SaskPower CEO says $20M worth of carbon capture penalties are in the past

SaskPower's CEO says he does not expect to pay anymore penalties because the company's carbon capture facility at Boundary Dam 3 is operating well.

Last year,SaskPower was forced to pay shortfall penalties of $7.3 millionto Cenovus Energy for failing to meet its contractual obligations for deliveryof capturedCO2 at the $1.5-billionBoundary Dam 3 facility.

It paid the Alberta energycompany a $12-million penalty in 2014.

The company made $15.1 million in sales of CO2 to Cenovus in 2015-16.

"The revenues more than offset the shortfall payments,"SaskPowerCEOMike Marsh said.

"We don't expect to be paying any shortfall penalties as long as the plant continues to operate."

The powercompanyexpects to receive between $15 and $20 million dollars in CO2 sales this year toCenovusalone if theplant is working at capability.SaskPowercould stand to make even more if it can find another buyer for CO2.

"We are now in the process of negotiating with other off-takers for potential second contract for additional CO2 sales," Marsh said.

• Carbon capture plant delay costing SaskPower millions

Marsh said the company expects Boundary Dam 3 to capture its first milliontonnes of CO2 sometime in the next few weeks. He said the plant should capture 800,000tonnes of CO2 in 2016.

SaskPower has set a deadline of the end of 2017 to make a decision on whether to convert Boundary Dam 4 and 5 to carbon capture. Federal regulations on carbon emissions will force SaskPower to decide on that conversion before Dec. 31, 2019.

SaskPowernet income down - rate increases to continue

The province changed itsfinancial reporting period to end on Mar.31 instead of Dec.31. SaskPower reported net income of $60 million in 2014-15.

For the 15-month period ending Mar.31, 2016, the company reported a net income of $26 million.

Thepower company is investing $1.2 billion this year towards building and improving the province's electrical system.

It expects to continueto invest close to that amount over the next few years.

Rate increases

Customers in the province can expect rate increases to continue as well.SaskPowerasked to hike rates twice in six months by five per cent thisJuly 1and by anotherfive per cent on Jan.1, 2017.

• SaskPower bills to increase again

"Rate increases are inevitable," Marshsaid.

"Next year we may be in a position to have a lower rate increase and possibly not even a rate increaseat all in the next fiscal year if we can achieve what we've asked for in this rate application," Marsh said.

SaskPower's CEOsaid he expects a rateincrease in 2018-19 of close to fiveper cent.