I. Introduction

In 2009, BC Hydro (“BCH”) and Zellstoff Celgar Limited Partnership (“Celgar”)1 entered into an Electricity Purchase Agreement (“2009 EPA”) that specifies an annual Generator Baseline (“GBL”) of 349 GWh/year for generation from the facilities at Celgar.2 This memo addresses the GBL methodology applied by BCH to Celgar, and compares it with BCH’s general GBL methodology.

II. Celgar GBL Methodology and Relevant Background

Celgar did not have an existing EPA (or similar agreement) at the time it entered into the 2009 EPA. Prior to the EPA, Celgar operated a 52 MW turbine generator to supply the mill’s load.3 In 2005, Mercer invested in a series of mill operations improvement projects at the Celgar mill, which it dubbed “Blue Goose.” These projects were aimed primarily at increasing pulp production efficiency, though some electricity generation efficiencies were also gained through these projects.4 Celgar did not receive any incentives from BCH to build its 52 MW generator in 1993 or to implement the mill operations improvement projects that it undertook prior to participating in the Bioenergy Call for Power (and prior to commencing EPA negotiations), including Blue Goose.