BC Hydro

Guaranteed injury to BC taxpayers

BC Hydro is in a quandary.

Premier Clark’s Government requires the utility purchase increasing amounts from independent power producers. However, consumers of electricity, particularly residential and commercial users – the only ones who contribute to BC Hydro profits – are not buying more power.

That leaves only two options:

  • Produce less power from BC Hydro’s own generators, or
  • Keep producing power but dump it outside the province for a quarter of the price BC Hydro pays IPPs.

The numbers underlying these graphs are drawn from BC Hydro reports:

 

The injury to taxpayers will grow worse. By BC Hydro Chief Apparatchik Jessica McDonald’s own words, new IPPs are coming on stream. As only one example, I’m told there are 13 ruin of river projects slated for Jervis/Princess Louisa Inlets on BC’s south coast.

ADDENDUM:

We the present day citizens of British Columbia suffer financially when smart operators and compliant politicians take advantage of our ignorance and inattention. However, maybe the worst impact will be visited on future citizens because pristine wilderness lands close to BC’s major populations are damaged. People affected are routinely ignored and dismissed and the bureaucrats charged with protecting the environment see their roles as expeditors of whatever projects are placed before them.

Read this item from 2012. It was written by someone with a direct interest in the lands of Narrows Inlet:

Guest post regarding Narrows Inlet

 

24 replies »

  1. The BC Clean Energy Act says that BC must be self-sufficient in electricity, which means
    1) we must not rely on electricity imported from the US (even though it may be cheaper), and 2) we must not rely on power from the Columbia Treaty, even though we are entitled to it.

    Consider how they keep saying demand for electricity in BC will rise 40% in years to come.

    Consider the policy which forbids BC Hydro from building any new power, except the ridiculous Site C dam, and upgrading existing facilities.

    Consider how the Clean Energy Act forbids BC Hydro from using its natural gas-powered Burrard Thermal plant, which could be a significant source of power, ostensibly due to CO2 emissions. Note that one of the uses of LNG, when exported to Asia, is to be burned in plants similar to Burrard Thermal.

    Consider the massive benefit all this gives to IPPs in BC, at BC Hydro's expense.

    Consider how Jessica McDonald was Gordon Campbell's Deputy Premier at the time the Clean Energy Act was being made. And how she is now CEO of BC Hydro.

    Consider how Innergex (a major IPP company in Canada) recently sponsored a Board of Trade meeting featuring Jessica McDonald.

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  2. Section 14 of the BC Clean Energy Act:

    Sale of heritage assets prohibited
    14 (1) The authority (BC Hydro) must not sell or otherwise dispose of the heritage assets (old BC Hydro dams).

    (2) Nothing in subsection (1) prevents the authority from disposing of heritage assets if the assets disposed of are no longer used or useful for their intended purpose, or they are to be replaced with one or more assets that will perform similar functions.

    In other words, if we have so much IPP power, we don't need one or two of those old dams.

    http://www.bclaws.ca/civix/document/id/complete/statreg/10022_01

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  3. All of which would be fine if the cost per unit were the same for the red and yellow lines.

    Unfortunately, as Norm and others have made very clear, the costs for each up-tick of the yellow line costs us far more than an equal down-tick of the red line.

    And I think it is not unreasonable to suggest that even luddite farmers with law degrees understand what that really means, budget-wise.

    .

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  4. And here I thought Minister Bill Bennett wanted to save us poor taxpayers some money ?

    ” BC Hydro will cancel as many as 10 electricity purchase contracts with independent power producers and defer delivery dates on nine more as part of the province’s mandate to reduce the utility’s cost ” ” “When I said to Hydro ‘find ways to spend less,’ I wasn’t specifically thinking about buying less electricity,” Bennett said “They came back and said these IPP proponents have not performed, we could get out of those contracts, or perhaps defer delivery to a date in time when we need the electricity.”

    That was September 2013….. and I guess we need the power now….despite

    “BC Hydro, in its Integrated Resource Plan released Aug. 23, determined that, between existing power sources and estimated conservation of electricity, it can meet B.C.’s short term needs, but a gap between supply and demand would emerge within 10 years.”

    Guy in Victoria

    http://www.vancouversun.com/technology/Hydro+cancel+independent+power+deals+defer+delivery+some+others/8855422/story.html?__lsa=bd8e-b67a

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  5. Liberals were required to not run a deficit by an act of the Legislature. When they wanted to run a deficit, they simply changed the law. Wham, bam, thank you.

    The Clean Energy Act says what it says because people dictating to Christy Clark are happy. If the BC Government comes to its senses after the next election, energy policy would be rationalized. However. There are 60+ billions of dollars due to IPPs (rates far above market) and more billions of deferred expenses and questionable capital expenses that must be written off.

