Every fall the Board of NOTL Hydro approves a capital budget for NOTL Hydro for the upcoming year. As electricity distribution is an asset intensive business the size of this budget is very important. If it is too small, the electrical system in the Town will gradually age and eventually the performance of the system will suffer. Once it reaches that point you suddenly have to invest a lot of money in the system. There are municipalities in Ontario for which this is an issue. On the other hand, if you spend too much every year you are overinvesting, likely not getting much benefit from much of this investment and driving up your distribution rates to pay for it.
We break our capital expenditure into the following components: new services, system rebuilds (underground), system rebuilds (overhead), smart grid, general plant, transformers and special projects. The table below summarizes our expenditures since 2014 and our forecast expenditures until 2025.
New Services
This expenditure is driven by new housing and new businesses in Niagara-on-the-Lake so is not an expenditure we control. Some of these expenditures are paid for by the builder or business. We have seen a decline in new services recently and are forecasting a continued lower level but that could change if there are some significant new developments.
System Rebuilds (Underground)
These are primarily the voltage conversion projects whereby we are replacing old wiring, moving the wiring underground and converting the voltage to 27,600 volts. However, we are also starting to need to replace existing underground wiring such as in Garrison Village. Over time, the conduit pipes and the wire coating can deteriorate creating the potential for water contacts. These can cause a short and an outage. The amount spent on both underground and overhead rebuilds will vary from year to year depending on the projects.
System Rebuilds (Overhead)
It is important to maintain a steady annual spend on capital rebuilds. This is an area where it is easy to appear to “save” money by shortchanging these expenditures. However, eventually this catches up to you with worsening outage performance and the growing challenge to catch-up on the missed spending. Our overhead rebuilds are also voltage conversions as we replace the poles and wires in rural areas of the Town.
General Plant
These are the general expenditures to support our operations such as IT, the office building and tools. IT is usually the biggest expenditure as the number and sophistication of the systems supporting our operation continues to grow. In 2020 and 2021 we renovated our office building.
Smart Grid
These are expenditures designed to improve the performance of the distribution system. Most of the expenditures are on automated switches, trip-savers and reclosures. Trip-savers and reclosures allow the system to automatically re-establish itself after a one-time contact and short. When the power goes off for a second but immediately comes back on it is this equipment working. Automated switches allow us to remotely adjust the flow of the electricity over the system. This can allow us to quickly re-establish power over a section of the system and to isolate an outage to its immediate vicinity.
Transformers
The installation of new transformers at our two stations that connect with the Hydro One grid are our biggest individual expenditures. In 2015 we replaced an old 25 MVa transformer with a new 50 MVa transformer at our NOTL Station. In 2019-2020 we replaced our 41.7 MVa transformer with an 83 MVa transformer at our York Station. We then moved the 41.7 MVa transformer to our NOTL Station where it replaced an old 25 MVa transformer. This project had a budget of $3.5 million. NOTL Hydro is now well positioned in this regard and we do not anticipate any expenditures in this regard for a number of years.
Special Projects / Vehicles
Our vehicles are sizable expenditures, especially our large trucks which can cost over $300 thousand each. Our next one of these is planned for 2023 but with the current supply chain challenges it may not arrive until 2024. Special projects cover one-time items of significance. For instance, in 2019-2020 NOTL Hydro invested in a small 250 kV battery to test offsetting short circuit issues with distributed generation while in 2022 NOTL Hydro is purchasing a small excavator and related equipment for our new underground team.
Niagara Region recently approved the Glendale District Plan that when implemented could see the population of Glendale grow to 15,000 residents. The Plan lays out a broad plan for new builds within the 400 hectares of developable lands in Glendale. This will result in demands for New Services. I would suggest that your future projections consider this new growth.