7% (2007 - 59.7%).
82 SASKPOWeR AnnuAL RePORt 2008 24.cOMMItMentS AnD cOntInGencIeS (in millions) (a) the corporation has entered into power purchase agreements expected to cost $6,194 (2007 – $5,634) until 2028 and provide approximately 469 MW of generating capacity.
(b) SaskPower has entered into contracts to purchase natural gas expected to cost $95 (2007 – $89) based on forward market prices until 2011.this includes fixed price forward contracts with a notional value of $13 (2007 – $nil) for which the corporation has elected to use the own-use exemption.
(c) At 2008 prices, the corporation also has forward commitments of $1,496 (2007 – $1,636) extending until 2024 for future minimum coal deliveries.
(d) the corporation is forecasting to spend $954 on capital projects in 2009.
(e) through the energy Performance contracting Program, the corporation has guaranteed $13 (2007 – $7) of energy savings to various customers. the energy Performance contracting Program is a comprehensive facility improvement initiative designed to enhance the facilities of the customer while permanently reducing utility costs. these guarantees are offset by third party guarantees to SaskPower that ensure the energy savings are realized.
(f) SaskPower has committed to electricity sales of $15 (2007 – $5) and electricity purchases of $11 (2007 – $5). these contracts are considered derivative financial instruments and changes in their fair value have been included in net income.
(g) the corporation has issued letters of credit and promissory notes in the amount of $4 (2007 – $8) related to electricity trading activities and physical natural gas purchases. In 2007, a $5 promissory note was provided as acceptable credit support for project lenders in respect of the debt coverage service ratio requirements for the cory cogeneration Station. this promissory note was not required for the 2008 year-end.
(h) A legal action was commenced in 1996 by an individual, in a representative capacity, on behalf of members of the Power corporation Superannuation Plan (PcSP; the defined benefit pension plan). the claim alleges the corporation has inappropriately ceased making contributions to the PcSP; incorrectly offered employees early retirement with unreduced pensions; and did not provide sufficient information to allow employees to make an informed decision regarding the choice to either stay within the PcSP or move into the Public employees Pension Plan.
Since 1996, various legal proceedings have taken place to properly define the claim. A pre-trial conference took place on dates in the second and fourth quarters of 2008. the trial is expected to take place in 2009. It is the corporation’s position that the final outcome from the claim is not determinable. As such, no provision has been set up to cover any potential settlement or adverse disposition.
SaskPower has various other legal matters pending, which in the opinion of management, will not have a material effect on SaskPower's consolidated financial position or results of operations.
25.net cHAnGe In nOn-cASH WORKInG cAPItAL (in millions) 2008 2007
Accounts receivable and unbilled revenue $5 $ (5) Inventory (7) (13) Prepaid expense 2 7 Accounts payable and accrued liabilities 2 12 Accrued interest (6) (1) $ (4) $–
SASKPOWeR AnnuAL RePORt 2008 83 26.JOInt VentuReS (in millions) (a) the corporation holds a 50% interest in an unincorporated joint venture with AtcO Power canada Ltd. the joint venture owns and operates a 228-MW natural gas-fired cogeneration plant (cory cogeneration Station) near Saskatoon, Saskatchewan.
(b) the corporation holds a 50% interest in cory cogeneration Funding corporation (ccFc). ccFc is a special purpose company established by the corporation and AtcO Power canada Ltd. (the Owners) to borrow long- term, non-recourse debt to finance the cory cogeneration Station. ccFc acts as agent for the Owners by receiving revenues, disbursing costs (including debt service) and distributing proceeds to the Owners.
(c) the corporation’s interest in joint ventures is summarized below: 2008 2007
Statement of income Revenue $ 20 $ 18 Operating, maintenance and administration (5) (5) Depreciation (5) (5) Finance charges (6) (6) Income from joint ventures $4 $2
Statement of financial position current assets $4 $4 Property, plant and equipment 113 116 current liabilities (5) (4) non-recourse long-term debt (78) (82) Other liabilities (1) (1) Investment in joint ventures $ 33 $ 33
Statement of cash flows Operating activities $ 10 $6 Investing activities (1) (1) Financing activities (7) (6) Increase (decrease) in cash $2 $ (1)
current assets include cash of $2 (2007 – $nil) which is only available for use within the joint ventures.
27. ReLAteD PARty tRAnSActIOnS (in millions) Included in these consolidated financial statements are transactions with various Saskatchewan crown corporations, ministries, agencies, boards and commissions related to the corporation by virtue of common control by the Government of Saskatchewan and non-crown corporations and enterprises subject to joint control and significant influence by the Government of Saskatchewan (collectively referred to as related parties).
Routine operating transactions with related parties are settled at prevailing market prices under normal trade terms. these transactions and amounts outstanding at year-end are as follows: 2008 2007
Revenue $ 114 $ 113 expense 275 283 Dividends declared 46 97 Accounts receivable and unbilled revenue 3 5 Property, plant and equipment 26 – Accounts payable and accrued liabilities 10 10 Accrued interest 48 54 Dividends payable 8 31
Included in the above, in October 2008, SaskPower purchased property from Saskatchewan transportation company. this purchase was accounted for as a related party transaction and as such, the excess of consideration paid over the net book value of the property was charged to retained earnings ($1).
84 SASKPOWeR AnnuAL RePORt 2008 In the prior year, SaskPower sold property to Ministry of Government Services (formerly Saskatchewan Property Management). this sale was also accounted for as a related party transaction and as such, the excess of consideration received over the net book value of the property was credited to retained earnings ($2).
the corporation also pays Saskatchewan provincial sales tax on all its taxable purchases to the Saskatchewan Ministry of Finance. taxes paid are recorded as part of the cost of those purchases.
28.eMPLOyeeS’ FutuRe BeneFItS (in millions) Defined benefit pension plan the corporation sponsors a defined benefit pension plan (the Plan) that has been substantially closed to employees since 1977.the measurement date of the latest actuarial valuation used to determine the Plan assets and obligations was September 30, 2008. Accordingly, the significant turmoil affecting the capital markets since September 30 is not reflected in either the 2008 funded status of the Plan or the 2008 pension expense at the end of the fiscal year.
the effective date of the most recent actuarial valuation for funding purposes was December 31, 2007. under current canada Revenue Agency guidelines, an actuarial valuation for funding purposes is to be completed at a minimum, every 3 years. However, the corporation has committed to request an actuarial valuation for funding purposes in 2009 with an effective date of December 31, 2008.
the defined benefit pension plan is solely the obligation of the corporation. the corporation is not obligated to fund the Plan but is obligated to pay benefits under the terms of the Plan as they come due.
(a) Status of the Plan the actuarial valuation measured at September 30, 2008, showed that the Plan had an actuarial deficit of $106 (2007 – surplus of $9). the decline in the funded status of the Plan was predominantly due to negative returns earned on the Plan’s assets. the calculation of the pension plan (deficit) surplus is as follows: 2008 2007
Plan assets Fair value, beginning of year $ 836 $ 790 Actual return on plan assets (95) 86 employee funding contributions 2 2 Benefits paid (44) (42) Fair value, end of year 699 836
Accrued benefit obligation Balance, beginning of year 827 836 current service cost 8 9 Interest cost 47 43 Benefits paid (44) (42) Actuarial gain (33) (19) Balance, end of year 805 827 Plan (deficit) surplus at September 30 $ (106) $9
For accounting purposes, an asset of $17 (2007 – $28) has been recorded in other assets on SaskPower’s consolidated statement of financial position at December 31, 2008. the difference between the value reported as the Plan (deficit) surplus and the value recorded on SaskPower’s consolidated statement of financial position is due to the cIcA requirement to base the valuation of the Plan for accounting purposes on long-term actuarial assumptions rather than on actual experience.
SASKPOWeR AnnuAL RePORt 2008 85 Below is a reconciliation of the Plan (deficit) surplus and the value of the Plan recorded on SaskPower’s consolidated statement of financial position: 2008 2007
Plan (deficit) surplus $ (106) $9 Add: unamortized net actuarial loss (gain) not yet recorded 108 (9) Add: unamortized past service costs 15 28 Defined benefit pension asset recorded in other assets $ 17 $ 28
there are two significant reconciling items. the first item relates to the unamortized net actuarial loss (gain). this loss (gain) is made up of the accumulated difference between the actual returns and obligations of the Plan and the expected returns and obligations of the Plan based upon the long-term actuarial assumptions. the second item relates to the unamortized past service costs. these costs relate to legislation introduced by the Government of Saskatchewan in 2006 that amended the Plan to provide regular benefit increases equal to 70% of the increase in the Saskatchewan cPI.
(b) Benefit expense In 2008, using long-term assumptions as noted in (c), the corporation recorded a non-cash pension expense of $11 (2007 – $8). this amount was recorded in the corporation’s operating, maintenance and administration expense. the following is a summary of the calculation of the pension expense: 2008 2007
Cost arising from events during the year SaskPower’s current service cost $6 $7 Interest on accrued benefit obligation 47 43 Actual return on plan assets 95 (86) Actuarial gain on accrued benefit obligation (33) (19) Future benefit costs (credits) before adjustments 115 (55)
Adjustments to recognize the long-term nature of cost Difference between actual and expected return on plan assets (150) 36 Amortization of past service costs 13 13 Amortization of transitional asset – (5) Difference between amortization of net actuarial loss (gain) and actual actuarial gain on accrued benefit obligation 33 19 Total adjustments (104) 63 Pension expense recorded in operating, maintenance and administration $ 11 $8
(c) Assumptions the significant actuarial assumptions adopted in measuring the corporation’s accrued benefit obligation at September 30 are: 2008 2007
Discount rate, beginning of year 5.75% 5.25% Discount rate, end of year 6.25% 5.75% expected long-term rate of return on plan assets, beginning of year 6.75% 6.50% expected long-term rate of return on plan assets, end of year 6.75% 6.75% Long-term rate of compensation increases 3.50% 3.50% Remaining service life (years) 2.56 3.22 Long-term inflation rate 2.50% 2.50% Assumptions for benefit increases (percentage of cPI) 70.00% 70.00%
86 SASKPOWeR AnnuAL RePORt 2008 the actuarial assumptions are based on management’s expectations, independent actuarial advice and guidance provided by cIcA. two of the most significant assumptions are the discount rate and expected long-term rate of return on plan assets. the discount rate has been increased in 2008 to better reflect the spot yield for high-grade, long-term canadian corporate bonds. the expected long-term rate of return on Plan assets is based upon the asset mix of the Plan and expected returns for each asset class.
(d) Benefit plan asset allocation
2008 2007
equity securities 60.3% 66.6% Debt securities 39.0% 32.8% cash and short-term securities 0.7% 0.6% 100.0% 100.0%
(e) Benefit payments the benefit payments expected to be made to beneficiaries over the next five years are as follows: 2009 2010 2011 2012 2013
expected benefit payments $ 49 $ 56 $ 61 $ 65 $ 67
Defined contribution pension plan under the defined contribution pension plan, the corporation's obligations are limited to the contributions for current service. these contributions are charged to income when made. the net expense for the defined contribution pension plan is as follows: 2008 2007
Defined contribution pension plan expense $ 10 $9
Other benefit plans Other benefit plans include a defined benefit and a defined contribution severance plan, a supplementary superannuation plan and a voluntary early retirement plan. A reconciliation between the opening and closing accrued benefit obligations balance is provided below: 2008 2007
Accrued benefit obligations Balance, beginning of year $ 42 $ 38 expense 10 13 Benefits paid (9) (9) Balance, end of year $ 43 $ 42
Present value of accrued benefit obligations $ 56 $ 57
the significant actuarial assumptions adopted in measuring the corporation’s accrued benefit obligations at September 30 are: 2008 2007
Discount rate 5.50% – 6.25% 5.25%- 5.75% Long-term rate of compensation increases 3.50% 3.50% Remaining service life (years) 9.06 9.70
29.cOMPARAtIVe FIGuReS certain amounts for the prior year have been reclassified to conform with current year financial statement presentation.
SASKPOWeR AnnuAL RePORt 2008 87 FIVe-yeAR FInAncIAL SuMMARy
(in millions) 2008 2007 2006 2005 2004 Consolidated statement of income Revenue Saskatchewan electricity sales $ 1,385 $ 1,356 $ 1,269 $ 1,181 $ 1,132 exports 33 57 29 68 66 net sales from electricity trading 17 11 15 94 Other revenue 54 45 40 31 28 Total revenue 1,489 1,469 1,353 1,289 1,230 Operating costs Fuel and purchased power 554 463 478 459 478 Realized natural gas risk management activities (9) 18 20 (5) (5) Operating, maintenance and administration 430 416 360 336 317 Depreciation 234 219 207 189 189 Finance charges 153 167 161 147 157 taxes 35 35 34 32 28 Total operating costs 1,397 1,318 1,260 1,158 1,164
Operating income $ 92 $ 151 $ 93 $ 131 $ 66 unrealized natural gas risk management activities (28) (13) ––– Net income $ 64 $ 138 $ 93 $ 131 $ 66
Consolidated statement of financial position Assets current assets $ 335 $ 418 $ 354 $ 365 $ 371 Property, plant and equipment 3,901 3,734 3,695 3,616 3,344 Debt retirement funds 212 237 201 170 140 Other assets 72 86 114 120 115 Total assets $ 4,520 $ 4,475 $ 4,364 $ 4,271 $ 3,970
Liabilities and equity current liabilities $ 270 $ 605 $ 312 $ 294 $ 292 Long-term debt 2,571 2,225 2,449 2,415 2,106 Other liabilities 150 130 135 126 182 equity 1,529 1,515 1,468 1,436 1,390 Total liabilities and equity $ 4,520 $ 4,475 $ 4,364 $ 4,271 $ 3,970
Consolidated statement of cash flows cash provided by operating activities $ 320 $ 373 $ 255 $ 297 $ 289 cash used in investing activities (377) (248) (258) (457) (289) cash (used in) provided by financing activities (21) (61) (42) 121 100 (Decrease) increase in cash position $ (78) $ 64 $ (45) $ (39) $ 100
Financial indicators Dividends $ 46 $ 97 $ 61 $ 85 $ 59 capital expenditures 422 280 285 473 301 Operating return on equity 5.9% 10.1% 6.4% 9.2% 4.8% Return on equity 4.2% 9.3% 6.4% 9.2% 4.8% Per cent debt ratio 60.7% 59.7% 61.0% 60.9% 58.2%
88 SASKPOWeR AnnuAL RePORt 2008 FIVe-yeAR ReVenue StAtIStIcS
2008 2007 2006 2005 2004 Number of Saskatchewan electricity customers Residential 328,719 321,183 315,203 311,736 308,659 Farm 62,712 63,384 64,273 65,110 66,099 commercial 54,563 53,917 53,574 53,008 52,911 Oilfield 13,932 13,147 12,437 11,757 11,409 Power 78 80 80 79 85 Reseller 2 2222 460,006 451,713 445,569 441,692 439,165
Total electricity sales (in millions) Residential $ 322 $ 311 $ 288 $ 269 $ 255 Farm 125 127 118 121 118 commercial 297 292 279 267 255 Oilfield 203 192 176 158 146 Power 366 362 337 302 298 Reseller 72 72 71 64 60 Saskatchewan electricity sales 1,385 1,356 1,269 1,181 1,132 Exports 33 57 29 68 66 Total electricity sales $ 1,418 $ 1,413 $ 1,298 $ 1,249 $ 1,198
Total electricity sales (GWh) Residential 2,721 2,643 2,531 2,514 2,484 Farm 1,306 1,329 1,272 1,337 1,350 commercial 3,311 3,269 3,239 3,200 3,132 Oilfield 2,682 2,541 2,399 2,264 2,165 Power 6,898 6,854 6,666 6,552 6,502 Reseller 1,274 1,287 1,293 1,266 1,261 Saskatchewan electricity sales 18,192 17,923 17,400 17,133 16,894 Exports 409 851 480 1,048 1,002 Total electricity sales 18,601 18,774 17,880 18,181 17,896
Average electricity sales price ($/MWh) Residential $ 118 $ 118 $ 114 $ 107 $ 103 Farm 96 96 93 91 87 commercial 90 89 86 83 81 Oilfield 76 76 73 70 67 Power 53 53 51 46 46 Reseller 57 56 55 51 48 exports 81 67 60 65 66 Total weighted average electricity sales price $ 76 $ 75 $ 73 $ 69 $ 67
Average annual usage per residential customer (kWh) 8,278 8,229 8,030 8,065 8,048
Electricity trading electricity trading sales (in millions) $ 125 $ 125 $ 118 $ 46 $ 31 electricity trading sales (GWh) 1,813 1,897 1,649 622 536
SASKPOWeR AnnuAL RePORt 2008 89 FIVe-yeAR GeneRAtInG AnD OPeRAtInG StAtIStIcS
2008 2007 2006 2005 2004 Net electricity supplied (GWh) coal 11,405 11,661 11,102 11,467 12,191 Gas 3,812 3,545 3,556 3,234 3,729 Hydro 4,030 4,393 4,032 4,573 2,746 Wind 574 620 573 92 74 Imports 587 316 451 481 960 Other 72 36 ––– Gross electricity supplied 20,480 20,571 19,714 19,847 19,700 Line losses (1,879) (1,797) (1,834) (1,666) (1,804) Net electricity supplied 18,601 18,774 17,880 18,181 17,896
Available generating capacity (net MW) coal 1,682 1,661 1,661 1,651 1,651 Gas 913 976 976 976 976 Hydro 854 854 854 854 854 Wind 172 172 172 22 22 Other 20 55–– 3,641 3,668 3,668 3,503 3,503
Peak loads (net MW) Annual peak load 3,194 2,969 2,960 2,946 2,954 Minimum load 1,664 1,583 1,510 1,482 1,466 Summer peak load 2,834 2,879 2,706 2,639 2,591
Lines in service (km) transmission lines 12,311 12,216 12,212 12,159 12,149 Distribution lines 144,350 143,602 142,843 142,110 141,408 156,661 155,818 155,055 154,269 153,557
Number of permanent full-time employees 2,541 2,488 2,458 2,425 2,397
90 SASKPOWeR AnnuAL RePORt 2008 SySteM MAP As at December 31, 2008
Northwest Territories AVAILABLE GENERATION (net capacity) .... ______Nt i 1 ------"\ Hydroelectric Natural gas I- Stony Rapids '. • Wind I ' • Coal ·I '. • Independent Power Producer I ' ·I Points North '. • 1. Athabasca Hydroelectric System - 23 MW I ' • • Wellington (5 MW) ·I '. • Waterloo (8 MW) I ' • Charlot River (10 MW) ·I '. 2. Island Falls Hydroelectric Station - 102 MW I ' 3. E.B. Campbell Hydroelectric Station - 288 MW ·I '. 4. Nipawin Hydroelectric Station - 255 MW I ' 5. Meadow Lake Power Station - 44 MW ·I '. 6. Meridian Cogeneration Station - 210 MW I '. 7. NRGreen Kerrobert Heat Recovery Project - 5 MW· I 'I 8. Landis Power Station - 79 MW I· Saskatchewan 2 I. 9. Cory Cogeneration Station - 228 MW ! \ 10. Queen Elizabeth Power Station - 322 MW 11. Coteau Creek Hydroelectric Station - 186 MW I 12. Success Power Station - 30 MW I 5 13. Cypress Wind Power Facility - 11 MW i Meadow Lake 14. SunBridge Wind Power Project - 11 MW I · 4 3 15. Centennial Wind Power Facility - 150 MW LloydminsterI Prince Albert 16. Poplar River Power Station - 582 MW 6 17. Boundary Dam Power Station - 824 MW 18. Shand Power Station - 276 MW 19. NRGreen Loreburn Heat Recovery Project - 5 MW 7 8 Saskatoon Man
20. NRGreen Estlin 9 10 it \ o Heat Recovery Project - 5 MW ba I 21. NRGreen Alameda 11 Heat Recovery Project - 5 MW 19 Alberta Regina TRANSMISSION 12 Swift Current 20 230 kV I 15 138 kV I 13 14 -138 kV line operating at 72 kV ·I Switching station Estevan ! Coronach Interconnection Il. ______17 21 18 16 United States of America
SASKPOWeR AnnuAL RePORt 2008 91 this page is intentionally left blank.
