Assessment of Incremental Utility Revenues in the NWT
The GNWT commissioned a study in 2021-2022 to look at the NWT’s hydroelectricity surplus generation capacity and recommend ways to support investments to switch to using more of that surplus hydro power without resulting in new system-wide costs.
One of the six objectives of the 2030 Energy Strategy is to develop the NWT’s energy potential, address industry emissions and do our part to meet the national climate change objectives.
The NWT has surplus generation capacity on its two hydro grids, Snare and Taltson, most months of the year. Developing ways to use this surplus capacity would provide additional revenues to utilities. It could also contribute to decreasing power rates and reducing greenhouse gas emissions, assisting the NWT in meeting the objectives of the 2030 Energy Strategy.
Providing fuel-switching incentives through targeted rate design programs is common across North America. The study looked at load growth programs (load growth means growth in electricity sales) offered by 25 utilities across Canada and the United States to identify three opportunities in the NWT that could lead to the use of its surplus hydro capacity.
- Targeted fuel-switching (electrification) can provide incremental revenues and help reduce rate increases for all consumers, given the fixed cost nature of the electricity grid.
- Updated rate designs can also be used for economic development purposes by providing reduced charges or rates for businesses that invest in the NWT.
- Fuel-switching also provides an environmental benefit by utilizing emissions-free hydroelectric energy for space and water heating as opposed to propane or heating oil.
Scenarios considering various levels of adoption and rates estimate such measures could annually add five to 42 Gigawatt hours of power demand on hydro grids, corresponding to $160,000 to $1.28 million in incremental revenues for utilities.
The study had five recommendations. These recommendations would only apply to customers in the NWT’s two hydro rate zones – Taltson and Snare.
- Implement a utility-led fuel switching program through rate design for residential, commercial, and government customers, with a focus on space and water heating. The program should rely on a rate design that encourages increases in the use of the surplus hydro but could be expanded to include direct incentives (e.g., rebates, low-cost financing).
- Provide on-bill financing for metering and grid investments required as part of the fuel-switching program. On-bill financing is a loan made to a customer to pay for these metering and grid investments.
- Offer development rates and other incentives for industrial and commercial customers – such as:
- Reduced demand charges for new electricity loads for medium-volume customers.
- Reduced rate for blocks of surplus hydro for large industrial costumers on the Taltson grid.
- Reduced energy rate based on marginal cost of hydro generation for large-volume customers not eligible for the previous option.
- Offer interruptible rates, with a different approach for the Taltson and Snare grids:
- For Taltson: Tie the electric heating rate to the marginal cost of hydroelectricity (as opposed to a discount to fuel oil).
- For Snare: Introduce an interruptible rate for the peak winter months that allows customers to pay a lower rate for a service that is interruptible or design a heating rate that considers the use of diesel during peak load periods.
- Consider developing an electric vehicle charging rate, with a different approach for the Taltson and Snare grids.
Read the full report.