N.L. Hydro propping up Corner Brook paper mill by buying its overpriced — and unneeded — electricity
In a 6-month period last year, N.L. Hydro spent $22M for power at a rate of 27.5 cents per kWh
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The provincial government, through its Crown-owned utility company, is helping prop up the struggling newsprint mill in Newfoundland and Labrador by buying unnecessary electricity from Corner Brook Pulp and Paper at an inflated rate.
It's power that Newfoundland and Labrador Hydro does not need to supply customers, according to the utility company.
"This contract is not considered part of our long-term resource adequacy planning to meet demand for island customers," a spokesperson for N.L. Hydro wrote in a statement to CBC News.
N.L. Hydro has confirmed that it is buying electricity from Deer Lake Power, which energizes the paper-making machines at the Corner Brook mill, for 27.5 cents per kilowatt hour.
That's nearly twice the average domestic electricity rate — 15.3 cents, when the basic customer charge is included — on the island of Newfoundland.
By comparison, N.L. Hydro is purchasing power from the Rattle Brook hydro station near Jackson's Arm for 11.228 cents in the winter months, and 8.682 cents in the summer. Rattle Brook is a four-megawatt plant owned by Algonquin Power, an independent power producer.
The provincial government directed N.L. Hydro to buy electricity from Deer Lake Power through a six-month agreement announced on March 15, 2024, several weeks after it had been signed.
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By the time the contract expired on July 31, N.L. Hydro had purchased 80,000 megawatt hours of electricity — at a cost of $22 million — from the century-old hydroelectric plant in Deer Lake, which has a capacity of 129 megawatts.
Last fall, the provincial government announced the contract was extended for another six months under the same terms, and is set to expire in March.
The provincial government has defended the contracts, at a time when paper mills throughout Canada have been dropping like flies in the past two decades.
At the industry's peak, there were three paper mills in Newfoundland and Labrador, with Stephenville's closing in 2005 and the Grand Falls-Windsor mill closing four years later.
The power purchase agreement is meant to help "stabilize" Corner Brook Pulp and Paper, its workers and the forestry industry during challenging times in the global newsprint market, the province has said.
Finance Minister Siobhan Coady declined an interview, but in a statement, a department spokesperson wrote that "discussions with Corner Brook Pulp and Paper Limited are ongoing as the company works on strategies to diversify its operations."
N.L. Hydro said the contracts will not affect domestic electricity rates.
Both the paper mill and the hydroelectric power station are owned by Quebec-based Kruger Inc.
Kruger spokesperson Jean Majeau said a company task force is "actively working on evaluating viable concepts to diversity our operations. This is progress toward our final diversification plan and why the agreement has been extended under the same conditions."
History of help
The power purchase agreement is just the latest attempt to save the Corner Brook mill by both Liberal and Progressive Conservative governments.
In 2014, the government signed off on a $110-million loan, with the company required to make quarterly payments of $1.85 million.
But the company made just three payments, and the the loan's balance has now swelled to $122.7 million as of March 31, 2024.
The loan to Corner Brook Pulp and Paper Limited is secured by a mortgage over the company's power assets and water rights, including the Deer Lake power plant and Watson's Brook power plant.
The Corner Brook mill currently operates two paper machines with an annual production capacity of 245,000 tonnes, according to provincial government budget documents from last year. Over all its operations, the company employs about 425 workers.
Newsprint production grew seven per cent to 226,986 tonnes in 2023, but the value of those exports dropped by 10.6 per cent to $174.7 million, with India as the No. 1 market.
Kruger has described Corner Brook Pulp and Paper as a "vital force" in western Newfoundland's economy. In 2021, the company said payroll and benefits totalled $40 million, average annual salaries were $82,000, and the company spent more than $100 million on goods and services.
Majeau said the company will update those figures in the coming days.
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