92 SASKPOWeR AnnuAL RePORt 2008 On the back cover Sophie Ho, Senior Auditor, corporate and Financial Services
Printed on Productolith Dull with 10% recycled content and Via Smooth natural with 30% recycled content. Saskatchewan Power corporation 2025 Victoria Avenue | Regina, Saskatchewan canada S4P 0S1 saskpower.com Exhibit “A2” SaskPower 10-Year Transmission Development Plan
SaskPower 10-Year Transmission Development Plan
May 2002
SaskPower
Page 113 10-YEAR TRANSMISSION DEVELOPMENT PLAN
Table of contents Executive Summary ...... i 1.0 Introduction ...... 1 1.1 Context ...... 1 1.2 Document Scope ...... 2 2.0 Definition of SaskPower’s Facilities ...... 3 2.1 Grid Transmission Facilities ...... 3 2.2 Sub-Transmission Facilities ...... 4 2.3 Distribution Facilities ...... 4 3.0 Transmission System Performance Criteria ...... 5 3.1 Transmission System Adequacy ...... 8 3.2 Transmission System Security ...... 8 3.3 Transmission System Reliability ...... 10 3.4 Cost Effectiveness of the Transmission System ...... 11 4.0 Major Drivers of Need for New Transmission Facilities ...... 12 4.1 Load Growth ...... 12 4.1.1 Corporate 10-Year Load Forecast ...... 12 4.1.2 Regional Load Forecast ...... 13 4.2 Connection of New Generation ...... 15 4.2.1 New SaskPower Generation Developments ...... 16 4.3 Connection of New Major Loads ...... 17 4.4 SaskPower’s Open Access Transmission Tariff (OATT) ...... 17 4.5 Aging Infrastructure ...... 18 4.6 Compliance with NERC Reliability Standards ...... 19 5.0 Evaluation of Requirements for Transmission System Developments ...... 20 5.1 The Prince Albert and La Ronge Study Area ...... 22 5.1.1 Reinforcement of the Supply to La Ronge ...... 22 5.1.2 Transmission Reinforcement for the Prince Albert Area ...... 24 5.2 The Meadow Lake Study Area ...... 25 5.2.1 Reinforcement of the Supply to the Area North of Meadow Lake ...... 25 5.2.2 Interconnection of a New OSB Plant Near Meadow Lake ...... 27 5.2.3 Transmission Grid Reinforcement for the Meadow Lake Area ...... 27 5.3 The Pelican Narrows – Deschambault Lake Study Area ...... 29 5.3.1 Supply Reinforcement for Pelican Narrows – Deschambault Lake ...... 29 5.4 The Kindersley – Kerrobert – Unit Study Area ...... 30 5.4.1 Supply Reinforcement for the Area West of Kindersley ...... 30 5.4.2 Transmission Reinforcement for Kindersley, Kerrobert, Unity ...... 30 5.5 The City of Saskatoon Study Area ...... 31 5.6 The City of Regina Study Area ...... 33 5.7 Other Projects ...... 35 5.7.1 Alberta – Saskatchewan Interconnection at Lloydminster ...... 35 5.7.2 Connection of Wind Generation in the Area Southwest of Swift Current . . . . .36 5.7.3 Alberta Newsprint Mill ...... 36 APPENDICES ...... 37 A NERC Planning Standards – Table I ...... 37 B Summary of Capital Expenditures on Transmission System for 2002 to 2006 ...... 39 i 10-YEAR TRANSMISSION DEVELOPMENT PLAN
Executive Summary capital investment plan that outlines the transmission improvements The SaskPower 10-Year Transmission planned for the next 5 years. The Development Plan provides a discussion plan should be detailed and of SaskPower’s anticipated transmission comprehensive and include the developments for the period 2002-2011. reason for the investment; the location, probable type, and The impetus for preparing the capacity; the estimated cost; and Transmission Development Plan is found the expected dates of public review in the work of the Transmission Line and commissioning. Routing Review Panel, established in June 2000. When the Transmission Line With publication of this Transmission Routing Review Panel was convened, its Development Plan, SaskPower has Final Report was envisioned as a guide to fulfilled the commitment made in response help SaskPower manage these changing to the Panel’s Final Report of February expectations. The Panel recommendations 2001. Starting with this first Plan, regarding public consultation and SaskPower will provide update reports on benchmarking have become an important an annual basis. part of SaskPower’s efforts to ensure that This Plan discusses planned facility corporate guidelines and processes reflect additions along with anticipated but current realities and best practices within unbudgeted additions to SaskPower’s the industry. transmission facilities and sub- The publication of SaskPower’s 10-Year transmission facilities over the next 10 Transmission Development Plan addresses years. This Plan does not discuss planned issues identified by the Panel, as found in additions to SaskPower’s distribution Recommendations #4 and #5 of its Final system. This is consistent with the terms Report: of reference for the Transmission Line #4 The Panel recommends that Routing Review Panel and the definition SaskPower annually publish and of Transmission Facilities as used by communicate to stakeholders a 10- the Panel. year forecast of load growth that assesses system reliability, identifies upcoming deficiencies, and outlines a general plan of improvements to address them.
#5 The Panel recommends that SaskPower annually publish a 10-YEAR TRANSMISSION DEVELOPMENT PLAN ii
The transmission developments that are The full Plan can also be found on discussed in this Plan are related to the SaskPower’s web site at reinforcement of a number of areas in the www.saskpower.com. province. The prime study areas identified in the Plan are: • The Prince Albert and La Ronge Study Area, • The Meadow Lake Study Area, • The Pelican Narrows – Deschambault Lake Study Area, • The Kindersley – Kerrobert – Unity Study Area, and • The City of Saskatoon and City of Regina Study Areas.
The requirement for new transmission facilities into or within these areas is almost exclusively related to the growth of local load in the study areas. There is no discussion of specific transmission associated with new generation facilities, as at the time the Plan was prepared, no plans for major new generation developments within the province had been identified. SaskPower’s Open Access Transmission Tariff may also result in requirements to build transmission facilities within the province. There are a number of requests for transmission service pending under the provisions of the tariff. However, at the time of preparation of this Plan, it had not been determined whether additional transmission facilities would be required to satisfy the requests for transmission service. 1 10-YEAR TRANSMISSION DEVELOPMENT PLAN
SaskPower 10-Year 2000. The Panel’s mandate was to advise Transmission Development Plan SaskPower on guidelines and practices to guide the routing of transmission lines on private and municipal land in the surveyed 1.0 Introduction portion of Saskatchewan.
The SaskPower 10-Year Transmission The construction of transmission lines has Development Plan provides a discussion become an increasingly challenging of SaskPower’s anticipated transmission proposition for not only SaskPower, but developments for the period 2002-2011. also all electrical utilities across North America. Increased emphasis on Starting with this first Plan, SaskPower environmental issues and public reviews will update this document on an regarding proposed transmission facilities annual basis. has meant additional responsibilities for The preparation and publication of this 10- SaskPower. Year Transmission Development Plan is in When the Transmission Line Routing keeping with SaskPower’s commitment to Review Panel was convened, its Final provide clear and open communication to Report was envisioned as a guide to help our customers across Saskatchewan. SaskPower manage these changing When reviewing the contents of expectations. The Panel recommendations SaskPower’s 10-Year Transmission regarding public consultation and Development Plan, it is important to keep benchmarking have become an important the following considerations in mind: part of SaskPower’s efforts to ensure that corporate guidelines and processes reflect • Customer service needs and resulting current realities and best practices within projects may arise that are not the industry. included. • SaskPower may be in discussions with The publication of SaskPower’s 10-Year customers who do not wish to have the Transmission Development Plan addresses discussions prematurely disclosed issues identified by the Panel, as found in because of the potential to compromise Recommendations #4 and #5 of its commercial or competitive interests. Final Report: #4 The Panel recommends that 1.1 Context SaskPower annually publish and The impetus for preparing a SaskPower communicate to stakeholders a 10- Transmission Development Plan is found year forecast of load growth that in the work of the Transmission Line assesses system reliability, identifies Routing Review Panel, established in June upcoming deficiencies, and outlines 10-YEAR TRANSMISSION DEVELOPMENT PLAN 2
a general plan of improvements to purposes of covering the cost of project address them. construction, allocated in the capital budget which is part of SaskPower’s five- #5 The Panel recommends that year business plan. SaskPower, has also SaskPower annually publish a identified projects that may occur within capital investment plan that outlines the next five years, but are not currently the transmission improvements included in its business plan document. planned for the next 5 years. The These projects may have been left out of plan should be detailed and the plan because of their tentative nature, comprehensive and include the reason for the investment; the or because they may be driven by location, probable type, and customer requirements and are still at the capacity; the estimated cost; and preliminary stages of discussion. the expected dates of public review SaskPower has also identified projects and commissioning. which are beyond the five-year business plan, but which are expected to occur With publication of this Transmission based upon the 10-year load forecast and Development Plan, SaskPower has supply development requirements. fulfilled the commitment made in response to the Panel’s Final Report of As a matter of clarification, transmission February 2001. projects that are identified in SaskPower’s five-year capital plan are not necessarily 1.2 Document Scope committed. Major projects that are This document discusses planned facility included in the business plan are normally additions along with anticipated but submitted on the basis of a preliminary unbudgeted additions to SaskPower’s assessment of need. These projects are transmission facilities and sub- still required to go through final technical transmission facilities. This document studies and internal approval by does not discuss planned additions to SaskPower’s Executive and Board (as SaskPower’s distribution system. This is dictated by the notional value of a consistent with the terms of reference for project). During the internal review the Transmission Line Routing Review process, projects listed in the Business Panel and the definition of Transmission Plan may change because of the final Facilities as used by the Panel. technical studies, changes in the load forecast or changes in For the purposes of this document, customer requirements. SaskPower differentiates between planned facilities and anticipated but unbudgeted facilities. Planned facilities are those facilities that have had funds, for the 3 10-YEAR TRANSMISSION DEVELOPMENT PLAN
2.0 Definition of SaskPower’s changing customer demands under a wide Facilities variety of system operating conditions. SaskPower’s power line facilities Provide Flexibility for Changing System associated with the delivery of electrical Conditions — Transmission capacity must power from the source to the end user be available on the interconnected can be broken down into three transmission systems to provide flexibility general categories: to handle the shift in facility loadings caused by the maintenance of generation • Grid Transmission Facilities and transmission equipment, the forced • Sub-transmission Facilities outages of such equipment, and a wide range of other system variable conditions, • Distribution Facilities such as construction delays, higher than expected customer demands, and 2.1 Grid Transmission Facilities generating unit fuel shortages. The North American Electric Reliability Council (NERC)1 identifies the purpose of Reduce Installed Generating Capacity — the grid transmission system or Transmission interconnections with ‘interconnected transmission system’ neighboring electric systems allow for the as follows2: sharing of generating capacity through diversity in customer demands and The interconnected transmission systems generator availability, thereby reducing are the principal media for achieving investment in generation facilities. reliable electric supply. They tie together the major electric system facilities, Allow Economic Exchange of Electric generation resources, and customer Power Among Systems — Transmission demand centers. These systems must be interconnections between systems, coupled planned, designed, and constructed to with internal system transmission operate reliably within thermal, voltage, facilities, allow for the economic exchange and stability limits while achieving their of electric power among all systems and major purposes. These purposes are to: industry participants. Such economy transfers help to reduce the cost of electric Deliver Electric Power to Areas of supply to customers. Customer Demand — Transmission systems provide for the integration of SaskPower’s grid transmission system electric generation resources and electric (Figure #1, pg. 6) consists of the system facilities to ensure the reliable interconnected power lines and associated delivery of electric power to continuously equipment involved in the transfer of
1 The North American Electric Reliability Council (NERC) is a not-for-profit corporation. NERC's members are the ten Regional Transmission Councils. The members of these Regional Councils come from all segments of the electric industry: investor-owned utilities; federal power agencies; rural electric cooperatives; state, municipal and provincial utilities; independent power producers; power marketers; and end-use customers. These entities account for virtually all the electricity supplied in the United States, Canada, and a portion of Baja California Norte, Mexico. Since its formation in 1968, NERC has operated as a voluntary organization to promote bulk electric system (transmission system) reliability and security 2 NERC Planning Standards document, September 1997, page 7 10-YEAR TRANSMISSION DEVELOPMENT PLAN 4
electric energy between major points of 72 kV sub-transmission power lines. supply and major points of delivery. By Power flow levels on individual sub- definition, grid transmission lines always transmission lines are normally below originate and terminate at switching 30,000 kW. The exception to this is the stations. The switching station may be shorter sub-transmission lines that supply associated with a supply point (connection the highly concentrated loads in of a power plant) or load points where the urban areas. The loading on these sub- transmission voltage is stepped down to a transmission lines can exceed 100,000 kW. voltage suitable for use on the sub- transmission or distribution system. The 2.3 Distribution Facilities transmission system includes the facilities The distribution system delivers electrical associated with the bulk transfer of energy from SaskPower’s sub-stations to electric energy between Saskatchewan and the majority of SaskPower’s customers. Alberta, Manitoba and North Dakota. The The distribution system consists of power grid transmission lines in Saskatchewan lines in the range of 25,000 volts down to generally operate at voltages of 230,000 4,160 volts, and secondary distribution, volts (230 kV3) or 138,000 volts (138 kV). which operates at voltages below 4,160 SaskPower has grid transmission lines in volts. The majority of SaskPower’s northern Saskatchewan that operate at distribution system is a 110,000 volts and 115,000 volts. Power 25,000 volt (three phase – flow levels on individual grid transmission three wire) / 14,400 volt (single phase – lines operating at 230,000 volts can single wire) system. SaskPower has exceed 300,000 kW4. approximately 22,800 km of overhead 25,000 volt powerline, 700 km of 2.2 Sub-Transmision Facilities underground 25,000 volt powerline, The sub-transmission system (Figure #2 72,400 km of overhead 14,400 volt pg. 7) consists of the power lines that take powerline and 42,900 km of underground electrical energy from switching stations 14,400 volt powerline. The majority of and deliver it directly to larger customers, SaskPower’s distribution system, in terms or to smaller load centers (sub-stations) in of the length of facilities, is associated urban and rural areas where it is with the supply of loads in rural areas. transformed for delivery onto SaskPower’s Farm and rural residence loads are distribution system. The majority of generally supplied directly from the SaskPower’s sub-transmission system 14,400 volt system via individual operates at 72,000 volts (72 kV); however, transformers at the customer’s site which there are some sub-transmission facilities drop the voltage to the customer’s operating at 138,000 volts (138 kV). utilization voltage. In urban areas, the SaskPower has approximately 4,400 km of distribution system includes secondary
3 kV is an abbreviation meaning thousands of volts 4 kW is an abbreviation meaning thousands of watts. Watt is a measure of electrical power. The term electrical power is used interchangeably with electrical demand. 5 10-YEAR TRANSMISSION DEVELOPMENT PLAN
voltage power lines operating at 120/240 grid transmission system) – refers to volts (generally located in alleys or in the ability of the interconnected easements) which are used to collect the transmission system to withstand loads of a number of individual customers sudden disturbances such as electric in a city block for supply from an short circuits or unanticipated loss of individual transformer. The power transfer system transmission elements without on individual 25,000 volt power lines in causing extended loss of load or rural areas is typically in the order of uncontrolled shut down of the 3,000 kW. However, the loading on power system, individual 25,000 volt power lines that • reliability- reliability is an all supply highly concentrated loads in urban encompassing description. As used by areas can exceed 8,000 kW. NERC, it includes an assessment of the adequacy and security of the transmission system. SaskPower uses 3.0 Transmission System the term reliability as a term distinct Performance Criteria from adequacy and security, when discussing the performance of the sub- SaskPower plans additions to its grid transmission system where the NERC transmission and sub-transmission concepts of system security do not facilities in an attempt to ensure that they apply. When assessing the reliability will continue to operate in a satisfactory of the sub-transmission system, manner in the future as the requirements SaskPower’s objective is to ensure that imposed on the system changes. the frequency and duration of power SaskPower uses a number of criteria to outages to customers is kept to an assess what constitutes satisfactory acceptable level, and performance. These criteria can be placed • cost effectiveness - ensuring that the into the following general categories: total annual cost of the transmission • adequacy - the ability of the electric system (including capital costs, system, with all facilities in service, to transmission loss costs and supply the aggregate electrical demand maintenance costs) is minimized. and energy requirements of customers at all times, while maintaining Adequacy and security criteria receive adequate system voltages and without equivalent consideration when assessing incurring apparatus overloads, and the need for grid transmission facility taking into account scheduled and additions. As noted, security criteria are reasonably expected unscheduled not applicable to the sub-transmission outages of system elements, system. Adequacy and reliability are the most important criteria in assessing the • security (applies to the interconnected 10-YEAR TRANSMISSION DEVELOPMENT PLAN 6
Figure #1 2002 Grid Transmission Facilities
\ ".
\
110· 108" 104" 8 HYCFIO ""NE"ATr
Figure #2 2002 72kV Subtransmission Facilities
110' lOB' lOS' 104' 102" 100' "C· f\:l~~===-;=IOC.
00·
LAKE
110' lOB' B Hi1JfKJ OCNERATING SIT!'
• THERI.IAL GENERATING SIT!' 72 'V ,." ..... S.. SSIIlN UNES [;iii NT!'RMAL GOIoIIlUSTW OCNERATtJG SIT!' J, \ TD\~T\\QRK.J)E\I[LOf>I..IENT\721:V 72kV SU8TRANSMISSION""" FACILITIES 10-YEAR TRANSMISSION DEVELOPMENT PLAN 8
need for sub-transmission facilities. Cost withstand the increasing internal effectiveness by itself rarely becomes a temperature rise resulting from increased driver for new transmission facilities. loading (elevated temperatures lead to Cost criteria come in to play when accelerated aging of insulation and determining such items as the most eventual insulation breakdown). In the effective conductor size for a transmission case of transmission lines, ratings may line, or when evaluating the merits of one also be set by the available clearance particular reinforcement scheme against below the energized conductor. As the another scheme. level of power flow on a transmission line increases, the conductor heats up. The 3.1 Transmission System Adequacy thermal expansion resulting from the The flow of electric power over higher operating temperature of the transmission lines generally causes the conductor causes it to lengthen, with the voltage at the receiving end of the power result that it droops more between support line to be lower than the voltage at the structures. This results in a reduction in sending end of the power line. the clearance between the conductor and SaskPower’s objective is to maintain the ground. The CSA establishes standards level of the voltage at delivery points high for the minimum acceptable enough such that it is able to meet the ground clearance. Canadian Standard Association (CSA) standard Preferred Voltage Levels for AC As power flow increases on transmission Systems 0 to 50,000 V (CAN3-C235-83). facilities, it may be necessary to upgrade This generally requires that the voltage at or add additional facilities in order to delivery points on the sub-transmission maintain adequate voltages and maintain system not be allowed to drop below 90% equipment within acceptable of nominal voltage. Voltages at source loading levels. points on the grid transmission system 3.2 Transmission System Security normally operate at nominal or greater because of transmission security SaskPower’s grid transmission system considerations and a desire to minimize experiences regular disturbances, which losses on the transmission system. can cause a forced outage of a transmission line or other transmission In addition to maintaining adequate components. The most significant cause voltages, it is also SaskPower’s objective of transmission line forced outages is to ensure that its facilities are capable of adverse weather (greater than 45%.)5 delivering power without exceeding the SaskPower designs its interconnected grid ratings of the transmission equipment. system so that it can tolerate a single Equipment limits are normally determined element outage (a single grid line or grid by the ability of the equipment to transformer) without seriously degrading
5 Annual average for the 10-year period from 1992-2001 9 10-YEAR TRANSMISSION DEVELOPMENT PLAN
customer service reliability. The factors ‘1A S2 The interconnected transmission SaskPower takes into consideration in systems shall be planned, evaluating the security of its transmission designed, and constructed such grid are the ability to withstand the loss of that the network can be any single transmission element without operated to supply projected causing: customer demands and contracted firm (non-recallable • cascade tripping of any remaining reserved) transmission services, transmission lines, at all demand levels, under the • cascade tripping of generator units due conditions of the contingencies to real or reactive power overloads, as defined in Category B of Table I (attached).’ • the transmission system to become dynamically unstable, or ‘The transmission systems also shall be capable of • incurring system voltage collapse. accommodating planned bulk electric equipment maintenance The security criteria for SaskPower’s grid outages and continuing to transmission facilities are largely operate within thermal, voltage, consistent with the NERC system and stability limits under the adequacy and security requirements. conditions of the contingencies NERC’s planning standards for system as defined in Category B of adequacy and security are as follows 6: Table I (attached).’ ‘1A S1. The interconnected transmission systems shall be planned, ‘1A S3. The interconnected transmission designed, and constructed such systems shall be planned, that with all transmission designed, and constructed such facilities in service and with that the network can be normal (pre-contingency) operated to supply projected operating procedures in effect, customer demands and the network can deliver contracted firm (non-recallable generator unit output to meet reserved) transmission services, projected customer demands at all demand levels, under the and provide contracted firm conditions of the contingencies (non-recallable reserved) as defined in Category C of transmission services, at all Table I (attached). The demand levels, under the controlled interruption of conditions defined in Category customer demand, the planned A of Table I (attached).’ removal of generators, or the curtailment of firm (non-
6 NERC Planning Standards document, September 1997, page 9 -10 10-YEAR TRANSMISSION DEVELOPMENT PLAN 10
recallable reserved) power transmission system is only five per year. transfers may be necessary to Because of their low probability, meet this standard.’ SaskPower has not explicitly designed its transmission system to provide service ‘The transmission systems also without interruption following a three- shall be capable of phase fault. As a result, not all the accommodating planned bulk elements of SaskPower’s existing electric equipment maintenance transmission system are compliant with outages and continuing to the NERC category B requirement for operate within thermal, voltage, and stability limits under the withstanding three phase faults. conditions of the contingencies SaskPower is generally planning its future as defined in Category C of additions to the transmission system such Table I (attached).’ that they follow the NERC planning standards for adequacy. SaskPower is 1A S4. The interconnected transmission currently reviewing options for systems shall be evaluated for compliance on existing facilities. the risks and consequences of a number of each of the extreme SaskPower is generally in compliance contingencies that are listed with the performance requirements of under Category D of Table I NERC standard 1A S3; however, it does (attached). have some non-conformance issues with respect to the systems it uses for In NERC standard IA S2, Category B controlling the loss of load. conditions include the loss of a single element such as a generator, transmission 3.3 Transmission System Reliability circuit or transformer. The NERC As noted, SaskPower uses the term standard 1A S2 criteria requires that the reliability, as a term distinct from loss of this element be withstood whether adequacy and security, when discussing it be induced by a single line to ground the performance of the sub-transmission fault or a three-phase line to ground fault. system. The concepts of system security The significance of this is that the three- espoused by the NERC planning phase fault imposes a much more severe standards, which require the ability to disturbance on the power system than the maintain service following the loss of one single line to ground fault; however, three- or two elements, do not apply to the sub- phase faults are extremely rare. The 10- transmission system. The majority of the year average for all grid transmission line sub-transmission system consists of serial forced outages is 2117 per year for elements with only one point of supply. SaskPower’s system. However, the There are no parallel paths connected over average for three-phase faults on its grid which power can flow in the event that
7 For the 10-year period from 1992 to 2001 11 10-YEAR TRANSMISSION DEVELOPMENT PLAN
one of the serial elements fails. times can be long because of the length of the system, complexity of the system, and When assessing the reliability of the sub- access issues in the event of permanent transmission system, SaskPower’s equipment damage. These power lines objective is to ensure that the frequency were built for the express purpose of and duration of power outages to providing electrical service to northern customers is kept to an acceptable level. mine sites and the limitations imposed by SaskPower does not currently set specific the location of the facilities was targets for sub-transmission system outage recognized in the supply arrangements that frequency and duration, in part because were negotiated with the customers. outage frequency is affected by the length of the sub-transmission line (longer lines 3.4 Cost Effectiveness of the will be have a greater possibility of Transmission System weather induced outages due to their The flow of electrical power over a greater exposure). The 10-year average transmission element results in parasitic for SaskPower’s average interruption power and energy loss due to the frequency per sub transmission line, due to resistance of the element. This energy all causes, is 4.88 interruptions per year. loss manifests itself as heating of the The 10-year average annual interruption transmission element. At peak load, the duration per sub-transmission line is 1289 parasitic losses on SaskPower’s grid minutes per year. When particular lines transmission system use up about 5% of have significant deviation from the the power that is delivered from average, SaskPower assesses remedial generation sources. action, such as it is carrying out on the PA8 and ML3 72 kV sub- Parasitic losses can be reduced by adding transmission lines. additional transmission circuits to reduce the magnitude of flows on individual The reliability of the transmission lines elements, raising the operating voltage of that extend north from the Island Falls transmission lines, or increasing the size of Switching Station to Rabbit Lake and transmission conductors. Uranium City are not assessed on the same basis as southern sub-transmission The reduced energy losses represent a cost lines. These power lines are built in saving to SaskPower since less fuel is remote areas, through the Canadian required to serve the loads. Also, the Shield, which does not permit effective reduction in losses results in a lower overall grounding and lightning protection on the system instantaneous power demand which power lines. As a result, these power lines reduces the amount of generation capacity experience a very high frequency of that is required to serve the load, which lightning induced outages. Restoration represents a further capital cost saving.
