Program adds competitive edge, companies say
Marc Boissonneault said the program, which gives large industrial users a break on electricity prices, allows the company to be competitive on the international market.
That's especially true when Xstrata Nickel bids to process other companies' material at their smelter in Falconbridge, he said.
“This particular facility is an electric-based smelter,” said Boissonneault, speaking at the announcement, which was held at the smelter.
“So you can imagine, it's the core centre of the Xstrata Nickel business, and it runs off electricity.”
Participants in the program receive a rebate of two cents per kilowatt hour, up to a maximum of 2011-12 eligible consumption levels, or $20 million per year – whichever is lower.
As electricity can cost up to nine cents per kilowatt hour, knocking off two cents makes a big difference for large electricity users, said Boissonneault.
“In an industry where you're trying to process other companies' feed materials, you're making a very narrow margin on some metal recovery,” he said.
“Even a 15 per cent difference in electricity rate is quite influential to whether or not you can bid for a third party's nickel concentrate, all of which we try to attract here. Two cents per kilowatt hour certainly is material.”
While the program could always be better, Boissonneault said the program puts the company “in a roughly competitive situation with our neighbours, when we look at competing jurisdictions.”
Companies participating in the program are required to submit an energy efficiency plan to the Ministry of Northern Development and Mines and the Ministry of the Environment.
“We've taken a number of steps to consume electricity at times of the day that is most advantageous to the province,” Boissonneault said. “So we'll run the smelter at a higher level at night, for instance, when there's more electricity available.”
Sudbury MPP Rick Bartolucci, who made the announcement, was asked by reporters how the renewal of the program would impact Cliffs Natural Resources plans to build a smelter in the Capreol area by 2016.
The company has said in the past it was concerned about the high energy rates in the province.
“To presuppose which company is going to use the program is a bit presumptuous,” Bartolucci said.
“I'm not about to reflect that or go down that road, which would be very inappropriate, as you know. However, we know (energy rates are) part of the discussions that Cliffs is having with the provincial government.”
When asked about the likelihood the program will be renewed again in three years, Bartolucci said it's impossible for him to know.
“If I was a fortune-teller, I would be able to say,” he said.
“What the government of the day would do, I would only speculate. I think you see the success of the program, and the importance of the program. If I were still where I am now, I would be advocating for the program, because it is so good.”
Kelly Strong, Vale's vice-president of Ontario and UK operations, also spoke about the program renewal at the press conference.
“As many of you know, at Vale, we're one of the largest consumers of electricity in Ontario,” he said.
“Energy remains our second largest cost next to labour. At times, we're faced with challenges such as lower commodity prices.
“Any kind of relief such as this program is certainly welcome. I believe today's announcement is an important step to keep northern communities competitive on the market.”
As for what Vale is doing to improve energy efficiency, the company recently invested $50 million in Rail-Veyor technology at its 114 ore body in Copper Cliff, Strong said.
Rail-Veyor uses a light rail track system with a series of interconnected cars to transport materials. “This project has the ability to reduce our energy costs by 40 per cent, something we're very excited about at Vale.”