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Ontario regulator wants best price from Hydro One, NextBridge for 230-kV line

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Ontario regulator wants best price from Hydro One, NextBridge for 230-kV line

Ontario's energy regulator wants rivals Hydro One Ltd. and NextBridge Infrastructure to give a hard cap on the cost of an electricity transmission system they are vying to build.

The Ontario Energy Board, or OEB, asked both companies to add a "not-to-exceed" price for the Lake Superior Link network before the end of January 2019, Hydro One said. The provincial government-controlled distribution utility said the decision was influenced by its plan to set a cap on the cost of the project, according to a Hydro One statement. The Dec. 20 OEB order said the not-to-exceed, or NTE, price will be the final step before it allows one of the applicants to start construction on the line.

"Hydro One has submitted a not-to-exceed price with a cost escalation condition linked to environmental approvals," the regulator's order said. "NextBridge has chosen not to submit a NTE price against the backdrop of its escalating construction costs. In order to compare the applications on a level-playing field and to mitigate ratepayer risk, the OEB will allow the NextBridge and Hydro One to file a NTE price based on OEB-stipulated conditions on January 31, 2019."

Hydro One unit Hydro One Networks Inc. filed a competing proposal in February to build the system after the OEB had already commissioned NextBridge to do preliminary work. Hydro One proposed a 368-kilometer line and related infrastructure for C$636.2 million, undercutting NextBridge's capital cost bid by about C$120 million. The company said it would achieve much of the savings by using a shorter and narrower route than the competing project.

Ontario's government declared an east-west tie project a priority in 2016. NextBridge proposed its 450-kilometer project with an initial cost estimate of C$419 million, which had ballooned to approximately C$777.2 million by the end of July 2017. The increased cost prompted the province to request a re-evaluation of the project. In its Dec. 20 order, the OEB said NextBridge could recover about C$31.2 million in development costs from ratepayers.

Hydro One is proposing a 230-kV, double-circuit transmission line that would run in a right of way that would roughly parallel that of its existing 230-kV line. The new line would span 368 kilometers and include a 57-kilometer bypass of two northern Ontario communities. The application said Hydro One is in discussions with Parks Canada to convert approximately 35 kilometers of the existing 230-kV, double-circuit line within Pukaskwa National Park to a four-circuit line.

NextBridge is owned by affiliates of NextEra Energy Inc., Enbridge Inc. and OMERS Infrastructure Management Inc., the investment arm of Ontario's municipal employee pension fund. (OEB docket EB-2017-0364)