8 For the 10-year period from 1992-2001 9 For the 10-year period from 1992-2001 10-YEAR TRANSMISSION DEVELOPMENT PLAN 12
4.0 Major Drivers of Need for New A general discussion of each of these Transmission Facilities drivers follows. Additions to the transmission system are 4.1 Load Growth normally required because of an expected SaskPower generates two load forecasts; violation of SaskPower’s performance the Corporate load forecast and the criteria. Violation of system adequacy, in Regional load forecast. The Corporate particular the ability to maintain forecast provides an end-use based satisfactory voltage, is the performance forecast of the total annual domestic criteria that most often drives requirements electrical energy requirements that for new transmission or sub-transmission SaskPower will have to supply for the next facilities. SaskPower checks for violations 10 years. The Regional Load Forecast of its performance criteria using analytical provides a breakdown of the expected computer models. Violations of the annual peak demand 10 and annual energy performance criteria predicted by the usage at every major delivery point models usually results from forecast (switching station or large industrial increases in power flow over transmission customer) that is connected to or sub-transmission facilities. The major SaskPower’s transmission system. drivers contributing to increased power 4.1.1 Corporate 10-Year Load Forecast flows include: The load forecast is developed on an • Growth of general provincial load, annual basis in order to determine the • Connection of new generation, energy requirements and peak demand for SaskPower’s customers in the province of • Connection of new large industrial Saskatchewan. This forecast forms the loads, and basis for capacity additions, maintenance schedules, power plant operations, fuel • Increased utilization of the transmission system as a result of budgets, operation budgets and SaskPower’s Open Access Corporate revenue. Transmission Tariff The 2001 Load Forecast was prepared for Other factors, which are unrelated to the years 2001-2011 using inputs from the increased power transfers, but may 2001 SaskPower Economic Forecast, result in a requirement for new historical energy sales, and individual transmission include: customer forecasts. This forecast is a compilation of energy sales forecasts for • Aging infrastructure, and Key Account, Oilfield, Commercial, • Compliance with the NERC Residential, Farm, and Reseller customers. reliability standards The forecast also includes projections for
10 DEMAND – The rate at which electrical energy is delivered to or used by a system or part of a system at a given instant or averaged over any designated interval of time. Demand is generally expressed in kilowatts (kW) or megawatts (MW). The term electrical power is used interchangeably with electrical demand. 13 10-YEAR TRANSMISSION DEVELOPMENT PLAN
internal corporate use, system losses and province as a whole. The Corporate unaccounted energy use, and non-grid forecast is not particularly useful for energy use. forecasting future requirements for the transmission system since it does not Weather can have a significant impact on identify the location of load growth within the amount of electricity used by the province. As an example, the Residential, Commercial, Farm, and Corporate forecast will provide an Reseller customers. Due to this weather estimate of total oilfield load growth sensitivity, average daily weather within the province, but will not be conditions for the last 30 years are specific as to which oilfields will assumed throughout the forecast horizon. experience the growth. To address this The 2001 Load Forecast predicts an deficiency, SaskPower creates a separate increase in the total system energy load forecast report called the Regional requirements of 3,082 GW.h11 over the Load Forecast. next 10 years. This increase from 18,179 The Regional Load Forecast is developed GW.h in 2001 to 21,261 GW.h in 2011 on an annual basis in order to determine translates into an average annual growth the energy requirements and peak demand rate of 1.6% (Figure #3, pg. 14). The for SaskPower’s major delivery points on historical average annual growth rate was the transmission system. The Regional 3.2% for the years 1990-2000. Load Forecast provides the expected The system peak load is expected to annual peak demand and annual energy increase by 475 MW from 2,882 MW12 in usage at every major delivery point 2001 to 3,357 MW in 2011(Figure #4, (switching station or large industrial pg. 14). This equates to an average annual customer) that is connected to growth rate of 1.5%. The demand at time SaskPower’s transmission system. The of system peak grew at an average annual forecast for each delivery point has been rate of 2.0% for the years 1990-2000. developed based on the historical relationship between the peak demand at A report documenting the methodology the delivery point and the aggregate behind the derivation of the forecast data, demand for the whole system. the assumptions and the forecast results Information about the historical for the 2001-2011 timeframe, is available relationship between delivery point from SaskPower on request. demands and the system demand is derived from SaskPower’s real time 4.1.2 Regional Load Forecast monitoring system for the grid and its The Corporate forecast is useful for interval metering system for grid making decisions about future energy and connected customers. capacity supply requirements for the
11 GW.h means Giga watt-hours. Electrical energy is measured in units of watt-hours. A giga watt-hour is 1,000,000,000 watt-hours. 12 MW is an abbreviation meaning millions of watts. 10-YEAR TRANSMISSION DEVELOPMENT PLAN 14
Figure #3
Total Energy Requirements Forecast GW.h
22,000
20,000
18,000
16,000 Actual Requirements 14,000 Forecast Requirements
12,000 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Energy Requirements = Energy Sales + Losses
Figure #4 System Peak Load Forecast MW
3,500
3,000
2,500
2,000 Actual Peak
Forecast Peak
1,500 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 15 10-YEAR TRANSMISSION DEVELOPMENT PLAN
The Regional Forecast provides an or reverse flows on existing indication as to where the load increases transmission facilities. are occurring. An increase in the peak demand is normally the biggest factor in Integration of wind power generation driving the requirement for reinforcement projects presents an unusual problem. of the transmission system. This forecast Individual wind turbines tend to be less forms the primary basis for determining than 1,000 kW in size; however, because the requirements for reinforcing the the wind resource is very site specific, the transmission system to supply increasing practice is to develop large clusters of customer demand at the various bulk machines at individual sites or ‘wind electric system delivery points on power projects’. Integration of these wind SaskPower’s transmission system. power projects usually requires the construction of some transmission or sub- 4.2 Connection of New Generation transmission facilities. This comment also New generation facilities require applies to so called smaller ‘distribution interconnection with SaskPower’s system connected generation’ technologies if a if the generation is going to be used to large number of these generation units are supply energy to SaskPower customers or clustered at a particular location. for export out of the province. In general, For details on the technical requirements generators up to about 1,000 kW in size associated with the connection of can be incorporated into the distribution generation to SaskPower’s system, refer to system. Any generators above 5,000 kW the documents ‘Non-Utility Generation will almost certainly require connection Interconnection Requirements at Voltages into the sub-transmission or 25 kV and Below’ and ‘Non-Utility transmission system. Generation Interconnection Requirements Connection of major generation at Voltages 72 kV and Above’ which are developments such as a hydro project or a available at www.saskpower.com. coal fired generation project, which are SaskPower posts an interconnection queue typically remote from load centers, on the public portion of its OASIS13 web requires the addition of significant site (http://mapp.oasis.mapp.org/document transmission facilities. Generation s/SPC/spc_info_public.htm). The purpose developments, which are based around co- of the interconnection queue is to facilitate generation at existing industrial loads, can the non discrimination provisions in quite often be integrated with minimal SaskPower’s Standard of Conduct14 by amounts of transmission. This is making public all requests that have been especially true if the load sites are close to made for a study to evaluate an major provincial load centers, or if the interconnection with SaskPower’s effect of the generation is to reduce,
13 OASIS - OASIS stands for Open Access Same Time Information System and is the internet based system which provides information related to the provision of transmission service under SaskPower’s Open Access Transmission Tariff (OATT) along with providing the means for eligible customers to submit requests for transmission service under the SaskPower’s OATT. 10-YEAR TRANSMISSION DEVELOPMENT PLAN 16
transmission system. Interconnection province for domestic supply. Examples study requests are typically for generators, of projects which have or are being built but may also be submitted by entities that to supply SaskPower load but which are are requesting the interconnection of not under the direct ownership of transmission facilities with SaskPower’s SaskPower are the Meridian Cogeneration system. The queue lists the date of the Project at Lloydminster, the SunBridge request, the size of the interconnection, the Wind Power Project near Gull Lake and location of the interconnection and the the Cory Cogeneration Station status of the request. Due to near Saskatoon. confidentiality issues, the queue does not identify the requestor; however, all SaskPower is no longer acting as the only requests, including those submitted by project developer in the province, and as SaskPower for the supply of domestic such, it does not have an exclusive view load, and requests submitted by on the location and associated SaskPower’s affiliates NorthPoint Energy transmission for all future generation Solutions and SaskPower International, are developments in the province. Potential listed in the queue. As of 2002 March 31, generation developers will take into there were no requests for studies for consideration the location of resources, be interconnection of new generation projects it the availability of suitable hosts for with SaskPower’s transmission system. economical cogeneration projects, or optimal wind power regimes. The amount 4.2.1 New SaskPower Generation Developments that SaskPower is prepared to pay a Prior to 1990, SaskPower did all of its potential developer for the supply of own planning and development in terms of electrical energy is influenced by the cost new generation resources required to of integrating that resource into supply increasing domestic load. Given SaskPower’s system. Developers may this approach to supply planning, select sites with the objective of SaskPower was able to develop a long- minimizing the amount or cost of term view on where all major generation transmission required to integrate a projects and associated transmission particular generator site. SaskPower facilities were going to be located. In the currently posts information (internal mid-1990s, SaskPower changed its resource penalty factors) on its OASIS approach to supply development. internet web site which allows potential SaskPower still continues planning in developers to assess the impact of any terms of identifying the quantity and potential generation site on transmission timing for new generation developments, system losses. but it no longer acts as the exclusive At present, SaskPower has two new developer of generation projects in the supply sources, the Cory Non-utility co-
14 Copies of the Standard of Conduct are available on SaskPower’s OASIS web site 17 10-YEAR TRANSMISSION DEVELOPMENT PLAN
generation project and Queen Elizabeth facilities to connect the load is higher. Power Station Unit #1 repowering project. Depending on the loads peak demand and Both will be in service by year-end 2002. annual energy requirements, the rate and As a result, SaskPower’s most recent loss savings may or may not pay for the review of its resource requirements has higher facilities cost. determined that major new supply developments for domestic load are not 4.4 SaskPower’s Open Access expected before 2008. This date is based Transmission Tariff (OATT) upon SaskPower’s current load forecast In November of 2001, SaskPower posted and is subject to revisions in the load an Open Access Transmission forecast. In addition, SaskPower may be Tariff (OATT). engaging in some small-scale generation Under the provisions of SaskPower’s developments prior to 2008 to facilitate OATT, eligible transmission customers can specific programs such as GreenPower. request transmission service from 4.3 Connection of New Major Loads SaskPower which may require the Depending on the characteristics of the construction of new transmission or sub- load, it may be possible to accommodate transmission facilities in Saskatchewan. an individual customer load as large as This transmission service may, or may not 1,000 to 5,000 kW on the distribution be associated with the supply of load system, if it is located in or near urban located within Saskatchewan. Under the areas. Without special consideration, it is provisions of its tariff, SaskPower generally not possible to supply a load this provides equal treatment and consideration large via the distribution system in rural for all transmission whether it is being areas. New loads greater that 5,000 kW built by SaskPower for the supply of will almost certainly require connection to domestic load, or to satisfy a service the sub-transmission system or the request under the provisions of transmission system. The choice of SaskPower’s OATT. connection to the sub-transmission system Traditionally, generation projects were or the transmission system will depend on developed exclusively by SaskPower for the proximity of existing SaskPower the purpose of supplying domestic load. facilities, the size (peak demand) of the Under SaskPower’s Open Access load, characteristics of the load and the Transmission Tariff (OATT), proponents economics of the overall project. The interested in the development of latter factor tends to balance the fact that generation projects for the purpose of the higher transmission voltages tend to supplying energy to entities other than have lower transmission losses and lower SaskPower can request connection to the transmission rates, but the cost for the transmission system and service over 10-YEAR TRANSMISSION DEVELOPMENT PLAN 18
SaskPower’s transmission system to 13,000 circuit kilometers of transmission deliver that energy to the desired location. and sub-transmission power lines in SaskPower may be required to build service. In 1972, SaskPower had transmission to integrate these projects, or approximately 9,100 kilometers of to provide the transmission service transmission and sub-transmission power required to facilitate the ultimate delivery line in service. Without consideration of of this energy. These projects may be the small amount of sub-transmission driven by market conditions for electrical facilities that have been removed from energy outside of Saskatchewan. Due to service since 1972, approximately 70% of the volatility of some of these markets, SaskPower’s transmission and sub- project proponents tend to defer decisions transmission facilities are in excess of 30 on these projects to the last possible years of age. SaskPower has a large moment. As SaskPower receives requests number of 138 kV transmission lines in for new interconnections to its service that date back to construction in transmission system, these requests are the 1950s, which is the same timeframe added to the Interconnection Study Queue, for the construction of the majority of which is posted on the public portion of SaskPower’s 72 kV sub- SaskPower’s OASIS web site. transmission system.
SaskPower has received a number of For accounting purposes, SaskPower requests for transmission service under the currently uses a composite expected asset provisions of its tariff. Some of these life of 45 years for transmission line service requests exceed the transmission assets. The expected asset life, and the system transfer limits that are currently current age of the majority of SaskPower’s posted on SaskPower’s OASIS site. transmission line assets would suggest that Analytical studies are currently under way SaskPower has an emerging issue to assess the requirements associated with associated with the replacement of aging servicing these requests. The first group transmission lines. The reality is that of studies has yet to be completed, and as SaskPower engages in a program of such, it is not known whether any continual monitoring of the condition of transmission facilities will have to be its transmission line assets. In the case of added to service the requests. In addition, wood pole construction, deterioration of the transmission customers have to agree the poles due to rot at the ground line is to the terms and conditions of the normally the biggest problem. Where transmission service before any facilities SaskPower detects pole deterioration, it would be built. carries out stubbing or replacement of the failing poles. SaskPower also checks line 4.5 Aging Infrastructure hardware for integrity and tightness. SaskPower currently has slightly over 19 10-YEAR TRANSMISSION DEVELOPMENT PLAN
SaskPower’s older transmission lines have ML3, that were built with insulators reached the point where they require known as pin-type insulators. These regular inspection and a higher level of pin–type insulators have a design flaw maintenance than a new transmission line. called cement growth, which leads to the However, the cost of this annual development of cracks in the porcelain inspection and maintenance is well below insulator skirt and its subsequent failure. the cost of replacement. Due to the In the case of PA8 and ML3, because the inspection and maintenance program, power lines are also running into problems SaskPower’s older transmission lines are with voltage adequacy, a decision has been not approaching the end of their useful life made to retire the lines and replace them based upon their physical condition. with new facilities. Since 1987, all new major transmission and sub-transmission projects have been 4.6 Compliance with NERC Reliability constructed with tubular steel instead of Standards wood. To date, the tubular steel design Since its formation in 1968, the North has proven to require very low levels American Electric Reliability Council of maintenance. (NERC) has operated as a voluntary organization to promote bulk electric Based upon the transmission line system (transmission system) reliability maintenance practices that SaskPower has and security. In promoting electric system engaged in, and the new steel designs that reliability and security, one of NERC’s SaskPower has adopted, it is anticipated activities is the on-going development of that there will be very little new operating policies and planning standards transmission line construction required to to ensure bulk electric system reliability. address replacement of existing NERC has also been active in developing transmission lines solely due to age related a process for measuring compliance with deterioration. There may be some cases its operating policies and standards where some older transmission lines are through the Regional Councils that exceeding their rating due to increased constitute its membership. loading, and a decision has been made to replace them; however, this is an issue of NERC’s mandate for ensuring security and transmission adequacy, not age. reliability does not extend to setting standards for the sub-transmission system There are a couple of locations where or the distribution system. Compliance transmission line replacement is in part with the operating policies and planning being precipitated by facility age and standards is not currently enforced through condition. There are a number of sub- any federal or provincial regulations; transmission lines in north central however, the policies and standards are to Saskatchewan, among them PA8 and some extent viewed as ‘good utility 10-YEAR TRANSMISSION DEVELOPMENT PLAN 20
practice’. Some of the regional requirements of NERC has not. transmission entities, which have SaskPower has yet to make a decision as established contractual agreements with to whether it is going to adopt full their members, make compliance with the compliance with the NERC standards. NERC policies and standards a This decision will in part be driven by the condition of membership, which is business issues associated with being part established through the contractual of the overall interconnected mid- membership agreements. continent transmission system of the United States and Canada, along with the SaskPower is participating in the cost of achieving full compliance. assessment of compliance with the NERC policies and standards being carried out by 5.0 Evaluation of Requirements for the Mid-continent Area Power Pool Transmission System (MAPP), the Regional Council with which SaskPower is associated. Most of the Developments compliance issues that have been The evaluation of the requirement for identified are associated with transmission system reinforcement has documentation deficiencies that been carried out by study areas within the SaskPower is working to address. province. The study areas are shown on However, the NERC standards set out Figure #5, (pg 21). The projects that fall requirements that are more onerous than within each study area are discussed. The SaskPower’s current performance criteria status of each of the projects is indicated when it comes to withstanding certain on the following basis: types of forced outages on transmission • The project has been approved by equipment. SaskPower is aware that it SaskPower for construction (external may have some compliance issues related approvals may still be pending), to the performance of the transmission system following the loss of particular • The project is in SaskPower’s five-year components of its grid transmission capital plan, system. These compliance issues are discussed in more detail in section 5.3. • It is anticipated that the project could occur within the next five years, but Addressing these performance deficiencies the project is not currently in may require the construction of new SaskPower’s five-year capital plan, and transmission facilities. • It is anticipated that the project could Grid transmission reliability and security occur within the next five to 10 years. have always been historical drivers of transmission need in Saskatchewan. Appendix B provides a listing of all the However, compliance with the specific transmission projects that have been 21 10-YEAR TRANSMISSION DEVELOPMENT PLAN
Figure #5 Provincial Study Areas
PELICAN NARROWS - DESCHAMBAULT LAKE MEADOW LAKE STUDY AREA STUDY AREA
PRINCE ALBERT - LA RONGE STUDY AREA
KINDERSLEY - KERROBERT - UNI TY STUDY AREA 10-YEAR TRANSMISSION DEVELOPMENT PLAN 22
included in SaskPower’s five-year capital period. This rapid growth has resulted in plan. The five-year spending plan is an ongoing problem associated with updated quarterly. The plan attached as maintaining acceptable voltage at Appendix B was the most current version La Ronge. To date, this problem has been when this document was being prepared. handled by adding 72 kV voltage In the interest of keeping the list relevant, regulators15 to the line and installing not all transmission projects in capacitors at the various substations along SaskPower’s five-year capital plan are the line. There are presently five, 72 kV listed in Appendix B. Projects that involve voltage regulators in the PA8 power line. the communication, protection or control facilities associated with SaskPower’s In addition to the voltage problems, as transmission system are not listed because noted in Section 4.5, there have been they generally do not have any impact on insulator problems with sections of the the public. Projects that have expenditures PA8 power line, which compromise the over the five year period that total less reliability of service to La Ronge. The than $50,000 have also been deleted from PA8 power line structures have also the list in the interests of brevity. experienced pole failures as a result of damage to the poles caused by carpenter 5.1 The Prince Albert and La Ronge ants and woodpeckers. Study Area The current solution of continuing to add 5.1.1 Reinforcement of the Supply to La Ronge 72 kV voltage regulators to the PA8 power La Ronge, and most of the communities line has led to deteriorating service quality north of Prince Albert, are provided with for the customers supplied from PA8, the electrical service via the PA8 power line. potential for customer equipment damage, PA8 is a 256 km long, 72 kV power line and increasing costs for SaskPower and its fed from the Prince Albert Switching customers. As the number of series Station. It supplies power to four voltage regulators in the line increases, distribution substations north of Prince coordination of the operation of the Albert; Spruce Home, Timber Cove, individual voltage regulators has also Weyakwin and La Ronge. The majority of become increasingly difficult. As a result the load on the line (about 65%) is at the of the coordination problems, customers La Ronge Substation located at the north experience increased voltage fluctuations end of the line. (shows up as flickering of lights). At peak load times, customers could ultimately The annual growth in peak load demand at experience extended periods of alternately La Ronge has averaged 5.8% since 1981, high and low voltage leading to the which is well above the provincial average potential for improper operation of, or of approximately 2.4% for the same damage to, customer equipment.
