Dear Sir,

The latest Belco newsletter had a grenade hidden under the usual cotton candy:

“... the Fuel Adjustment Rate will increase from the existing rate of 16.513 cents per kilowatt-hour ... to 24.517 cents per kilowatt-hour ...”

That is a 50 per cent increase.

The FAR was put in place when oil prices changed by large amounts within weeks. The idea was that rates might be based on a low oil price (say $50) but then next quarter the might price jump to $100. Fair enough.

Fuel prices today have not increased by 50 per cent; the reason for this jump is buried little deeper.

By choosing the fuel it is burning, Belco is using the mechanism to insulate itself from costs that should not fairly be passed on to its customers.

The way that works is that heavy fuel oil is cheap, light fuel oil (diesel in this case) is expensive. Belco should burn mostly HFO, so the FAR should be based on, say, 90 per cent HFO and 10 per cent diesel. What has happened recently is that Belco has drastically increased the amount of “expensive” fuel (diesel) it has been burning, so the total cost of the fuel burnt has jumped.

The cost increase is not about the cost of the fuel, it is about their choice to burn more of the much more expensive fuel.

Remember, this is not just a one-month or three-month surcharge, it will continue for as long as Belco chooses to burn diesel instead of HFO.

The reason for this goes back to the “soot problem” with the new engines in the new North Power Station.

When they ordered the engines, Belco/Algonquin/Liberty made a mistake. They wanted to use LNG as a fuel. (After all, LNG is Algonquin’s main business.) They were so sure they would get their way that they chose to have the new engines configured to burn LNG as their primary fuel.

This despite the decision on LNG not being theirs to make. That decision was up to the RA — on our collective behalf — via the Request For Proposal process.

When the fuel decision went against Belco/Algonquin/Liberty, they did not modify the engine specification. They chose to run them as is on heavy fuel oil — their secondary fuel.

These two Belco/Algonquin/Liberty choices had consequences.

The machines run perfectly well on HFO but they also discharge a lot more soot. The exhaust systems do not have the equipment necessary to remove this soot — they, too, were designed for the LNG fuel option — so that soot accumulates and is ejected in gross “clumps” from the stacks and falls on the surrounding roofs, cars, laundry, walkways, etc. By now this memory should be coming into focus.

At this point, fixing the soot problem can involve one or a mix of solutions:

• Additional, more fundamental and expensive, modification of the engines to get them closer to the configuration that would burn HFO without generating excess soot. Belco actually did the cheap first steps of this process when it installed its “new piston crowns and shims”. The next steps will be much more costly and Belco would have to pay the costs. Operation of the engines would not be materially affected.

• Addition of exhaust-side cleaning equipment so the soot doesn’t go out the stacks. These are systems that are almost “off the shelf”. They are standard practice on many marine and stationary diesels of the type Belco has installed. These systems cost money but likely not as much as some of the engine modifications. It would incur ongoing operating and maintenance expenses, although these would not be excessive. These costs would all be to Belco’s account.

• Belco has actually decide to burn high-quality, high-priced diesel fuel instead of HFO. This reduces the amount of soot generated and the “fallout”. This alternative costs nothing to implement, but it means that every gallon of fuel consumed is far more expensive. This increases the fuel cost by a lot — 50 per cent or so — for ever. This cost should be borne by Belco since it is actually the cost of fixing the soot-fallout problem and not part of the “regular operations” of the power generation system.

So here it is:

• The recent 50 per cent increase in the Fuel Adjustment Rate is not owing to increased prices in the fuel supply chain

• The increase reflects the option that Belco has chosen to use to fix the soot-fallout problem

• Fixing the soot problem is entirely the responsibility of Belco/Algonquin/Liberty, who specified the engines for the wrong fuel in the first place.

This added cost should not be billed to customers.

The responsibility for allowing this belongs to the Regulatory Authority:

• If the RA approved this increase, it was were wrong to do so

• If the increase was not subject to approval, it should be — fix this!

• If the regulatory wording is insufficient or ambiguous and the increase exploits a loophole, fix this!

We pay a lot of money to the RA through the rate surcharge on our bills.

It needs to make it explicitly and legally clear to Belco that all costs associated with mitigating the pollution because of the error in the original fuel specification for the engines must be borne Belco and not borne by Belco customers.

The RA and Government need to step up and correct this rip-off immediately.

JAN CARD

Smith’s