15 Voltage regulators are devices, connected in series with the power line, which boost the operating voltage along the power line. The purpose of the voltage regulator is to attempt to compensate for the voltage drop in a power line caused by the flow of line current through the impedance of the power line. 23 10-YEAR TRANSMISSION DEVELOPMENT PLAN
Figure #6 Prince Albert and LaRonge Study Area
Lac La Ronge Provincial Park
La Ronge
Air Ronge
Weyakwin
Nipawin Provincial Park Timber Bay
Prince Albert Waskesiu National Park Lake
Candle Lake
Emma Lake Christopher Lake
Meath Park Spruce Home
Prince Albert
Melfort
Phase I Reinforcement Phase II Reinforcement Existing line 10-YEAR TRANSMISSION DEVELOPMENT PLAN 24
Because of the size of wire utilized on Cove) is being studied. The tentative in- PA8, the existing power line incurs very service date for stage three is 2004. The high transmission line losses. At the time stage three project is in SaskPower’s five- of peak load, approximately 35% of the year capital plan. power that is supplied into the line goes towards the supply of losses. These losses The larger conductor and higher operating cost SaskPower and its customers voltage will address the voltage control approximately $1.5 million in 1999. The and transmission loss problems on PA8. annual cost of supplying these losses will The use of steel poles structures with increase as the load supplied from the modern composite insulators will improve line increases. service reliability. 5.1.2 Transmission Reinforcement for the Prince SaskPower’s plan for reinforcement of La Albert Area Ronge is based upon a multi-stage The loads in the immediate Prince Albert replacement / reinforcement of the PA8 area, along with communities north (up to power line. The first stage of La Ronge) and northeast of Prince Albert, reinforcement provides for replacement of are supplied from a number of 72 kV and the portion of PA8 between Prince Albert 138 kV distribution substations, which are and Timber Cove with a power line all supplied from the Prince Albert equipped with larger conductor and Switching Station. The Prince Albert insulated for future 138 kV operation. Switching Station, which is located just This project has been approved and is in southwest of Prince Albert is, in turn, the process of being completed. The new supplied via a double circuit 138 kV section of power line will continue to transmission line (designated B1P and operate at 72 kV until 2003. In 2003, the B2P) from the Beatty Switching Station second stage of the reinforcement plan located west of Melfort. Based on current provides for conversion of the new line to forecast peak demand growth in the Prince 138 kV operation to supply a new 138-72 Albert area, reinforcement may be kV switching station to be built at Timber required by 2010 because of an inability to Cove. This project has been approved for maintain satisfactory voltages at the Prince construction. After completion of stage Albert Switching Station. However, the two, the portion of PA8 from Timber Cove possibility of new industrial sites or to La Ronge will continue to operate at expansion at existing industrial sites in the 72 kV. area will accelerate this requirement. It is A third stage of reinforcement, consisting expected that this reinforcement would be of rebuilding the section of PA8 between provided via a new 230 kV transmission Timber Cove and Tracy Road line extending between the Prince Albert (approximately 74 km north of Timber Switching Station load supply point and 25 10-YEAR TRANSMISSION DEVELOPMENT PLAN
the Beatty Switching Station. ongoing problem associated with maintaining acceptable voltage at the It is anticipated that reinforcement could communities along the line. To date, this be required within the next five to problem has been handled by adding 10 years. 72 kV voltage regulators to the line, There has been some discussion of the rebuilding portions of the line and possibility of additional or new non-utility installing capacitors at the various generation in the Prince Albert area. The substations along the line. There are addition of a moderate amount of presently two 72 kV voltage regulators in generation in the Prince Albert area could the power line. possibly defer the need for system In addition to the voltage control reinforcement. However, a very large problems, as noted in Section 4.5, there generation project could accelerate the have been insulator problems on sections requirement for reinforcement to ensure a of the ML3 line, which compromise the secure connection of the generation to the reliability of service for the customers provincial grid. supplied from ML3. The ML3 line 5.2 The Meadow Lake Study Area structures have also experienced pole failures as a result of damage to the poles 5.2.1 Reinforcement of the Supply to the Area caused by carpenter ants. North of Meadow Lake The communities north of Meadow Lake Due to the size of wire utilized on ML3, are provided with electrical service via the the existing power line incurs very high ML3 power line. ML3 is a 300 km long, transmission line energy losses. At the 72 kV power line fed from the Meadow time of peak load, approximately 23% of Lake Switching Station. It supplies power the power that is supplied into the line to five distribution substations north of goes towards the supply of losses. These Meadow Lake; Dore Lake, Beauval, Ile a losses cost SaskPower and our customers la Crosse, Buffalo Narrows and Turnor approximately $1.2 million in 2001. The Lake, as well as to NorSask Forest annual cost of supplying these losses will Products, located just northeast of the increase as the load supplied from the town of Meadow Lake. line increases.
The annual growth in peak demand SaskPower’s reinforcement plan for the associated with the load on ML3 has ML3 feeder is a staged development averaged 4% since 1981, which is well similar to the La Ronge reinforcement above the provincial average of plan. SaskPower has been replacing approximately 2.4% for the same period. sections of ML3 with new power line This rapid growth has resulted in an equipped with much larger conductors, 10-YEAR TRANSMISSION DEVELOPMENT PLAN 26
Figure #7 Meadow Lake Study Area
La Loche
Turnor Lake LEGEND 25 kV Line 72 kV Line
TURNOR LAKE 72-25 kV SUBSTATION
Dillon Patuanak
Buffalo N BUFFALO NARROWS 72-25 kV SUBSTATION
ILE A LA CROSSE 72- 25 kV SUBSTATION
LITTLE AMYOT 72 kV Pine House VOLTAGE REGULATOR Ile a la Crosse LITTLE AMYOT LAKE 72-25 kV SUBSTATION
BEAUVAL 72-25 kV SUBSTATION
DORE LAKE SUBSTATION Dore Lake
BEATTY LAKE 72 kV VOLTAGE RGULATOR MEADOW LAKE SWITCHING STATION
Meadow Lake Sawmill
ML3 72 kV FEEDER 27 10-YEAR TRANSMISSION DEVELOPMENT PLAN
and insulated to allow future conversion to been approved. The fourth stage of 138 kV operation. In March of 1999, the replacement of ML3 is in SaskPower’s 37 km section of ML3 directly north of five-year capital plan. Conversion of ML3 Beatty Lake was rebuilt and placed into to 138 kV operation and extension of service. In April of 2002 the replacement 72 kV to La Loche are anticipated to of the 30 km section of ML3 directly occur within the next five to 10 years. south of Beauval will be completed. 5.2.2 Interconnection of a New OSB Plant Near Several methods of addressing the future Meadow Lake growth in demand, line loss and reliability To provide process power to the proposed issues have been explored. The results of new Tolko Oriented Strand Board (OSB) the analyses carried out by SaskPower plant, near Meadow Lake, a new 7.2km, indicated that the continued multi-stage 230 kV transmission line will be required. replacement of the ML3 powerline is the This line will tap off of the existing BR11 preferred reinforcement option. The third 230 kV transmission line. By tapping off stage of reinforcement provides for the of an existing line, the required new replacement of the 26 km section of ML3 transmission line length is minimized. from Green Lake to Beatty Lake in late The OSB plant is expected to be in service 2002. The fourth stage reinforcement by the end of 2003. The project is in provides for replacement of the 22 km SaskPower’s five-year capital plan. section of ML3 from Green Lake, west Preliminary engineering and line routing towards Meadow Lake by 2004. Further work has been approved. reinforcement or extension of the ML3 line will depend on the load growth in the 5.2.3 Transmission Grid Reinforcement for the area, the performance of the existing line Meadow Lake Area and the operating limitations of the The consumer load in the immediate existing system. Current indications are Meadow Lake area, and the load for all of that the next steps in reinforcement may the communities north of Meadow Lake, consist of the conversion of the Meadow is supplied from a number of 72 kV Lake to Beauval section of ML3 to distribution substations, which are all 138 kV operation to supply a new 138- supplied from the Meadow Lake 72 kV switching station to be located near Switching Station. The Meadow Lake Beauval. In addition, the significant Switching Station is, in turn, supplied via increase in consumer load at La Loche a single 138 kV transmission line from the may require the extension of ML3 from its Brada Switching Station near North current northern terminus of Turnor Lake Battleford. The Meadow Lake Switching to La Loche. Station is also connected to the Meadow Lake Power Station, which has a single 46 The third stage of replacement of ML3 has 10-YEAR TRANSMISSION DEVELOPMENT PLAN 28
MW gas turbine generator. SaskPower is evaluating a number of options for addressing the 138-72 kV As noted in Section 5, SaskPower plans transformer capacity problem and the facilities so that we can continue to supply voltage support problem at Meadow Lake. the entire load in the event of the failure of SaskPower could address the voltage a single piece of equipment. In the case of support problem by installing reactive the supply to Meadow Lake, the critical compensation equipment in the Meadow element for supply reliability is the single Lake Switching Station, or reinforcing the 138-72 kV transformer at the Meadow Meadow Lake Switching Station via Lake Switching Station, which serves the connection to the 230 kV transmission line entire load supplied from the Switching (BR11) from the Brada Switching Station Station. SaskPower’s plans were that in which supplies the Millar Western Pulp the event of failure of this transformer, we Mill northeast of Meadow Lake. Although would run the Meadow Lake generator to these lines cross, at present there is no supply this load. Increases in the peak interconnection between the 230 kV and demand associated with the load in the 138 kV lines. Reinforcement via area supplied from the Meadow Lake connection to the 230 kV transmission line Switching Station mean that the Meadow could be accomplished via the Lake generator is no longer large enough construction of a 230-138 kV switching to supply the Meadow Lake load in the station at the point where the 230 kV line event that the 138-72 kV transformer fails. crosses the 138 kV line. This would The load growth in the Meadow Lake area minimize the amount of new 230 kV has also created the potential for problems transmission line construction, but would with maintaining satisfactory voltages at require the construction of a new the Meadow Lake Switching Station. Due switching station at that location. This to relatively high forced outage rates for alternative would still require additional peaking gas turbine generators like the 138-72 kV transformer capacity at the Meadow Lake unit, SaskPower does not Meadow Lake Switching Station, which rely on the operation of these units to might require some expansion of the maintain service unless there is more than existing property. Another possible option one unit. Based upon current load is to create a new 230-72 kV switching forecasts, SaskPower predicts that by the station where the 230 kV transmission line winter of 2002 – 2003, the voltage at the crosses the ML3 72 kV transmission line Meadow Lake Switching Station will drop which is supplied out of the Meadow Lake to unacceptable levels during peak load Switching Station. This again would periods if the Meadow Lake generator is minimize the amount of new 230 kV out of service. transmission line construction, but would require the construction of a new 29 10-YEAR TRANSMISSION DEVELOPMENT PLAN
switching station at that location. This water heating. alternative would also address the requirement for additional new The high winter load levels have created transformation capacity at the 72 kV level. protection coordination problems and have SaskPower has not selected its preferred forced SaskPower to install five sets of 25 reinforcement alternative. kV voltage regulators in the line to Deschambault Lake. SaskPower typically The project is in SaskPower’s five-year tries to limit the number of voltage capital plan. regulators in series in a 25 kV line to no more than three sets. 5.3 The Pelican Narrows – Deschambault Lake Study Area In order to accommodate the growing load in this area, SaskPower is evaluating the 5.3.1 Supply Reinforcement for Pelican Narrows constructing of a 110 / 138 kV – Deschambault Lake transmission line between the Island Falls The communities of Pelican Narrows, Jan Switching Station and the Village of Lake, Deschambault Lake and Sandy Bay Pelican Narrows which would be used to are presently served by a 190 km long, supply a new 110-25 kV distribution 25 kV line extending from a 110-25 kV substation near Pelican Narrows. The substation at the Island Falls Switching addition of this line would allow Station. The line was constructed in the SaskPower to remove three of the five sets 1980s in order to connect these of 25 kV voltage regulators, correct the communities to the SaskPower grid and to protection coordination problems, reduce enable SaskPower to decommission the the line losses, improve the reliability of diesel plants that had previously served the electrical service in the area and them. The combined load of these accommodate future load growth. The communities was initially quite small (less new line and substation may also be able than 2 MW), but has since grown to accommodate the proposed sawmill substantially. Over the past two years the developments in the area, depending on peak demand has increased by more than their exact location and 10% annually and is now approximately load characteristics. 6.9 MW. The load in this area is expected to continue to grow at a rate of more than The project is in SaskPower’s five-year 5% for the foreseeable future, due to the capital plan. population growth in the area, combined with the fact that these communities have decided to install electric heat in all new 5.4 The Kindersley – Kerrobert – Unity and renovated homes. Prior to 2001, Study Area propane had been used for home and The loads in the Kindersley, Kerrobert and 10-YEAR TRANSMISSION DEVELOPMENT PLAN 30
Unity area are supplied out of the Ermine more are anticipated. In addition, there Switching Station which is located just are a number of oil well pumps that are southeast of Kerrobert. The Kerrobert, presently running off of well head gas and Luseland and Unity 72 kV substations are the oil companies are considering supplied out of Ermine on the ER3 72 kV converting these to electric drives. There feeder. The Coleville and Kindersley 72- have also been power quality problems in 25 kV substations are supplied out of the Marengo and Mantario areas. The Ermine on the S1E 72 kV feeder. The operation of several large motors in these Ermine Switching Station is in turn, oil fields results in voltage fluctuations supplied via three 138 kV transmission that violate the permissible limits set by lines designated L2E, E1L and C1E. The SaskPower for the operation of consumer L2E and E1L lines extend south from owned equipment. Lloydminster and North Battleford, and the C1E line extends west from In order to accommodate the new loads Coteau Creek. and improve the existing level of service for customers in the region, SaskPower 5.4.1 Supply Reinforcement for the Area West of proposes to extend a 72 kV line from Kindersley Kindersley, west for approximately 44 km, The oilfields, in the Marengo area to the and to construct a new 72-25 kV west of Kindersley, are presently served substation near Marengo. This project is by a 25 kV feeder from the Kindersley in SaskPower’s five-year capital plan. It is 72-25 kV substation. The loads in these proposed that preliminary work would oilfields have been growing over the past 5 begin later in 2002, with an in-service date years and have reached a point where tentatively slated for September of 2004. SaskPower now requires three 25 kV voltage regulators in the feeder in order to 5.4.2 Transmission Reinforcement for Kindersley, Kerrobert, Unity maintain acceptable voltage levels. The increased peak demand associated with the Based on the current forecast of growth loads is forecast to become an issue in for peak load demand in the Ermine area, terms of the rating adequacy of the reinforcement of the Ermine Switching Station may be required by 2010 because Kindersley substation transformer. The of an inability to maintain satisfactory increased demand is also presenting voltages at the switching station delivery problems in terms of ensuring that the point. However, load growth in this area protection systems on the feeder supplying is mainly related to oilfield and pipeline the loads will have satisfactory protection activity, which is subject to volatility. coordination. A number of service This makes long-term forecasts difficult. applications for new wells in the area have It is expected that this reinforcement recently been received from customers and would be provided via a new 230 kV 31 10-YEAR TRANSMISSION DEVELOPMENT PLAN
transmission line to Ermine from a 230 serves the west side of the City, as well as kV supply point. This supply could come the customers in and around Dalmeny and from the Coteau Creek, Queen Elizabeth Rosthern. Q3E is a 72 kV line that (Saskatoon), Brada (North Battleford) or supplies the customers on the east side of Lloydminster Switching Stations. the City as well as the University of There has been some discussion by Saskatchewan and the Royal University independent power producers of the Hospital. QE18 serves the customers on possibility of new non-utility generation the north side of Saskatoon, as well as projects in the Kerrobert area. The Sterling Chemicals and a portion of the addition of an appropriately sized, multi- City of Saskatoon’s franchise area. unit generation facility in this area could possibly defer the need for transmission It is expected that the City of Saskatoon based reinforcement for the Ermine electrical load will continue to grow and Switching Station. At this time, that the majority of this load growth will SaskPower is not aware that any of these be in SaskPower’s franchise area. Based projects are being pursued. on present load projections, SaskPower plans to carry out the following work in an It is anticipated that the transmission effort to continue to accommodate this reinforcement project could occur within increasing load. the next five to 10 years. In 2002, the Q3E 72 kV line will be rebuilt 5.5 The City of Saskatoon Study Area from the Queen Elizabeth Switching Station, The City of Saskatoon Electrical east for 10.7 km. The new line will have department serves that portion of larger conductor and will be insulated for Saskatoon that is within the 1958 City 138 kV, but will continue to operate at boundaries. The area outside of the 1958 72 kV. The north-south portion of Q3E boundaries, along with the University of from the end of the new line north for 3.5 Saskatchewan, is in the SaskPower km to the Wildwood Substation will have its franchise area and this area has existing conductor replaced with larger experienced the majority of the new conductor. The larger conductor will reduce developments in the Saskatoon area. The losses, voltage drop and have a higher growth in demand associated with the load transfer capability. This project will ensure in SaskPower’s franchise area has that the Q3E line will be able to averaged 3.7% annually for the past 6 accommodate the new Canadian Light years. The present peak load demand has Source synchrotron project load as well as now reached a point where the three the growing load on the east side of the City. existing transmission lines (QE6, Q3E & QE18), which serve this area, need to be Beginning in 2002, SaskPower also plans reinforced. QE6 is a 72 kV line, which to begin working on a 138 kV loop around the west side of the City, with a proposed 10-YEAR TRANSMISSION DEVELOPMENT PLAN 32
Figure #8 City of Saskatoon Study Area
LEGEND Existing Lines N New Construction
Sterling Chemicals
SASKATOON NORTH INDUSTRIAL 138-25kV SUBSTATION
DUNDONALD SUBSTATION (to be converted City of Saskatoon to 138 kV) W. J. Bunn Substation SUTHERLAND 72-25 KV SUBSTATION
NEW QE19 WEST SIDE LOOP SIDE NEW QE19 WEST CITY OF SASKATOON To Dalmeny FRANCHISE AREA and Rosthern U of S
ENGEN 138-25Kv SUBSTATION an River CONFEDERATION PARK w 72-25 kV SUBSTATION
katche s WILDWOOD 72-25KV CORY 72-25 kV SUBSTATION SUBSTATION th Sa QE6 (72 kV) Sou
Q3C (138 kV) Q3E (72 kV)
Cory Generation Queen Elizabeth Project Switching Station QE18 (138 kV)
CITY OF SASKATOON 33 10-YEAR TRANSMISSION DEVELOPMENT PLAN
in-service date of 2006. This project will Pipeline Station located near Richardson. involve extending a 138 kV line from the The Fleet Street Switching Station is recently constructed C3Q line around the located in the northeast area of the city west and north sides of Saskatoon and tie and serves the customers in the east and into the QE18 line in the North Industrial northeast portion of the city, via the C1F, area. There will also be a 138 kV tap off R1F, FS27 and FS29, 72 kV lines and the of this new line into the Dundonald F2B and FS7 138 kV feeders. In addition Substation. The new line will relieve the to being supply points for the Regina area load on the existing QE18 line and will loads, the Regina South and Condie provide back up service for the customers Switching Stations are major switching in the northern part of Saskatoon. The points on SaskPower’s transmission grid. Dundonald Substation will also be transferred to this new line and will in turn The east side of the City of Regina has reduce the loading on the QE6 line. been experiencing a significant amount of development over the past 10 years. As a The 138 kV loop project is in SaskPower’s result, the adequacy of the existing five-year capital plan. electrical distribution facilities in the area are approaching their limits in terms of 5.6 The City of Regina Study Area being able to supply the areas peak load The City of Regina, and the rural areas demand. SaskPower plans to address this around the City of Regina, are served by a deficiency by providing a new major number of 72 kV and 138 kV power lines, infeed to reinforce the distribution system extending from three Switching Stations in the area. This will be accomplished by located on the edges of the City. The the construction of a new 138-25 kV Condie Switching Station, located to the substation, named Wascana. The proposed northwest of Regina, supplies the location for the new Wascana Substation is residential and commercial customers in approximately one-half of a kilometre the north and northwest portions of the north of Highway #1 and adjacent to the city via the CD4, 138 kV power line and CPR railway tracks. SaskPower plans to the C1F and R1C 72 kV power lines. In supply the substation by tapping into the addition, the CD3 138 kV power line existing RE9 138 kV feeder, which is serves the IPSCO steel making facility supplied out of the Regina South north of Regina. The Regina South Switching Station. The Wascana Switching Station, located southeast of the Substation will be supplied by extending city, supplies the customers (including the RE9, from a point near Richardson, north University of Regina) in the southern for approximately 8 km, to the new portion of the city, via the R1C R1R, RE6, substation site. Work on the project is and R1F 72 kV feeders. The RE9, 138 expected to begin in 2002, with the in- kV power line supplies the Trans Canada 10-YEAR TRANSMISSION DEVELOPMENT PLAN 34
Figure #9 City of Regina Study Area
To Lumsden and Bulyea R4C (230 kV)
CD7 CD3 (138 kV) (72 kV) To IPSCO
Armour Siding 72-25 kV Substation CONDIE SWITCHING STATION C1F (72 kV)
CD4 (138 kV)
Condie 138-25 kV Substation Coronation 72-25 kV Substation R1C (72 kV) R1C (72 R2C (138 kV) R2C (138 FLEET
B1C (72 kV) B1C (72 STREET FS27 SWITCHING Broad Street (72 kV) STATION 138-14.4 kV & 72-25 kV Substations F2B (138 kV)
FS7 (138 kV)
Athol Street 72-25/14.4 kV Substation R1F (72 R1FkV) (72 Powerhouse R1B (72 kV) R1B (72 72-25/14.4 kV R1R (72 kV) Substation RE7 (72 kV) Albert Park 72-25 kV To Balgonie & Substation Fort QuAppelle
REGINA SOUTH SWITCHING STATION LEGEND: Underground Cable: Overhead Powerline: RE9 (138 kV) To Trans Canada CITY OF REGINA Pipelines at Richardson 35 10-YEAR TRANSMISSION DEVELOPMENT PLAN
service date tentatively slated for August Street Switching Station. This 138 kV tie of 2004. would defer the need for transformer capacity at the Fleet Street Switching As a result of the growth in peak demand Station. However, SaskPower is not associated with the electrical load in the currently pursuing this alternative because Regina area, transformer capacity it has other lower cost options such as increases are planned at the Regina South local reinforcement at Fleet Street. This Switching Station and the Fleet Street tie may become a viable option in the Switching Station. These transformer future. additions are needed to ensure that SaskPower can meet its criteria of 5.7 Other Projects continuing to supply the load in major urban areas following failure of one 5.7.1 Alberta – Saskatchewan Interconnection at Lloydminster transformer. At the Regina South Switching Station, additional 138-72 kV SaskPower has received a request for a transformation capacity will be added and merchant transmission interconnection at the Fleet Street Switching Station, between the transmission system of the additional 230-138 kV transformation Alberta Integrated System (AIS) and capacity will be added. It is anticipated SaskPower’s transmission system. The that these additions can be accommodated interconnection would be located in the within the boundaries of the property that Lloydminster area. The purpose of the SaskPower owns at these sites. interconnection would be to facilitate the transfer of electrical energy in and out of The Regina South and Fleet Street the AIS energy market under the Switching station transformer projects are provisions of SaskPower’s OATT. To planned to be completed within the next facilitate the proposed interconnection, a three years and are included in new 138 kV transmission line will be SaskPower’s five year capital plan. required between SaskPower’s Lloydminster Switching Station and the SaskPower has evaluated the extension of Alberta border (less than 10 km). the RE9 138 kV power line from the Additional transmission reinforcements at future Wascana Substation to the Fleet other locations in Saskatchewan might be Street Switching Station. The extension of required to facilitate the transfers. this power line would provide a 138 k V tie between the Regina South and Fleet Street Switching Stations. Such an interconnection could prove useful in The proposed in-service date for the terms of providing back-up capacity in the interconnection is 2003. The project is not event of a transformer failure at the Fleet currently in SaskPower’s five-year capital 10-YEAR TRANSMISSION DEVELOPMENT PLAN 36
plan as an interconnection agreement has projects are not currently in SaskPower’s not been negotiated with the proponent. five-year capital plan.
5.7.2 Connection of Wind Generation in the Area 5.7.3 Alberta Newsprint Mill Southwest of Swift Current Discussions have been taking place with At present, wind generation appears to be Alberta Newsprint with respect to the the most economical and commercially development of a new newsprint mill in available technology for supplying the north central part of the province. demands for GreenPower. The southwest Studies by Alberta Newsprint are at a area of the province will soon be the home pre-feasibility stage. As such, the decision for two wind projects (SunBridge & to proceed, timing and location of the mill Cypress) as the region has a good wind have not been determined. However, the regime and a vast geographic area. The anticipated size of the electrical load addition of further wind generation will associated with the facility suggests that require some upgrading of the existing extension of a 230 kV transmission line transmission facilities in the area and, would be required to provide service to depending on the location of the new wind the facility. power projects, there may be a requirement to extend the sub- It is anticipated that the project could transmission system. occur within the next five years, but the project is not currently in SaskPower’s At the present time there are no firm plans five-year capital plan. for additional wind generation in the area, but depending on several factors (interest in green power, energy prices, technology, etc) projects may be forthcoming. The reasonably short time frame (less than 1 year) for installing a wind project, allows developers to monitor the market and act quickly when the conditions are right. The short turn around time for these proponents makes it difficult for SaskPower to forecast and plan the development of the transmission system in potential areas, such as the southwest part of the province.
It is anticipated that these projects could occur within the next five years, but the 37 10-YEAR TRANSMISSION DEVELOPEMENT PLAN
APPENDIX A NERC Planning Standards No No No No No No No No No No No No No Outages Cascading c d d d d d d d b b b b b No No No No No No Planned Planned Planned Planned Planned Planned Planned Loss of Demand or Curtailed Firm Transfers Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Stable System (A/R) a A/R A/R A/R A/R A/R A/R A/R A/R A/R A/R Limits Voltage Applicable Rating a A/R A/R A/R A/R A/R A/R A/R A/R A/R A/R Limits Thermal System Limits or Impacts (A/R) Applicable Rating None Normal Normal Single Single Single Single Single Multiple Multiple Multiple Multiple MultipleMultiple A/RMultiple A/R Yes Components Out of Service A. Transmission Systems 8. Transformer Table I. Transmission Systems Standards Normal and Contingency Conditions Contingencies Initiating Event(s) and Contingency Component(s) adjustments, followed by another Category B (B1, B2, B3, or B4) contingency 1. Generator 2. Transmission Circuit 3. Transformer 1. Bus Section 2. Breaker (failure or internal fault) 3. Category B (B1, B2, B3, or B4) contingency, manual system 4. Bipolar (dc) Line 5. Double Circuit Towerline 4. Single Pole (dc) Line 6. Generator 7. Transmission Circuit 9. Bus Section Single Line Ground (SLG) or 3-Phase (3Ø) Fault, with Normal Clearing: Loss of a Component without Fault. SLG Fault, with Normal Clearing: SLG or 3Ø Fault, with Normal Clearing, Manual System Adjustments, followed by another SLG or 3Ø Fault, with Normal Clearing: Bipolar Block, with Normal Clearing: Fault (non 3Ø), with Normal Clearing: All Facilities in Service Single Pole Block, Normal Clearing: SLG Fault, with Delayed Clearing: Category A - No Contingencies B - Event resulting in the loss of a single component. C - Event(s) resulting in the loss of two or more (multiple) components. NERC Planning Standards I. System Adequacy and Security 38 10-YEAR TRANSMISSION DEVELOPMENT PLAN in widespread service interruption which cannot be restrained from
or areas. operating point. discretion of the entities responsible for reliability interconnected transmission systems. May involve substantial loss of customer demand and generation in a widespread area Portions or all of the interconnected systems may not achieve a new, stable Evaluation of these events may require joint studies with neighboring systems. Document measures or procedures to mitigate the extent and effects of such events. Mitigation or elimination of the risks and consequences these events shall be at Evaluate for risks and consequences. • • • • • A. Transmission Systems 3. Transformer action scheme) to operate when required special protection system (or remedial action scheme) for an event or condition for which it was not intended to operate another Regional Council. 1. Generator 2. Transmission Circuit5. Breaker (failure or internal fault) 6. 4. Loss of towerline with three or more circuits 7. Bus Section All transmission lines on a common right-of way 8. Loss of a substation (one voltage level plus transformers) 9. Loss of a switching station (one voltage level plus transformers) 3Ø Fault, with Delayed Clearing (stuck breaker or protection system failure): 3Ø Fault, with Normal Clearing: Other: 10. Loss of a all generating units at station 11. Loss of a large load or major center 12. Failure of a fully redundant special protection system (or remedial 13. Operation, partial operation, or misoperation of a fully redundant 14. Impact of severe power swings or oscillations from disturbances in able I. may occur in certain areas without impacting the overall security of the interconnected transmission systems. To prepare for the next contingency, system adjustments are permitted, including contingency, prepare for the next To security of the interconnected transmission systems. may occur in certain areas without impacting the overall transfers. electric power (non-recallable reserved) curtailments of contracted firm sequentially spreading beyond an area predetermined by appropriate studies. sequentially spreading beyond of the interconnected transmission systems. security transfers may be necessary to maintain the overall electric power (non-recallable reserved) curtailment of contracted firm D will be evaluated. of Category outages under each listed contingency possible facility - Extreme event e
D resulting in two or more (multiple) components removed or cascading out of service Footnotes to T a) owner. limit as determined and consistently applied by the system or facility thermal rating or system voltage facility Applicable rating (A/R) refers to the applicable normal and emergency b) area, component or by the affected customers, connected to or supplied by the faulted Planned or controlled interruption of generators electric supply to radial customers some local network c) location. Cascading results loss of system elements triggered by an incident at any Cascading is the uncontrolled successive d) from service of certain generators, or the system impacts, the controlled interruption of electric supply to customers (load shedding), the planned removal Depending on system design and expected e) that all It is not expected D and judged to be critical by the transmission planning entity(ies) will be selected for evaluation. contingencies that are listed under Category A number of extreme NERC Planning Standards I. System Adequacy and Security 39 10-YEAR TRANSMISSION DEVELOPEMENT PLAN
APPENDIX B Summary of Capital Expenditures on Transmission System for 2002 to 2006 Appendix B (pg. 40-42) provides a listing of all the transmission projects that have been included in SaskPower’s five-year capital plan. The five-year spending plan is updated quarterly. The plan shown here as Appendix B was the most current version when this document was being prepared. In the interest of keeping the list relevant, not all transmission projects in SaskPower’s five-year capital plan are listed in Appendix B. Projects that involve the communications, protection or control facilities associated with SaskPower’s transmission system are not listed because they generally do not have any impact on the public. Projects that have expenditures over the five year period that total less than $50,000 have also been deleted from the list in the interest of brevity. Transmission Capital Projects 2002 - 2006 Capital Plan Project status: A - indicates that project has been internaly approved by SaskPower for construction
1 Project ID Project Title Project Driver Project Budget Budget Budget Budget Budget Budget Status 2002 2003 2004 2005 2006 Totals
MEADOW LAKE AREA PROJECTS D428 ML3 72 KV LINE REBUILD - STAGE 2 Adequacy violation A $2,734,051 $0 $0 $0 $0 $2,734,051 due to load growth D425 ML3 72 KV LINE REBUILD - STAGE 3 Adequacy violation $3,049,000 $0 $0 $0 $0 $3,049,000 due to load growth ML3 72 KV LINE REBUILD - STAGE 4 Adequacy violation $0 $0 $500,000 $1,500,000 $3,500,000 $5,500,000 due to load growth MEADOW LAKE 230 KV SWITCHING STATION Load growth - 1st contingency reliability $250,000 $4,750,000 $0 $0 $0 $5,000,000
T050 TOLKO OSB PLANT PRELIMINARY ROUTING New Customer Load A $130,000 $0 $0 $0 $0 $130,000
PRINCE ALBERT AREA PROJECTS D474 LINE - PA8 Rebuild - Stage 2 Adequacy violation A $65,000 $763,000 $0 $0 $0 $828,000 due to load growth D474 SS - PA8 Rebuild - Stage 2 (Timber Cove) Adequacy violation A $400,000 $1,431,115 $0 $0 $0 $1,831,115 due to load growth D474 CP&C - PA8 Rebuild Stage 2 Adequacy violation A $0 $801,000 $0 $0 $0 $801,000 due to load growth D474 PA8 LINE REBUILD - STAGE 2 Adequacy violation A $465,000 $2,995,115 $0 $0 $0 $3,460,115 due to load growth T164 PA8 REBUILD - STAGE 1 - Phase II Adequacy violation A $4,613,000 $300,000 $0 $0 $0 $4,913,000 due to load growth PA8 REBUILD STAGE 3 Adequacy violation $100,000 $2,700,000 $8,000,000 $0 $0 $10,800,000 due to load growth CHRISTOPHER LAKE SUBSTATION - CONVERSION Change in supply $0 $1,400,000 $0 $0 $0 $1,400,000 TO 138 KV voltage
SASKATOON AREA PROJECTS T174A GENERATION CONNECTION - QUEEN ELIZABETH New generation A $19,000 $0 $0 $0 $0 $19,000 UNIT 1 REPOWERING PROJECT connection T175A GENERATION CONNECTION - CORY New generation A $5,110,855 $0 $0 $0 $0 $5,110,855 COGENERATION PROJECT connection T176A QUEEN ELIZABETH SWITCHING STATION FACILITY Replacement / Rebuild A $2,580,375 $1,664,996 $0 $0 $0 $4,245,371 UPGRADES T181-AB QE19 138 KV WEST SIDE LOOP PROJECT Adequacy violation A $42,000 $62,000 $100,000 $6,097,000 $1,217,000 $7,518,000 due to load growth D464 Q3E - QUEEN ELIZABETH 72 LINE REBUILD - Adequacy violation A $1,450,000 $0 $0 $0 $0 $1,450,000 STAGE 1 due to load growth CORY SUBSTATION TRANSFORMER CAPACITY Load growth - 1st INCREASE contingency reliability $0 $0 $0 $805,000 $0 $805,000
D369 DUNDONALD SUBSTATION TRANSFORMER Load growth - 1st CAPACITY INCREASE contingency reliability $0 $0 $0 $0 $578,000 $578,000
WILDWOOD SUBSTATION TRANSFORMER Load growth - 1st CAPACITY INCREASE contingency reliability $0 $0 $712,000 $0 $0 $712,000
1 - Refer to sections 3 and 4 of the report for an explanation and discussion of the criteria which drives the need for new transmission facilities. 2002 -2006 Plan Page 1 Transmission Capital Projects 2002 - 2006 Capital Plan Project status: A - indicates that project has been internaly approved by SaskPower for construction
1 Project ID Project Title Project Driver Project Budget Budget Budget Budget Budget Budget Status 2002 2003 2004 2005 2006 Totals T195 SASKATOON NORTH INDUSTRIAL SUBSTATION Load growth - 1st A TRANSFORMER CAPACITY INCREASE contingency reliability $150,000 $0 $0 $0 $0 $150,000
ENGEN 138-25 KV SUBSTATION TRANSFORMER Load growth - 1st CAPACITY INCREASE contingency reliability $0 $0 $0 $0 $615,000 $615,000
REGINA AREA PROJECTS D317A REGINA POWERHOUSE SUBSTATION REBUILD Replacement / Rebuild A $2,710,111 $0 $0 $0 $0 $2,710,111 T042 FLEET STREET SWITCHING STATION - ADDITION Load growth - 1st OF SECOND 230-138kV TRANSFORMER contingency reliability $2,080,000 $2,131,000 $0 $0 $0 $4,211,000
T157 REGINA SOUTH SWITCHING STATION - ADDITION Load growth - 1st OF THIRD 138-72kV TRANSFORMER contingency reliability $1,135,000 $1,197,000 $0 $0 $0 $2,332,000
T105 REGINA - WASCANA SUBSTATION PROJECT Adequacy violation A $250,000 $1,478,000 $2,530,000 $0 $0 $4,258,000 due to load growth T109 FLEET STREET SWITCHING STATION 138-25 kV Adequacy violation $0 $0 $0 $0 $18,000 $18,000 TRANSFORMER ADDITION due to load growth
OTHER PROJECTS T191 SENLAC 138-25 KV SUBSTATION PROJECT Adequacy violation A $2,813,000 $0 $0 $0 $0 $2,813,000 due to load growth T203A CANTUAR SUBSTATION PROJECT Replacement A $272,000 $0 $0 $0 $0 $272,000 D305 DAVIDSON 72-25 kv SUBSTATION TRANSFORMER Customer Driven $0 $629,000 $0 $0 $0 $629,000 CAPACITY INCREASE Capacity D334 GLASLYN SUBSTATION REBUILD Replacement $281,000 $500,000 $0 $0 $0 $781,000 D358 SHAUNAVON SUBSTATION TRANSFORMER Customer Driven $0 $0 $0 $0 $783,000 $783,000 CAPACITY INCREASE Capacity T015 CODETTE SWITCHING STATION - ADDITION OF Load growth - 1st SECOND 230/72kV TFMR contingency reliability $1,116,500 $1,178,500 $0 $0 $0 $2,295,000
SWIFT CURRENT 138-72 KV TRANSFORMER Load growth - 1st CHANGEOUT contingency reliability $500,000 $0 $0 $0 $0 $500,000
T159 SWIFT CURRENT SWITCHING STATION - ADDITION Load growth - 1st OF 138-72kV TRANSFORMER contingency reliability $0 $50,000 $4,952,000 $0 $0 $5,002,000
SWIFT CURRENT DISTRIBUTION SUSBSTATION Replacement / Rebuild $300,000 $1,000,000 $0 $0 $0 $1,300,000 REBUILD T182 TANTALLON SWITCHING STATION - ADDITION OF Load growth - 1st 138-72kV TRANSFORMER CAPACITY contingency reliability $0 $0 $4,582,000 $0 $0 $4,582,000
T197 CHAPLIN SWITCHING STATION - SECOND 138-72kV Load growth - 1st TRANSFORMER contingency reliability $0 $0 $0 $2,323,000 $0 $2,323,000
L2E 138 KV LINE VOLTAGE REINFORCEMENT - Adequacy violation $0 $0 $0 $0 $1,000,000 $1,000,000 HEARTS HILL CAPACITOR due to load growth MIDALE 72-25 KV SUBSTATION TRANSFORMER Adequacy violation $0 $800,000 $0 $0 $0 $800,000 CAPACITY INCREASE. due to load growth
1 - Refer to sections 3 and 4 of the report for an explanation and discussion of the criteria which drives the need for new transmission facilities. 2002 -2006 Plan Page 2 Transmission Capital Projects 2002 - 2006 Capital Plan Project status: A - indicates that project has been internaly approved by SaskPower for construction
1 Project ID Project Title Project Driver Project Budget Budget Budget Budget Budget Budget Status 2002 2003 2004 2005 2006 Totals Glaslyn Capacitor Move Reliability $100,000 $0 $0 $0 $0 $100,000 FUTURE REPLACEMENT OF EXISTING WOOD Replacement / Rebuild DISTRIBUTION SUBSTATIONS DUE TO $0 $2,000,000 $2,000,000 $2,000,000 $2,000,000 $8,000,000 DETERIORATION PONTRILAS DISTRIBUTION SUBSTATION REBUILD Replacement / Rebuild $0 $800,000 $0 $0 $0 $800,000 PELICAN NARROWS – DESCHAMBAULT LAKE Adequacy violation $2,440,000 $12,845,000 $0 $0 $0 $15,285,000 AREA REINFORCEMENT due to load growth T299 NERC COMPLIANCE PHASE I & II - TRANSMISSION Contingent project $2,000,000 $1,800,000 $0 $0 $0 $3,800,000 UPGRADES C686 NERC COMPLIANCE PHASE I & II - Contingent project COMMUNICATION, PROTECTION AND CONTROL $100,000 $100,000 $100,000 $0 $0 $300,000 UPGRADES Apache Canada - Midale: 72 kV Service New customer load $1,365,000 $0 $0 $0 $1,365,000 Wood Pole Life Extension Replacement / rebuild $10,000,000 $10,000,000 $10,000,000 $10,000,000 $10,000,000 $50,000,000 D313 NIPAWIN SUBSTATION REBUILD Replacement / rebuild A -$320,000 $0 $0 $0 $0 -$320,000 D318 RED JACKET SUBSTATION 72-25 KV Adequacy violation A $301,000 $0 $0 $0 $0 $301,000 TRANSFORMER CAPACITY INCREASE. due to load growth D342A SUNBRIDGE WIND GENERATION PROJECT New Generation A $455,000 $0 $0 $0 $0 $455,000 CONNECTION D344 PARKMAN 72 25 KV SUBSTATION Adequacy violation A $1,245,000 $0 $0 $0 $0 $1,245,000 due to load growth D366 BALGONIE SUBSTATION TRANSFORMER Adequacy violation A $10,000 $60,000 $0 $0 $0 $70,000 CAPACITY INCREASE due to load growth D380 MOOSE JAW 'A' SUBSTATION TRANSFORMER Load growth - 1st A CAPACITY INCREASE contingency reliability $1,986,000 $0 $0 $0 $0 $1,986,000
T006 PEEBLES SWITCHING STATION 230-138 KV Load growth - 1st A TRANSFORMER ADDITION contingency reliability $2,408,000 $0 $0 $0 $0 $2,408,000
T045 BEATTY SWITCHING STATION - ADDITION OF Load growth - 1st A THIRD 230-138kV TRANSFORMER ADDITION contingency reliability $3,126,000 $0 $0 $0 $0 $3,126,000
T045 BOUNDARY DAM SWITCHING STATION - Load growth - 1st A REPLACEMENT OF 901T 230-138 KV contingency reliability $1,684,000 $0 $0 $0 $0 $1,684,000 TRANSFORMER
1 - Refer to sections 3 and 4 of the report for an explanation and discussion of the criteria which drives the need for new transmission facilities. 2002 -2006 Plan Page 3 Exhibit “B” Map showing SaskPower’s generation and transmission lines, and the point of interconnection of the international power line
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Page 159 Exhibit “C” Notice of Application and Direction of Procedure (NOA/DOP) English Version December 17, 2009
Notice of Application and Directions on Procedure Saskatchewan Power Corporation (“SaskPower”) Application to Export Electricity on an Emergency Basis to the United States
By an application dated December 17, 2010, SaskPower (the “Applicant”) has applied to the National Energy Board under Division II of Part VI of the National Energy Board Act (the “Act”) for authorization to export, on an emergency basis, up to 150 megawatts of firm power over any 60 minute period for a period of 10 years. Any exports will be in accordance with the Adjacent Balancing Authority Emergency Energy Assistance Agreement between SaskPower, the Western Area Power Administration Upper Great Plains Region and NorthPoint Energy Solutions Inc. dated December 4, 2007 and the Adjacent Reliability Coordinator Coordination Agreement between SaskPower and Midwest Independent Transmission System Operator, Inc. dated October 7, 2008.
The Board wishes to obtain the views of interested parties on this application before issuing a permit or recommending to the Governor in Council that a hearing be held. The Directions on Procedure that follow explain in detail the procedure that will be used.
1. The Applicant shall deposit and keep on file, for public inspection during normal business hours, copies of the application at its offices located at:
Saskatchewan Power Corporation Attention: General Counsel 3W – 2025 Victoria Avenue Regina, Saskatchewan S4P 0S1
Facsimile: (306) 566-3113 Telephone: (306) 566-3111
and provide a copy of the application to any person who requests a copy. A copy of the application is also available for viewing during normal business hours in the Board’s library, Room 1002, 444 Seventh Avenue SW, Calgary, Alberta, T2P 0X8.
2. Submissions that any party wishes to present shall be filed with the Secretary of the Board, 444 Seventh Avenue SW, Calgary, Alberta, T2P 0X8, facsimile: (403) 292- 5503, and served on the Applicant by January 26, 2010.
3. Pursuant to section 119.06(2) of the Act, the Board shall have regard to all considerations that appear to it to be relevant. In particular, the Board is interested in the views of submittors with respect to:
(a) the effect of the exportation of the electricity on provinces other than that from which the electricity is to be exported;
(b) the impact of the exportation of the environment; and
Page 160 (c) whether the Applicant has:
(i) informed those who have declared an interest in buying electricity for consumption in Canada of the quantities and classes of service available for sale; and
(ii) given an opportunity to purchase electricity on terms and conditions as favourable as the terms and conditions specified in the application to those who, within a reasonable time of being so informed, demonstrate an intention to buy electricity for consumption in Canada.
4. Any answer to submissions that the Applicant wishes to present in response to items 2 and 3 of this Notice of Application and Directions on Procedure shall be filed with the Secretary of the Board and served on the party that filed the submission by February 10, 2010.
5. For further information on the procedures governing the Board’s examination, contact the Secretary at (403) 299-2714, facsimile: (403) 292-5503.
Anne-Marie Erickson Acting Secretary of the Board
Page 161
le 17 décembre 2009
Annexe C
Avis de demande et instructions relatives à la procédure Saskatchewan Power Corporation (« SaskPower ») Demande d’exportation d’électricité vers les États-Unis en situation d’urgence
Dans une demande datée du 17 décembre 2009, la société SaskPower (le « demandeur ») a déposé auprès de l’Office national de l’énergie, en vertu de la Section II de la Partie VI de la Loi sur l’Office national de l’énergie (la « Loi »), une demande en vue d’obtenir l’autorisation d’exporter, en situation d’urgence, jusqu’à 150 mégawatts d’énergie garantie pendant toute période de 60 minutes, sur une période de 10 ans. Toute exportation d’énergie se fera en conformité avec la convention sur l’assistance d’urgence en matière d’énergie des responsables de l’équilibrage des zones adjacentes signée le 4 décembre 2007 par la SaskPower, la Western Area Power Administration Upper Great Plains Region et la NorthPoint Energy Solutions Inc., de même que la convention de coordination des zones de fiabilité adjacentes entre SaskPower et Midwest Independent Transmission System Operator, Inc., datée du 7 octobre 2008.
L’Office souhaite obtenir les points de vue des parties intéressées sur cette demande avant de délivrer un permis ou de recommander au gouverneur en conseil qu’une audience publique soit tenue. Les instructions relatives à la procédure énoncées ci-après exposent en détail la démarche qui sera suivie.
1. Le demandeur doit déposer et conserver en dossier, aux fins d’examen public pendant les heures normales de bureau, des copies de la demande à ses bureaux situés à l’adresse suivante:
Saskatchewan Power Corporation Attention : Chef du contentieux 3W – 2025 Victoria Avenue Regina, Saskatchewan S4P 0S1
Télécopieur : (306) 566-3113 Téléphone : (306) 566-3111
Le demandeur doit en fournir une copie à quiconque en fait la demande. On peut aussi consulter une copie de la demande, pendant les heures normales de bureau, à la Bibliothèque de l’Office, 444 Seventh Avenue SW, salle 1002, Calgary (Alberta) T2P 0X8.
2. Les parties qui désirent déposer des mémoires doivent le faire auprès du Secrétaire, Office national de l’énergie, 444 Seventh Avenue SW, Calgary (Alberta) T2P 0X8, télécopieur : (403) 292-5503, et auprès du demandeur, au plus tard le 26 janvier 2010.
3. Conformément au paragraphe 119.06(2) de la Loi, l’Office tiendra compte de tous les facteurs qu’il estime pertinents. En particulier, il s’intéresse aux points de vue des déposants sur les questions suivantes:
(a) les conséquences de l’exportation d’électricité sur les provinces autres que la province exportatrice;
Page 162
(b) les conséquences de l’exportation sur l’environnement;
(c) le fait que le demandeur :
(i) a informé quiconque s’est montré intéressé par l’achat d’électricité pour consommation au Canada des quantités et des catégories de services offerts,
(ii) a donné la possibilité d’acheter de l’électricité à des conditions aussi favorables que celles indiquées dans la demande, à ceux qui ont, dans un délai raisonnable suivant la communication de ce fait, manifesté l’intention d’acheter de l’électricité pour consommation au Canada.
4. Si le demandeur souhaite répondre aux mémoires visés aux points 2 et 3 du présent avis de la demande et des présentes instructions relatives à la procédure, il doit déposer sa réponse auprès du secrétaire de l’Office et en signifier copie à la partie qui a déposé le mémoire, au plus tard le 10 février 2010.
5. Pour obtenir de plus amples renseignements sur les procédures régissant l’examen mené par l’Office, prière de communiquer avec son secrétaire par téléphone au (403) 299-2714 ou par télécopieur au (403) 292-5503.
Sécretaire temporaire de l’office Anne-Marie Erickson
Page 163 ;': xhibi t "0"
ADJACENT BALANCING AUTHORITY EMERGENCY ENERGY ASSISTANCE AGREEMENT
THIS AGREEMENT made in duplicate thisill day of Dec em ber ,2007
BETWEEN:
SASKATCHEWAN POWER CORPORATION A body corporate established pursua nt to The Power Corporation Act, having its head office at the City of Regina , in Ihe Province of Saskatchewan , Canada (hereinafter referred to as "SaskPower")
And
WESTERN AREA POWER ADMINISTRATION, UPPER GREAT PLAINS REGION A Federal agency of the United States of America, acting by and through the Administrator, Western Area Power Administration , Department of Energy , an agency under the laws of the United States of America. (hereinafter referred to as "WAUE")
(either SaskPower or WAU E may hereinafter be referred to as Party and both entities may hereinafter be referred to as Parties)
And
NORTHPOINT ENERGY SOLUTIONS INC. A body corporate incorpora ted pursuant to The Business Corporations Act (Saskatchewan ) and having an office in the City of Regina in the Province of Saskatchewan ("North Point")
WHEREAS, SaskPower serves as the Balancing Autho rit y in an area (the ~ Sask Powe r Reliability Area ") that comprises the SaskPower electric system th at generates, transmits , and distributes electric power in the Canadian Province of Saskatchewan ; and
WHEREAS , WAU E serves as the Balancing Authority in an area (the "WAUE Reliabi lity Area ") that in cludes Transmission Operators, electric utilities, and othe r entities , including the American State of North Dakota transmission system ; and
WHEREAS , the electric system in the SaskPower Reliabil ity Area is interconnected with the electric systems in the WAUE Reliability Area ; and
WHEREAS, the North American Eleclric Re liability Corporation ("NERC") Board of Trustees approved adoption of "Reliability Standards for the Bulk Electric Systems of
WAUE Emergency Energy Assista nce Agreement- FINAL.doc Page 1
Page 164 North America" and conversion of the NERC Operating Manual to be a subset of these standards on February 8, 2005, and
WHEREAS, the Parties agree to meet the requirements for adjacent Balancing Authorities as stated in Standard EOP-001-01 (Emergency Operations Planning) and Standard EOP-002-0 (Capacity and Energy Emergencies) of the NERC Reliability Standards and successor reviSions , and
WHEREAS, NorthPoint acts as an agent for SaskPower with respect to att invoicing and payment for emergency energy supplied under the terms of this Agree ment.
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, it is agreed as follows:
1.0 EMERGENCY ENERGY
1.1 Requirement R1 of the NERC Reliability Standard EOP-001-0 states that the "Balancing Authorities shall have operating agreements with adjacent Balancing Authorities that shall, at a minimum, contain provisions for emergency ass istance, including provisions to obtain emergency assistance from remote Balancing Authorities.·
1.2 Requirement R6A of NERC Reliability Standard EOP-002-1 states that "If the Ba lancing Authority cannot comply with the Control Performance and Disturbance Control Standards, then it shall immediately implement remedies to do so. These remed ies include, but are not limited to: ...... Requesting emergency assistance from other Balancing Authorities. M
1.3 In fulfilling the NERC requirements above, the purpose of Section 1.0 of this Agreement is to allow for the exchange of emergency energy between SaskPower and WAUE during such time when, due to unforeseeable circumstances, resources are insufficient to maintain reliable service to native load customers, and commercial remedies are either not ava ilable, or there is insufficient time to pursue the use of commercial remedies.
1.4 SaskPower or WAUE may , due to extraordinary operating circumstances, have insufficient contingency reserves available to their respective systems as a result of unforeseen circumstances Such conditions could result in the need by the Party experiencing the deficiency to request emergency energy in order to maintain reliable service to native load customers.
1.5 SaskPower and WAUE agree to provide service to one another to the extent possible from available resources pursuant to this Agreement to prevent manual firm load shedding.
1.6 Energy to be supplied from ava ilable resources, including contingency reserves, to the other Party will normally be called upon only after all other resources have been exhausted and prior to the deficient Party declaring an Energy Emergency
WAUE Emergency Energy Assistance Agreement- FINAL.doc Page 2
Page 165 Alert Level 3 as defined by Attachment 1 of the NERC Standard EOP-002-0 and its successor revisions.
1.7 Under circumstances outlined in Section 1.3 of this Agreement, upon demand, each Party shall supply emergency energy to the other Party to the extent available from the supplying Party's available resources.
1.8 Notwithstanding Section 1.6 of this Agreement, the delivery of emergency energy shall be subject to availa ble transmission capacity of the interconnection, the availability of resources to the Parties, operating security limits imposed on the Parties or their respective systems, and other reliability constraints binding on the Parties.
1.9 Consistent with the terms and conditions of this Agreement, the supply of emergency energy shall begin immediately upon demand of a Party, notwithstanding the standard scheduling practices of either Party.
1.10 The Parties shall use reasonable efforts to ensure that an emergency energy transaction continues only until it can be replaced by a commercial transaction. However, in no event shall a Party be obligated to supply emergency energy for more than 60 minutes unless otherwise agreed to by the Parties.
1.11 Each Party retains the rig ht to recall their emergency energy delivery immediately upon notification to the other Party under circumstances where contingency reserves are required 10 be activated on the supplying Party's system.
1.12 It is in the context of and subject to the provisions of this Article 1.0 and subject to the terms and conditions of this Agreement that SaskPower and WAUE agree to buy and sell emergency energy from and to each other from time to time
2.0 INVOICING AND PAYMENT:
2.1
2.2 SaskPower appoints NorthPoint as its agent. for Invoicing and billing functions including without limitation the payment and ·receipt of payment functions with respect to emergency energy purchases and sales under this Agreement. This agency appointment shall continue until further written notice from SaskPower to NorthPoint and WAUE or by NorthPoint to SaskPower and WAUE. For greater certainty: SaskPower authorizes and directs WAUE to issue in NorthPoint's name and deliver to NorthPoint invoices for energy sold to SaskPower under this Agreement arid SaskPower acknowledges and agrees that such invoices will be binding on SaskPower as if issued in SaskPower's name and delivered to SaskPower; and SaskPower acknowledges that it has authorized and directed NorthPoint to issue in NorthPoint's name and deliver to WAUE invoices for energy sold by SaskPower to WAUE under this Agreement and WAUE
WAUE Emergency Energy Assistance Agreement- FINAL.doc Page 3
Page 166 acknowledges and agrees that such invoices will be binding on WAUE as if issued in SaskPower's name.
2.3 Emergency Energy Price invoices shall be issued by the Invoicing Party within 15 days following the last day of the month during which the emergency energy was supplied. For the purposes of this Agreement the party that sold emergency energy under this Agreement shall be referred to as an "Invoicing Party· and the party that purchased emergency energy under this Agreement shall be referred to as an "Invoiced Party".
2.4 Invoices shall be rendered to the Invoiced Party at the address specified in Section 6.2 of this Agreement and the Invoiced Party shall make payments to the Invoicing Party as per sections 2.7 and 2.8. All payments shall be made in immediately available fund s payable to the Invoicing Party , or by wire transfer to a bank named and account designated by the same Invoicing Party, as described in Appendix A.
2.5 If the Invoicing Party is unable to issue timely monthly invoice(s) that include actual MWh values, it may elect to render estimated invoices. Such estimated invoice(s) shall be subject to the same payment provisions as final invoice(s), and any applicable adjustments will be shown on a subsequent monthly invoice.
2.6 WAVE, NorthPoint and SaskPower agree that net invoicing procedures will be used for payments due pursuant to sales of emergency energy under this Agreement. Payments due by WAUE to NorthPoint or SaskPower in any month shall be offset against payments due by NorthPoint or SaskPower to WAUE and payments due by NorthPoint or SaskPower to WAUE in any month shall be offset against payments due by WAUE to NorthPoint or SaskPower and the resulting net balance shall be paid to the party in whose favour such balance exists. For greater certainty for so long as NorthPoint remains SaskPower's appointed agent under this Agreement SaskPower authorizes and directs WAUE to make all such payments to NorthPoint. Provided that if SaskPower terminates its appointment of NorthPoint as its agent under th is Agreement and provides written notice to WAU E or if NorthPoint gives written notice to the other parties that it no longer will be SaskPower's agent then net invoici ng procedures provided for in this section 2.6 will no longer apply to NorthPoint. The parties shall exchange such reports and information that either requires for invoicing purposes. Net invoicing shall not be used for any amounts due which are in dispute.
2.7 For payments that are due and payable by SaskPower to WAUE pursuant to th is Agreement:
Payments of invoices presented to NorthPoint, as agent for SaskPower, or to SaskPower in the event NorthPoint is no longer agent for SaskPower under to this Agreement are due and payable to WAUE in U.S: do llars, before the close of business on the 20th calendar day after the date of issuance of each invoice or the next business day thereafter if such day is a Saturday, Sunday, or United States Federal holiday. Invoices shall be considered paid when payment is received by WAUE. Invoices wilJ be paid electronically or via the Automated Clearing House method of payment unless a written request to make payments
WAUE Emergency Energy Assistance Agreement- FINAL.doc Page 4
Page 167 by mail is submitted by NorthPoint and approved by WAUE. WAUE shall provide all necessary information requested by SaskPower to facilitate the making of such payments. Should the WAUE agree to accept payments by mail, these payments will be accepted as timely and without assessment of the charge provided for in Section 3 of th is Agreement if a first class mail postmark indicates the payment was mailed at least 3 ealendar days before the due date.
2.8 For payments that are due and payable by WAUE to SaskPower:
Payments of invoices presented to WAUE pursuant to this Agreement are due and payable to SaskPower in U.S. dollars before the close of business on the 20th calendar d.ay after the date of issuance of each invoice or the next business day thereafter if such day is a Saturday, Sunday, Canadian Federal holiday or Provin cial holiday in Saskatchewan. Invoices shall be considered paid when payment is received by SaskPower. Invoices will be paid electroni cally. All funds shall be paid in accordance with Appendix A.
3.0. NONPAYMENT OF INVOICES IN FULL WHEN DUE :
3. 1 Nonpayment of Invoices in full when due by SaskPower,or its deSignated agent:
Invoices not paid in full by SaskPower or its designated agent, by the due date specified in Section 2 of this Agreement hereof shall bear a charge of_ percent of the principal sum unpaid for each day payment is delinquent, to be added until the amount due is paid in full. WAUE wi ll also assess a fee of_ for processing a late payment. Payments received will first be applied t'O'""iFle charges for late payment assessed on the principal and then to payment of the principal.
3.2 Non-payment of Invoices in full when due by WAUE:
Invoices not paid in full by WAUE by the due date specified in Section 2 of this Agreement hereof shall bear an interest charge pursuant to the terms of the MEMA Agreement, which will be added until the amount due is paid in fu ll. Payments received will first be applied to the charges for late' payment assessed on the principal and then to payment of the principal.
3.3 Either Party shall have the right, upon not less than 15 days advance written notice, to discontinue fu rnishing the services specified in this Agreement for non payment of invoices in full when due, and to refuse to resume such services so long as any part of the amount due remains unpaid. Such a discontinuance of service will not relieve either SaskPower or WAUE of liability for charges during the time service is so discontinued. The rights reserved herein shall be in addition to all other remedies available either by law or in equity, for the breach of any of the terms hereof.
4.0. COMMUNICATION DURING ENERGY EMERGENCY
4.1 Requ irement R3 of Ihe NERC Re liability Siandard EOP-002-1 slates thai "A Balancing Authority that is experiencing an operating capacity or energy
WAUE Emergency Energy Assistance Agreement- FI NAL.doc Page 5
Page 168 emergency shalt communicate its current and future system conditions to its Reliability Coordinator and neighbouring Balancing Authorities."
4.2 The deficient Balancing Authority shall notify the other Party promptly when it becomes aware of an emergency condition and has requested a declaration of Energy Alert Level 1 as defined in Attachment 1 of the NERC Standard EOP- 002·1 from its respective Reliability Coordinator.
4.3 To the extent information is known, the notification shall describe the emergency condition, the extent of the deficiency, the expected effect on the operation of the system, its anticipated duration and the corrective action taken andlor to be taken.
4.4 The deficient Balancing Authority shall communicate its system conditions to the other Party by telephone in accordance with Section 2.5 and 2.6 of this Agreement.
4.5 Any communication to SaskPower during an energy emergency shall be directed to the on shift Power System Supervisor by telephone at (306) 566-3546, which is staffed 24 hours a day, 7 days a week.
4.6 Any communication to WAUE during an energy emergency shall be directed to the Generation Control System Operator by telephone at (605) 882-7576 or (605) 882·7584 which is staffed 24 hours a day, 7 days a week.
5.0. COORDINATtON OF EMERGENCY PLANS
5.1 Requirement R6 of the NERC Reliability Standard EOP-001-1 states that "The Transmission Operator and Balancing Authority shall provide a copy of its updated emergency plans to its Reliability Coordinator and to neighbouring Transmission Operators and Balancing Authorities."
5.2 Requirement R7 of the NERC Reliability Standard EOP-001-1 states that "The Transmission Operator and Balancing Authority shall coordinate its emergency plans with other Transmission Operators and Balancing Authorities as appropriate. This coordination includes the following steps, as applicable: The Transmission Operator and Balancing Authority shall establish and maintain reliable communications between interconnection systems; The Transmission Operator and Balancing Authority shall arrange new interchange agreements to provide for emergency capacity or energy transfers if existing agreements cannot be used ."
5.3 SaskPower and WAUE will provide each other with a copy of its updated emergency plans including successor plans upon request.
5.4 SaskPower and WAUE will use reasonable efforts to jointly coordinate and amend as necessary any emergency plans necessary to fulfill the requirements of this Agreement.
5.5 SaskPower and WAUE agree to maintain and test their respective Ba lancing Authority telecommunications on a regular basis .
WAUE Emergency Energy Assistance Agreement· FINAl.doc Page 6
Page 169 6.0. CONTACT INFORMATION FOR NOTICES AND INVOICES
6.1 Any notice permitted under the terms of this Agreement, except in an energy emergency situation as stated in Section 1.0 of this Agreement, shall be directed by mail or fax at the address indicated below:
SaskPower: Saskatchewan Power Corporation 2025 Victoria Avenue Regina , Saskatchewan , Canada S4P OS1 Attention : Supervisor, Transmission Services Fax: (306) 566-3479
WAUE: Western Area Power Administration Upper Great Plains Region Attention: Manager of Operations 133041" Sireet SE Watertown, SD 57201 Fax: (605) 882-7409
6.2 Any invoice permitted under the terms of this Agreement shall be directed by mail or fa x at the address indicated below:
NorthPoint: NorthPoint Energy Solutions Inc. 2025 Victoria Avenue Regina , Saskatchewan , Canada S4P OS1 Attention: Chief Financial Officer Fax: (306) 566-3364
WAUE: Western Area Power Administration Upper Great Plains Region Attent ion: Power Billing 1330 41 " Street SE Watertown, SD 57201 Fax : (605) 882-7409
6.3 Changes in persons or addresses for submittal of notices by a Party 10 Ihis Agreement shall be made in writing to the other Party and delivered in accordance with this section.
6,4 Notices shall be deemed delivered when received by facsimi le or received from an overnight messenger service . during the recipient's regular business hours .
WAUE Emergency Energy Assistance Agreement- FINAL.doc Page 7
Page 170 7,0. LIMITATION OF LIABILITY
In no event will either Party be liable for any indirect, special, consequential, punitive or exemplary damages, including without limitation, lost profits, in tort, contract or othelWise, even jf it has been advised of the possibility of these damages.
8,0, WAIVER AND ESTOPPEL
No failure by either Party at any time, or from time to time, to enforce or require the strict keeping and performance by the other Pari:y of any of the terms or conditions of this Agreement shall constitute either estoppel against or waiver by said Party and same shall not affect or impair such terms or conditions in any way, or the right of said Party at any time to avail itself of any remedy existing hereunder or at law or by statute.
g,O, APPLICABLE LAWS AND REGULATIONS
This Agreement executed hereunder shall be governed by and construed in accordance with the laws of the Province of Saskatchewan, Canada, except where the law of the United States is incorporated herein pursuant to paragraph 13,
10,0, AMENDMENT
The Parties may amend this Agreement by written instrument duly executed by bolh of the Parties.
11 ,0, CONDITIONS PRECEDENT
This Agreement is subject to, and conditional upon:
(a) the receipt by SaskPawer at
(i) a Presidential Export Permit from the United Stales Department of Energy; (ii) any required permits or authorizations of the Canadian National Energy Board in accordance with the National Energy Board Act (Canada); (iii ) SaskPower Executive approval; and (iv) any other required provincial, slate or federal permits, approvals or authorizations.
(b) the receipl by WAUE at
(i) any required provincial, state or federal permits, approvals or authorizations.
WAUE Emergency Energy Assistance Agreement- FINAL.doc Page 8
Page 171 12.0. TERMINATION
This Agreement may be terminated upon mutual agreement of the Parties or on 30 days prior notice in writing given by either Party to the other, provided that any such termination shall not prejudice any outstanding obligations entered in respect of emergency energy transactions.
13.0. PARTICIPATION BY THE UNITED STATES
The participation by Ihe Uniled Slates through WAUE to this Agreement is subject in all respects to acts of Congress and to regulations of the Secretary of Energy established thereunder. This reservation includes but is not limited to, the statutory limitations upon the authority of the Secretary of Energy to submit disputes arising under this Service Agreement to arbitration. In the event of a conflict between this provision and any other provision in this Agreement, this provision shall have precedence with respect to the application of this Agreement to the United States .
13.1 Contingent Upon Appropriations: Where activities provided for in th is Agreement extend beyond the current fiscal year, continued expenditures by the United States are contingent upon Congress making th e necess ary appropriations required for the continued performance of the United States obligations under this Ag reement. In case such appropriation is not made, SaskPower hereby releases the United States from its contractual obligations and from all liability due to the failure of Congress to make such appropriation.
13.2 Covenant Against Contingent Fees: In the event SaskPower is required to send a SaskPower employee to the WAUE's facil ities in the United States of America to perform SaskPower's obligations under this Agreement, SaskPower warrants that the SaskPower employee working in the United States of America has not been employed or retained to solicit or secure this Agreement upon an agreement or understanding for a commission, percentage, brokerage, or contingent fee , excepting bona fide employees or bona fide established co mmercial or selling agencies maintained by SaskPower for the pu rpose of securing business. For breach or violation of this warranty, WAUE shall have the right to annul this Agreement without liability or in its discretion to deduct from this Agreement price or consideration the full amount of such commission, percentage, brokerage, or contingent fee.
13.3 Contract Work Hours and Safety Standards: In the event SaskPower is required to send a SaskPower employee to the WAUE 's facilities in the United States of America to perform SaskPower's obligations under this Agreement, this Agreement, to the extent that it relates to the SaskPower employee working in the United States of America and is of a character specified in Section 103 of the Contract Work Hours and Safety Standards Act (Act), 40 U.S.C. § 3701 , as amended or supplemented, is subject to the provisions of the Act, 40 U.S.C. §§ 3701 -3708 , as amended or supplemented, and to regulations promulgated by the Secretary of Labor pursuant to the Act.
WAUE Emergency Energy Assistance Agreement- FINAL.doc Page 9
Page 172 13.4 Equal Opportunity Employment Practices: In the event SaskPower is required to send a SaskPower employee to the WAUE's facilities in the United States of America to perfonn SaskPower's obl igations under this Agreement, Section 202 of Executive Order No. 11246, 30 Fed. Reg . 12319 (1965), as amended by Executive Order No. 12086, 43 Fed . Reg. 46501 (1978), as amended or supplemented, which provides, among other things, that SaskPower will not discriminate against any employee or applicant for employment because of race, color, religion , sex , or national origin , is incorporated by reference in th is Agreement to the extent that it relates to the SaskPower employee working in the United States of Ame ri ca .
13.5 Use of Convict Labor: In the event SaskPower is required to send a SaskPower employee to the WAU E's facilities in the United States of America to perform SaskPower's obligations under this Agreement, SaskPower agrees the SaskPower employee working in the United States of America may not be undergoing a sentence of imprisonment except as provided by Executive Order 11755, 39 Fed. Reg . 779 (1973), as amended by Executive Order 12608, 52 Fed. Reg . 34617 (1987) and Executive Order 12943, 59 Fed . Reg . 64553 (1 994 ), and as further amended or supplemented.
WAUE Emerg ency En ergy Assistance Ag reement· FINAL.doc Page 10
Page 173 IN WITNESS WHEREOF, the Parties and NorthPoint have caused this Agreement to be executed and in effect as of l)E C 5: rnl}e. g Lf±h ,2007.
SASKATCHEWAN POWER CORPORATION Sask Power APPROVED FOR EXECUTION
WESTERN AREA POWER ADMINISTRATION UPPER GREAT PLAINS REGION
By: lli,~AL,~ By: Robert J. Har~s
Title: Title: Regional Manager Date: /:
NorthPoinl APPROVED FOR EXECUTION By:
Title:
Date:
WAUEE ergy Assista nce Agreement- FINAL.doc Page 11
Page 174 APPENDIX A
BANKING INFORMATION FOR PAYMENT OF SERVICES
Any monies payable by WAUE to NorthPoint for services rendered under the terms of this Agreement shall be paid into the following bank account and shall be made in immediately available funds :
Any monies payable by NorthPoint to WAUE for selVices rendered under the terms of this Agreement shall be paid into the following bank account and shall be made in immediately available funds:
Western Area Power Administration
For Automatic Clearing House (ACH) transactions: Richmond Federal Reserve ABA #051036706 Account Name: Western Area Power Administration Account Number: 312003
For Electronic Fund TransferMlire (EFT) transactions : New York Federal Reserve ABA #021030004 Account Name: Western Area Power Administration BNF=/AC89001602
WAUE Emergency Energy Assistance Agreement- FINALdoc Page 12
Page 175 Exhibit "E "
ADJACENT RELIABILITY COORIJINATOR COORIJI NAT ION AG REEMENT
This Agreement, being an Adjacent Reliability Coordinator Coordination Agreement, is made this 7th day or October, 2008 (,'Agreement") by and between Midwest Independent Transmission System Operator, Inc. ("Midwest ISO") and Saskatchewan Power Corporation ('·SaskPower'") hereinafter collectively referred to as the "Parties" and individually as a "Party:'
W I TN E S S ET H,
WHEREAS. Midwest ISO serves as the Reliability Coordinator in a region (the "Midwest ISO Reliability Area") that includes the Balancing Authorities, Transmission Operators, electric utilities. and other entilies in the Midwest ISO energy market, and in the Mid·Continent Area Power Pool (MAPP) Region, including the Manitoba Hydro transmission system; and
WHEREAS, SaskPnwer serves as the Reliability Coordinator in a region (the "SaskPower Reliability Area") that comprises the SaskPower electric systc:m that generates. transmits, distributes, and sells electric power in the Canadian j)rovinee of Saskatchewan: and
W HEREAS, electric systems in the Midwest ISO Reliability Area arc interconnected with the electric system in the SaskPower Reliability Area; and
W HEREAS, the North American Electric Reliability Council ("'NERe") Board of Trustees approved adoption of "Reliability Standards for the Bulk Electric Systems of North America" and conversion of the NERC Operating. Manual to a suhset or these standards on February g, 2005. and Standards tRO-DOI·O (Reliabilit)' Coordination - Responsibilities and Authorities) and IRO·002·0 (Reliability Coordination - Faci lities) of the NERC Operating Manual which address coordination agreements and data sharing ror Reliabi lity Coordinators: and
W H E I ~EAS" Rcqllin.'ml'nt 7 of Standard IRO·OOI·O (Reliability Coordination Responsibi lities and Authorities) of the NERC Operating Manual Slates that the '·Reliability Coordinator shall have clear. comprehensive coordination agreements with adjacent Re liability Coordinators to ensure that System Operating Limit or Interconnection Reliabi lity Operating Limit violation mitigation requiring actions in adjacent Reliabi lity Coordinntm Areas arc coordinated'"; and
WHEREAS, Requirement 2 or Standard IRO·002·0 (Reliability Coordination - Facilities) o r the NERC Operating M.mual states that "Each Reliability Courdinator shull dctcmlinc the data requirements to support its reliability coordination tasks and shall request such data from " .. adjacent Reliability Coordinators'·; and
Page 176 WHEREAS, Requirement 3 of Standard IRO-002-0 (Reliability Coordination - Facilities) of the NERC Operating Manual states that "Each Reliability Coordinator - or its Transmission Operators and Balancing Authorities - shall provide, or arrange provisions for, data exchange via a secure network to other Reliability Coordinators or Transmission Operators and Balancing Authorities";
NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, it is agreed as foll ows:
ARTICLE I PURPOSE
The purpose of this Agreement is to augment and further support the reliability of both Parties' respective Reliability Areas. It provides for system coordination and the exchange of data and information over the Interregional Security Network (" ISN") and the Reliability Coordinator Lnfonnation System ("RCIS") by and between the Parties so that each can coordinate its plans and operations in the interest of reliability. It also provides a means for exchanging information and system data, and for making necessary regional studies and recommendations designed to improve reliability of the interconnected bulk power systems.
ARTICLE II TERM OF AGREEMENT
SECTION 2.1 Term. This Agreement shall become effective on the first day of the month following the month in which all Parties have executed thi s Agreement and shall continue in effect until tenninated by either Party upon not less than thirty (30) days written notice to the other Party. The right to terminate shall be within the sole discretion of either Party.
SECTION 2.2 NERC Standard Revisions. In the event that revisions to the NERC Reliabili ty Standards referenced in this Agreement, arc approved by the NERC Board, the Parties shall meet (e ither in person or via conference call) within ninety (90) days of the approval to di scuss whether such revisions affect the terms and conditions of this Agreement, the necessity Jor any mutually agreeable revisions to this Agreement, and/or whether the revi sions affect the need for this Agreement.
ARTICLE III ADMINISTRA nON
SECT10N 3.1 Formation of an Operating Committee (OC). To administer the arrangements under this Agreement, the Parties shall establish an Operating Comm.ittee ("OC"). The OC shall have the foll owing duties and responsibilities:
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Page 177 (i) Meet no less than once a year (either in person or via conference call) to review thi s Agreement and conduct matters provided hereunder;
(ii) Conduct additional meetings upon notice given by any Party, provided that the notice specifies the reason(s) for the requested meeting;
(iii) Initiate process reviews at the request of any Party for activities undertaken in the performance of this Agreement;
(iv) fn its di scretion, take other actions, including the establishment of subcommittees and/or task forces, to address any issues that the OC deems necessary in the implementation of this Agreement.
3.3.2 Operating Committee Representatives. Upon execution of thi s Agrcement, each Party shall designate a primary and alternate representati ve to thc OC and shall inform the other Parties of its designated representatives by notice. A Party may change its designated OC representati ves at any time, provided that timely notice is given to the other Parties. Each designated OC representative shall have the authority to make decisions on issues that arise during the performance of thi s Agreement.
3.3.3 Dispute Resolution. In the event of a dispute arising out of or relating to this Agreement that is not resolved by the representatives of the Parties who have been designated under Section 3.3.2 of this Agreement within 7 days of the reference to such representatives of such dispute, each Party shall, within 14 days' written notice by either Party to the other, designate a senior officer with authority and responsibility to reso lve the disputc and refer the dispute to them. The senior officer designated by each Party shall have authority to make decisions on its behalf with respect to that Party's ri ghts and obligations under this Agreement. The senior officers, once designated, shall promptly begin discussions in a good faith effort to agree upon a resolution of the dispute. If the senior officers do not agree upon a resolution of the dispute within 14 days of its referral to them, or do not within the same 14 day period agree to refer the mailer to some individual or organization for allernate dispute resolution, then either Party shall have the right to pursue any and all remedies available to it at law or in equity. Neither the giving of notice of a dispute, nor the pendency of any dispute resolution process as described in thi s Section, shall relieve a Party of its obligations under this Agreement, extend any notice period described in this Agreement or extend any period in which a Party must act as described in thi s Agreement. Notwithstanding the requirements of this section, either Party may terminate this Agreement in accordance with its provisions, or pursuant to an action at equity. The issue of whether such a termination is proper shall not be considered a dispute hereunder.
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Page 178 ARTICLE IV COORDINATION
SECTION 4.1 Process for Requesting Assistance
SECTION 4.1.1 Process for Coordinating Energy Emergency Assistance. In the event either Party needs to request energy emergency assistance from the other Party, the requesting Party shall , consistent with NERC Reliability Standard EOP-002-0 (Capacity and Energy Emergencies) and Attachment l-EOP-002-0 (Energy Emergency Alerts) of Standard EOP-002-0, issue an Energy Emergency Alert ("EEA") and, noti fy the other Party, via the RCIS of the EEA and request from that Party the assistance that the requesti ng Party believes is nceded to alleviate the problems causing the EEA. The other Party shall provide the appropri ate emergency assistance consistent with Standard EOP- 002-0. The requesting Party must noti fy the other Party, via the RCfS, when the EEA has ended.
SECTION 4.1.2 Process for Coordinating Operating Limit Violations Assistance. Ln the event either Party needs to request assistance from the other Party, the requesting Party shall , consistent with NE RC Reliability Standard IRO-004-0 (Reliabili ty Coordination - Operati ons Pl anning), Standard IRO-OOS-O (Reliability Coordination - Current Day Operations), and Standard IRO-006-0 (Reliability Coordination - Transmi ss ion Loading Relief), notify the other Party, and requcst from that Party the assistance that the requesting Party believes is needed to alleviate the operating limit violations. The other Party shall prov ide the appropri ate assistance to all eviate the operating limit vio lati ons consistent with Standard IRO-004-0, Standard IRO-OOS-O.
SECTION 4.2 Reliability Problem Identification. In the event a Party makes an identification ofa potenti al reliability problem in the other Party's Reliability Area, it will make reasonable efforts to provide telephonic, email or facsimile noti ce to the other Party as soon as possibl e. In the event such notifi cation is made, the Parties agree that the noti fy ing Party is not prov iding any warranty or guaranty that the potential pro blem actuall y exists. Thi s provision shall also include the idcntification of any Interconnecti on frequency error causing a potential rel iability problem.
SECTION 4.3 Data Exchange. The Parties shall exchange the data that they require from each other to support their respective reliability coordination tasks and duties, as set forth in Exhi bit A to thi s Agreement. In exchanging data, the Parties shall utilize the ISN or another agreed upon data exchange medium. Exhibit A shall be amended onl y upon the written agreement of both Parties. The Party requesting additional data or infonnalion to be included in Exhibit A shall provide a wri tten, reli ability-based justification to the other Party supporting the request for such additional data or information. The Party receiving a req uest to provide data has the ri ght to accept or rej ect the other Party's justifi cation. In the event a dispute ari ses regarding the need for such data to be exchanged, it shall be resolved pursuant to the Di spute Resolution process in Section 3.3.3 of thi s Agreement.
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Page 179 SECTION 4.4 Outage Coordination
SECTION 4.4.1 Planned Outages Each Party shall post transmission and generation outages to NERC SDX System. Each Party shall communicate to the other Party potenti al impacts of proposed scheduled outages. Communication of outage schedules shall occur on a regular basis as detennined jointly by the Parties or NERC requirements.
SECTION 4.4.2 Forced Outages A Party experiencing any forced generation and transmi ssion outages shall inform the other Party as soon as practicable but not to exceed thirty (3 0) minutes after the event has been identified.
SECTION 4.5 Points of Interconnection. The Parties shall exchange, and periodically update, a li st of the transmission systems within their respecti ve Reliability Areas that are points of interconnection between the Parties. Exhibit B sets forth the points of interconnection between the Midwest ISO and SaskPower Reliability Areas as of the date of thi s Agreement.
SECTION 4.5.1 Performance Review of Interconnection Facilities
The Parties shall conduct, on an annual basis, a review of the reli ability and operating perfonnance of the interconnection facilities designated in Exhibit B. The Parties shall jointly review the performance of the interconnecti on facilities within one year of the date of this Agreement, and once each contract year thereafter. The conclusions and findings of the performance review shall be reported to the DC at its next regularly scheduled meeting for consideration and further action as deemed appropri ate by the DC.
ARTICLE V FACILITY EVACUATION
If either Party is required to evacuate its operational work area, it shall noti fy the other Party of such evacuation as soon as feasible by any practical means of communications. Each Party will attempt, to the extent feasible, to assume thc Reliability Coordinator functions for the Reliability Area of the evacuating Party in such event, until the evacuating Party is able to resume operations. The OC shall address coordination between the non-evacuating Party, and other contro l centers and Rel iability Coordinators with similar capabilities, to avoid confusion in the event of an evacuation. The contact information fo r the back-up control centers, and other control centers that may assist during an evacuation, shall be reviewed on an annual basis and updated as necessary.
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Page 180 ARTICLE VI LIMITATION ON OBLIGATION
SECTION 6.1 This Agreement is not intended to affect the control that the Member Systems of the Midwest ISO and SaskPower Reliability Areas, respectively, have over their own facilities and the use thereof.
SECTION 6.2 Nothing in thi s Agreement shall require a Party or such Member Systems to construct fac ilities primarily to the benefit of the other Party or its Member Systems. Nothing in this Agreement shall require a Party or such Member Systems to take any action requiring the expenditure of funds, or acqui siti on of equipment.
SECTION 6.3 Nothing in thi s Agreement shall entitle a Party or such Member Systems to interfere with the other Party's or a Member System's right to proceed with system additions or alterations, which, in its so le opinion, are required to provide adequate and reliable service to its custom ers;
SECTION 6.4 Nothing in this Agreement shall require a Party or such Member Systems to take any action requested by the other Party, including without limitation the suppl y of emergency energy or load shedding: (i) if such actions would, in its sole judgment, cause it to violate safety, equipment, regulatory, statutory or any other requirements, or (ii) if such actions in the sole judgment of the Party undermine the reliability of the Interconnection, or (i ii) if the other Party or Member Systems of such other Party have not implemented measures comparable to those requested, consistent with Standard EOP- 002-0 (Capacity and Energy Emergencies) and Standard IRO-005-0 (Reliability Coordination ~ Current Day Operations) of the NERC Operating Manual. In the event a Member System deelines to take such requested actions, it must immediately infonn its own Reliability Coordinator so that such informati on can be immediately rel ayed to the other Party requesting such action.
SECTION 6.5 Conditions Precedent. The supply of emergency energy by SaskPower pursuant to this Agreement is subject to, and conditional upon:
(a) the receipt by SaskPower of:
(i) a Presidential Export Permit from the United States Department of Energy; (ii) any required permits or authorizations of the Canad ian National Energy Board in accordance with the National Energy Board Act (Canada); (iii) SaskPower Executive approval; and (iv) any other requi red provincial, state or federal permits, approvals or authorizations.
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Page 181 ARTICLE vn LIABILITY
SECTION 7.1 No Liability. In no event shall either Party (including its offi cers, directors, employees, and agents) be li abl e 10 the other Party, or the other Party's Member Systems, or any other person or entity, for losses or damages (whether direct, indirect, incidental, or consequential) arising out of or related to any performance, non performance or del ay in performance of an obligation or action under thi s Agreement, whether based on contract, tort, strict liability, warranty, or otherwise, including without limitation, any action or failure to act by either Party related to any request, recommendation, or requi rement of either, or another, Reliability Coordinator.
SECTION 7.2 Indemnification. Each Party shall at all times indemnify, defend, and save harmless the other Party from any and all damages, losses, claims, including cl aims and acti ons relati ng to injury to or death of any person or damage to property, demands, suits, recoveri es, costs and expenses, court costs, attorneys' fees, and all other obligations by or to third parties ari si ng out of or resul ting from its own performance of its various reliability obli gations, except in the event of rec klessness, gross negli gence, intenti onal wrongdoing, or willful misconduct by such other Party.
ARTICLE VIII MISCELLANEOUS PROVISIONS
SECTION 8.1 Termination Notice. Any termination notices required by this Agreement shall be in writing and may be given by hand or sent by first class U.S. Mail, or express mail delivery to the applicable address as provided below:
If to Midwest 150: If to SaskPowcr: Attn: Stephen G. Kozey Attn: General Counsel General Counsel and Secretary SaskPower Corporation 70 I City Center Dr. 2025 Victori a A venue Cannel, IN 46033 Regina, Saskatchewan S4P OS I Tel: I 3 17-249-5431 1 306-566-3 111 Fax : 1 3 17-249-5912 1 306-566-3 113
SECTION 8.2 Waiver. Any waiver at any time by either Party of its ri ghts under this Agreement, or wilh respect to any other matter arising in connection with this Agreement, shall not be considered a waiver with respect to any subsequent default or matter.
SECTION 8.3 Assignment. Ne ither Party shall sell, assign, or otherwise transfer any or all of this Agreement or any or all of its respecti ve ri ghts, or delegate any or all of its respecti ve obligations under this Agreement without the prior written consent of the other Party.
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Page 182 SECTION 8.4 Merger Clause. This Agreement and the Exhibits comprise the full and complete statement of the agreement between the Parties and supersedcs and cancels all prior communications, undcrstandings and agreements between the Parties, whether written or oral, expressed or implied relating to the subject matter of this Agreement. No amendments, changes or modifications to this Agreement are valid, unless made in writing and signed by a duly authorized representativc of each of the Parties.
SECTION 8.S Responsibility for Costs. No fees, or other amounts are payable as a result of application of this Agreement. Each Party shall be solely and independently responsible for its conduct and any expenses or costs incurred under thi s Agreement.
SECTION 8.6 Nature of Relationship. The Parties hereto agree that no employment, agency, joint venture, tcaming, partnership, business arrangement or fiduciary relationship shall bc deemcd to exist or arise between them with respect to this Agreement.
SECTION 8.7 Headings. The descriptive headings in the various Articles and Sections of thi s Agreement have been inserted for convenience of reference only, and shall in no way modify or restrict any of the tenns and provisions hereof.
SECTION 8.8 Exhibits. The Exhibits to this Agreement are attached hereto and incorporated by reference. The Exhibits may bc amended from time to time as specifi call y set forth in the respective Exhibits.
SECTION 8.9 Executions. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. It shall not be necessary that any single counterpart hereof be executed by all Parties so long as at least one counterpart is executed by each Party. A facsimile or photocopy of any signature shall have the same force and effect as an original.
SECTION 8.10 Other Entities. Nothing in this Agrccmcnt is intended to confer benefits upon any person or entities not a Party, including without limitation the Member Systems of the Midwest ISO or SaskPower Reliability Areas, respectively. Nothing in this Agreement shall be construed as a stipulation for the benefit of others, and no third party, including without limitation the Member Systems of the Midwcst ISO or SaskPower Reliability Areas, respectively, shall be entitled to enforcc this Agreement against either Party.
SECTION 8.11 No Representation or Warranty. Neither Party shall be deemed to make any representation or warranty, express or implied, as to the truth, accuracy or complcteness of any infonnation or data exchanged or provided (or not exchanged or provided) to the other Party pursuant to this Agreement. The receiving Party, and all persons receiving such data and information, shall be solely responsible for any reliance
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Page 183 thereon, and all in vestigation thereof, and expressly waive any and all ri ghts of recourse against the Party providing the information.
SECTION 8.12 Confidentiality
The Parties agree that thei r confidenti ality obligations under thi s Agreement shall be consistent with and subject to the requirements of the NE RC Reliability Coordinator Standards of Conduct.
IN WITNESS WHEREOF, the signatories hereto have caused this Agreement to be executed by their duly authorized offi cers.
FOR Midwest Independent Transmission System Operator, Inc . BY:._,:""~4-"='-'-';<:",-,~,,,--=- \\- 3-08 ~ Date Vr c, d "~·i t Co::, Title
FOR Saskatchewan Power Corporation
By:
By:
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Page 184 EXHIBIT A
List of Data Exchanged Pursuant to Section 4.3
The Parties will exchange the following types of data and information: (a) Real-Time and Projected Operating Data; (b) SCADA Data; (c) EMS Models; (d) Operations Planning Data; and (e) Planning Infannalion and Models. The Parties agree to exchange the following infonnation as needed to coordinate reliable operations:
1) Real-time operating information:
i) Generation status of the units in each Party's Region; ii) Transmission line status; iii) Real-time loads; iv) Scheduled use of reservations; v) TLR information, including calculation of Market Flows; vi) Real-time constraints.
2) Projected operating information:
i) Maintenance schedules; ii) Forced outage rates; on an as needed basis iii) Independent power producer information including current operating level, projected operating levels, scheduled outage start and end dates; iv) The planned and actual operational start-up dates for any permanently added, removed, or significantly altered transmission segments; and v) The planned and actual start-up testing and operational start-up dates for any permanently added, removed, or s ignificantly altered generation units.
3) Exchange of SCADA Data.
a) The Parties shall exchange requested transmission power flows, measured bus voltages, and breaker equipment statuses of their bulk transmission facilities via ICCP or ISN.
b) Each Party shall accommodate, as soon as practical, another Party's request for additional existing ICCPIISN bulk transmission data points.
c) The Parties will comply with all governing confidenti ality agreements executed by the Parties relating to ICCP/ISN data.
d) The Parties shall exchange SCADA data consisting of:
i) Status measurements 69 kV and above (breaker statuses) (as available and required to observe for reliability as the respective Parties may determine);
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Page 185 ii) Analog measurements 69 kV and above (flows and vollages); (as available and required to observe for rcli ab ility as the respecti ve Parties may determine); iii) Generation point measurements, including generator output for eaeh unit in MW and MVARS, as available; iv) Load point measurements, including bus loads, and specifi c loads at each substati on in MW and MVARS, as available; v) Control Area net interchange; vi) Control Area total load; vii) Control Area operating reserves
e) Identification of other real-time data available through ICCPIISN.
i) Models. The Parties will exchange their detailed EMS models once a year in an agreed upon formal such as the CIM format, and shall exchange updates of the files as new data becomes available. The annual exchange shall include the ICCPIISN mapping fil es, identifi cation of indi vidual bus loads, seasonal equipment ratings, and one-line drawings that shall be used to expedite the model conversion process. The Parties shaH also exchange updates that represent the incremental changes that have occurred to the EMS model since the most recent update.
ii) Operations Planning Data. Upon the written request of a Party, a Party shall provide the information speci fi ed to the extent such information is available or can be obtained.
(I) Flowgates. The Parties shall exchange the following information:
(a) Flowgate definitions including seasonal TTC, TRM, C8M, and a & b multipliers;
(b) Flowgates to be added on demand;
(c) Li sl of APC Flowgates;
(d) Li st of Flowgates to recognize when selling point-to-point service (if different than the list of AFC flowgates); and
4) T ransmission Service Reservations. The Parties shall exchange the following information:
i) Daily li st of all reservations, hourl y increment of new reservations;
ii) Reservation and interchange schedules, as required to penn it the accurate calcul ation ofTTC and ATC/AFC values;
iii) Li st of reservations from OASIS that shoul d not be considered in ATC/AFC calculations, if app licable.
II
Page 186 5) Available Flowgate Capability Data. Each Party shall meet a minimum periodicity for calculating and making available AFCs to the other Party. The minimum periodicity depends on the service being offered. Each Party shall provide the following AFC data to the other Party:
i) Hourly for first seven (7) days posted at a minimum, once per hour;
ii) Daily for days eight (8) through thirty-one (31), posted at a minimum, once per day; and
iii ) Monthly for months two (2) through twelve (12), posted at a minimum, twice per month.
6) Load Forecast. The Parties shall exchange the fo llowing load forecast data and infonnation:
i) Hourly for next seven (7) days, daily for days eight (8) through thirty-one (31), and monthly for months two (2) through twelve (12), submitted once a day;
ii) Identify the origin of the forecast (e.g., identity ofRTO, RC, Control Area, etc.);
iii) Indicate whether thi s forecast includes transmission system losses, and if it docs, indicate what the percent losses are;
iv) Identify non-confonning loads;
v) Indicate how municipal ent ities, cooperatives, and other entity loads are trcated. Indi cate whether they are included in the forecast. I f so, indicate the total load or net load after removing other entity generation; and
vi) Peak load data for each period (e.g., dai ly, weekly, and monthly) in accordance with NERC policies and procedures. For the next seven (7) day horizon, the Parties shall either supply hourly load forecasts, or they shall supply dai ly peak load forecasts with a load profi le. All load forecasts will be provided on a Control Area basis by the applicable transmission provider
7) Generator Data. The Parties shall exchange the following generator data:
i) Unit owner, bus location in model;
ii) Seasonal rati ngs, PMIN , PMAX, QMIN, QMAX;
iii) Station auxiliaries to extent gross generation has been reported;
iv) Regulated bus, target vo ltage and actual voltage; and
v) EFOR, on an as needed basis.
12
Page 187 8) Designated Network Resources. The Parties shall exchange the foll owi ng Designated Network Resource data:
i) Network Integration Transmission Service Specifications;
ii) Identifi cation of generators that serve as Designated Network Resources;
iii) Indication of treatment as pseudo tic or dynami c/static schedules;
iv) Rules for sharing output between joint owners; and
v) Transmission arrangements.
9) Control Area Net Interchange from Resenrations and Tags. The Parties shall exchange the following data concerning Control Area net interchange from reservations and tags:
i) Any grandfathered agreements that do not appear in OASIS ; and
ii) If tags and reservations can not be used to develop Co ntrol Area or zone net interchange, then provide hourly unit commitment informat ion fo r all generators in the Control Area/zone.
10) Dynamic Schedules. The Parties shall exchange the following data concerning dynamic schedules:
i) List of dynamic schedules;
ii) Identifi cation of tile dynami c schedules are being used to move load into the Control Area or out orthe Control Area;
iii ) Identification of marginal generation zones; and
iv) Actual amo unt and future projection of dynamic schedule flows. All dynamic schedule fl ows and tags will be submitted in accordance with NERC po licy and procedures.
11 ) Controllable Devices. The Parties shall exchange the following contro ll able devices data:
i) Phase shifters;
ii) DC lines; and
iii) Back-to-hack AC/DC co nverters.
I 2) Generation and Transmission Scheduled and Forced Outages. The Parties shall exchange the fo ll owing data concerning scheduled outages of generation and transmission, and forced outages:
13
Page 188 i) scheduled outages of generation resources that are planned or forecast, as soon as practicable;
ii) scheduled outages of transmission resources that arc planned or forecast, as soon as pract icable; and
iii) Notification of all fo rced outages of both generation and transmission resources, not to exceed 30 minutes after they are identified.
Cost of Data and Information Exchange. Each Party shall bear its own cost of providing the data and information to the other Parties as required under this Exhibit and otherwise under this Agreement.
Confidentiality. The Parties agree that vari ous components of the data exchanged are Confidential Information and that, in addition to the protections of Confid ential Infonnation provided under Section 8.13:
1) The Party receiving the Confidential Information shall treat the infonnation in the same confidential manncr as its governing documents require it treat the confidenti al information of its own members and market participants.
2) The receiving Party shall not release the producing Party' s Confidential Information until expi.ration of the time period controlling the producing Party's disclosure of the same information, as such period is described in the producing Party's governing documents from time to time. As of the Effective Date, thi s period is six (6) months with respect to bid or pricing data, and seven (7) calendar days for transmi ssion data after the event ends.
3) All other prerequisites app li cable to the producing Party's release of such Confidenti al Information have been satisficd as dctennined by the producing Party.
14
Page 189 EXHIBIT B POINTS OF INTERCONNECTION
The Parties shall exchange, and periodically update, a li st of the transmission systems within their respective Reliability Areas that are points of interconnection between the Parties. This Exhibit B sets forth the points of interconnection between the Midwest ISO and SaskPowcr Reliability Areas as of the date of this Agreement.
Manitoba and Saskatchewan
The Manitoba- Saskatchewan Interconnection is comprised o f 5 interconnecting lines, namely:
• 230k V Interconnection P52E
• 230kV Interconnection R25Y
• 230kV Interconnection R7I3
• 11 Ok V Interconnection 11 F and 12F
230 k V Interconnection P52£
A 23 0kV transm ission circuit designated as P52E connected synchronously between the E.B.Campbell hydroelectric switching stat ion in Saskatchewan and The Pas-Rall's Island Terminal station in Manitoba.
230 kV Intercollllection R25Y
A 230kV transmission circuit designated as R25Y connected synchronously between Yorkton switching station in Saskatchewan and the Roblin South Terminal station in Manitoba.
230 k V R 7B Interconnection
A 230kV transmission circuit designated as R7B connected synchronously bctween the Boundary Dam switching station in Saskatchewan and the Reston Terminal station in Manitoba.
J JOkV Interconnectioll llF and I2F
A II Ok V double circuit transmission line with ci rcuits designated as II F and 12F connected synchronously between the Island Falls hydroelectric station in Saskatchewan and the Border Terminal station in Manitoba.
15
Page 190 North Dakota and Saskatchewan
The North Dakota-Saskatchewan Interconnection is comprised of a single 230kV line designated as BlOT connected synchronously between the Boundary Dam switching station in Saskatchewan and the Tioga switching station in North Dakota. BlOT is equipped with a vo ltage regulating and phase shifting transformer located at the Boundary Dam switching station in Saskatchewan that faci litates control of actual power flows to interchange schedules.
16
Page 191 p,e, 1982-3192 21 October, 19B2
'.
HIS EXCELLE NCY THE GOVERNOR GENERAL I N COUNCIL, on the_ recommendation of the Minister of Energy Mines ~nd Resources , pursuant to su~sec ti on 17( 2) of the National Energy Boare Act, is 'plcilsed hereby to approve the variation of Licenc e Nos. EL-117, F.L-IIB and EL-119 issued to Saskatchewan Power Corporation by revoking subcondition 9(a) of Licence EL-117. subcondition 11(a ) of Licence EL- 116 and subcondition Sib) of Licence EL-119 therefrom and substi tu ting therefore the following;
1. in Licence EL-117, Condition 9; ." ."
" (a) shall offer s uch energy for sale t o all economically acces sible Canadian electrical u ti l iti~s on t e rms and conditions e quivalent to tho!).c under which the eXp'ort would be made as set out in Article 6.01 of the · ... Interconnection and Transaction Agreement referred to in .' Condition I, including price, adjusted for lIny dif[erences in the cost of delivery, und"
2. in Licence EL-llB , Condition 11;
n (a) shall offer such energy for sale to all e conomicall y accessible Canudian electrical u t ilities on tenns and conditions equivalent to those under "'hich the export would be made as s et ou t i n Article 6 . 02 of t he Interconnection a~d Transaction Agreement re f er red to in Condition 1 , including price . adjusted for any differences in the cost of de livery , and"
J . in Licence EL-ll9, Condit i on 5 ;
"(b) any Canadian electrical utility willinC) to buy part or all of the energy on terms and concH tlons equi.villent to tllOse under ~Ihi ch the export is made as set out in the appl i cable Service Schedule to the Int(>rconllcction and Transaction Agreement referred to in Condition G, dncluding price , adjusted for any differellces in the cost o f delivery. "
Page 192 ',,- , NATIONAL EN ERGY BOARD OFFICE N':'TIOHAL DE L'ENERGIE. ·
CERTl~ICATE OF PUB LIC CONVENIENCE AND N ~C~SSI
NO . EC-III-l'1
IN THE MATTER OF an application by Saskatchewan Power Corporat ion (hereinafter referred to ~s " Saskatchewan Power" ) pursuant to the pro'lis~ons of the Nationa l Energy Board Act for a certificate of public convenience and necessi t y under section 4 4 of Part ·11.1 the reof in r e spec t of i!! proposed 230 kV i n terna t ional power line, filed with t.he Board und e r File No . 1940-4/S7-1 .
WHEREAS an application dated the 8th day of August , 1978, has been made to t h e Nation~l Ener;;lY Board unde ::- Part III of the National Energy Board Act in respect of a pro?Osed icte r na tiona1 powe r ltne:
AND WHEREAS a public hear i ng was held commencing on the 20th day of Fe bruary, 1979 , in the City of Regina, in the Province of Saskatchewan, at whiCh Saskat.chewan Powe r and all interested parties were heard, and at which the ?re siding l~am~er , Mr . Robert A , Stead, took evidence and acquired informa t ion for the purposes of reporting to the National Energy Board on the said application , pursuant to subsection 1 4 (1) of the N~t. i on~l E:nergy Soard Act;
AND NHEREt\S the Presid ing Bamber has tr..ade a report to the National Energy Board;
AND WHERE:AS 'the Board, hav ing cons idered the Pres id ing Member I s report , and hav i ng taken into accoun t all such matters as ap?ear to i~ to be r elevant, has satisfied itself that the proposed international power line is and will be required by the present and futu r e public convenience and necessity;
AND WHEREAS the Gvvernor in Council , by Order in Council 1979-16n, dat.ed the 21st day of June, 1979, has approved the issue of t his certif i cate ;
NOW THERE FORE the National Energy Boar=, pursuant to section 44 of toe National Energy Board Act and subject to the conditions hereof , hereby issues this Ce~tificate of Public Con'lenience and Necessity to Saskatchewan Power Cor90rat i on in res;:>ect of an inter-national po .... er line bet·... een Canada and the United States of America . , ;~-.
. ' . . . /2
Page 193 - 2 -
This Ce r t ifica t e is subject to the following terms and conditions :
1. The international power line to be const ~ ucted pursuant to this certificate shall be owned and ope~ated by Saskatchewan Power Cac-paration . .
2 . The international power line shall e~tend f r om the Boundary Dam switching station ot Saskatchewan Po wer to II point located in the centre of the south boundary of Section Four , in Township One, in Range Eight , West of the Second Meridian in the Province of Saskatchewan.
3 . The route of the international power line shall be as described in the Overy iew Report for the Boundary Dam to U.S. Border 230 kV Transmission Line da~ed May 1978 which formed a part of the application. 4. The total length of the powe r line shall be approximately lS.2 kilometres . S . The international power line shall have one three-phase circuit insulated f o r 230 kV , &0 hertz operation using conductors no smaller than 954,000 circular mil ACSR . 6 . The international power line shall me e t Canadian Standards Association Standard C22 .3, No . 1 - 1976, "Ov e rhead Systems and Underground Systems".
7 •
8 . Saskatchewan Power: shall file by the 1st di!y of ~!ay , 1951, a description and diagram of the terminal facilities to be used in association with the inter:national po·... er line .
9. Saskatchewan Power shall not make any changes in t~ internatlonal power I lne or in tne terminal facilities of the s71a""1:Ine at Boundary Dam sWl t chlng stabon or In the metering ·~nout the prior approval of thT'HOard . . . /3
EC -UI-19
Page 194 --.
-3-
10. Saskatche-..an POIier shall 1rn?lelllent or ce.us" to be ~le!:le:1ted both during am after the construction of t~ l.""Item2.tlo:12.l power line the recOlllll'!nd.:ltions ard practices fer t:,~ prot es~ l ~ of _!.h~IJYk~.m. as ac.duc~ L.'1 eV1::er..ce :)efore the Eoard .
1.1. \
IS3JCD at the City of Otta·... a , in the Prov-l....nce of Ontario; this 22nd day of June, 1979.
. I SEP.L . fl/ Ce;tlliE= 10 bJ a IrU2~Op., GJ .0 c.nli/ic le 'pl I~e ~~ £n«o' - -'~ i:fulfiifti. j , l-/. t/ Sec/;tory, Notional Energy / . - Boo(~ Ccnodo. .' I . . " Do'''' 'z~ . JUIN 1979
EC-II!-19
•
Page 195 NATIONAL I:NCRGY " A,,"D OFTICE NATIONAL. DC L.'lb"t RGl t
CRIER NO. AO-I-F.C-III-19
IN '!HE MP.TI'ER CF the National Energy Bc:erd Act, the Rel!}J.latiom an.1 the International Power L1ne Re~ l.ations IIlLde thereun:1er. am
IN '!'HE MATl'ElI: CF infar!llltion reeeived !'rail 5a.sk:atehewan Power Cc:r;loTation ("Saskatchewan Power") ccncerning the deser1ptl00 of the international power llne all'"...har".1zed by Certificate No. EC-m-19. (f'1le No. 19110-11/57-1)
BE FOR E the Beard 01"1 Friday, t he 9th d~ or July 1982.
UPOO the Board haVl:l!:; been a4v1sed by saskatcheWan ~.
by a letter dated the 21st day of Cktober 1981 , or a change In amer
to describe accurately the existing interratior.a1 power line IWthorized
by Certificate No, ro-ID- 19 ;
AND UJ'(N i t e.ppearirJg desirable to the Bc:erd to note thU
change in descript1on,
IT IS ~ '!HAT the description of the location or the interraational power line &tDwn in Conlitlon 2 be am is hereby changed fiocrn: "in t he eentre of the south boun:l.ary of Section Frur" to:
"31 metres east or the centre or the 50Jth bourX1ary or Section Ijn an.1 that the le~h or the power line is clarified as 15.555 IdlCllEtres am not 15.2 k11cm:'tres 80S stated 1n COn:!.it1on II.
NATICNAL D!rnGY BOARD -£.. ~k-'-- G. Yorke Slac1er ,,~=>
Page 196