    No matter who is elected in 2017, electricity rates will rise dramatically. The mess has been created already; its cleanup will be costly and difficult. Heavy Industries have grown reliant on power that has them paying about 40% of BC Hydro's marginal cost of electricity. That means that residential customers and small businesses and light industry will be stuck with giant increases.

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  6. It is one more example of a politician saying what is convenient and what he/she thinks the public wants to hear. Afterward, absolutely nothing is done to achieve what was said and implied.

    In this case, both the volume and average price increased substantially after Bennett's words. Perhaps he's been too often tired and emotional and can't properly address his responsibilities.

    .

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  7. Norm, I notice that no Liberal supporters or BC Hydro reps show up in comments to dispute anything you write. Are you blocking their comments or do they have no response?

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  8. It's the latter. To dispute the information about BC Hydro's sales and purchases they would have to find fault with years of BC Hydro's Annual Reports since the data I use comes primarily from those or Hydro's Quarterly Reports.

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  9. Would it be fair to say that BC Hydro could have kept their own sources (red line) fairly flat, since 2007… that they had the capacity in their legacy dams to meet the demands of the province?

    Also, to get this clear in my mind on your statement, “Heavy Industries have grown reliant on power that has them paying about 40% of BC Hydro's marginal cost of electricity.” Are you saying that heavy industry pays 60% LESS than the combined cost of producing legacy power + the cost of IPP purchases?

    Please remind us what legacy power costs to produce.

    Thanks for all you do, Norm!

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  10. Thanks to you and other engaged readers.

    BC Hydro does not make public reports of costs incurred at its various generating facilities nor does it allow us to see the costs and outputs of specific IPP contracts or classes of IPP contracts. However, it does report the total cost and total number of gigawatt hours taken from all IPPs. The cost of water running through generators at BC Hydro dams is reported (less than 1 cent per KWh) but there are additional fixed and variable costs of production at those sites.

    Additionally, BC Hydro pays collection and distribution costs for all power, whether from public or private facilities. BCH knows those costs but does not report them externally.

    In the quarter ended Dec 2014, BCH bought IPP energy for 8.15 cents a KWh. In the last quarter of 2015, it paid 9.14 cents, a 12% rise in average unit cost. Buying more power from privates seems not to reduce the price. The evidence demonstrates that an extra KWh of power from privates will cost on average about $0.10 but we know some suppliers are being paid even more. We also have to add collection and transmission costs and those tend to be higher because the IPPs are small scale and widely distributed.

    The notoriously inaccurate provincial government admits Site C cost of power will be above $0.12 per KWh. Given the usual cost escalation of Liberal capital projects, the number will likely land well over $0.15.

    BC Hydro was servicing its customers' needs before it began buying significant amounts of electricity from IPPs. Since demand has not risen in recent years, it would still be able to meet domestic customer needs without the power provided by recently contracted private operators or by Site C.

    When I refer to marginal cost of power, it means the amount to be paid for new power, over and above what is available today. That could come from privates or from new generators on new or existing dams.

    Heavy industry has been paying about $0.05 per KWh and, as we’ve seen with mining companies, they claim that is too heavy a price. When Red Chris mine began taking power, BC Hydro faced about a $1 billion expense for a transmission line to service them. So, while I say that the industrial customer is paying less than half Hydro’s marginal cost of power, that tells only part of the story, since the cost of delivering power to remote areas should be factored in as well.

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  11. Thanks again for the indisputable detail Norm. Some of this has to gain traction sometime.

    Have you been following Laila's work around the Hydro Hearings and her detail on Hydro's years of neglect at the Bennett Dam?
    http://lailayuile.com/

    Extremely dire consequences could happen there.
    Hawgwash.

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  12. Of course, Laila is doing excellent work. Not only does she report vital news about BC Hydro but she helps reveal the failures of BC's mainstream media. Citizen journalists are showing how special interests are looting the province, with resource and energy companies scoring billions and insiders like Gordon Wilson and Judi Tyabji-Wilson banking hundreds of thousands. Even when incompetence or duplicity is brazen, media sycophants ignore it or whitewash it.

    With jobs in media declining, too many reporters and commentators want to please the people who might soon be paying their wages. Remember the fuss about CBC's Victoria Bureau Chief being domestic partner with the Premier's Press Secretary. Stephen Smart's media colleagues claimed that we should trust his objectivity. Well, guess where he works now? A hint: he's often seen with his old Press Gallery mates only now his salary is paid by taxpayers.

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  13. There's a real drop from BC Hydro sources around 2015-2016. Do you know what's going on there? They wouldn't be deliberately lowering their own output?

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  14. They either reduce the power generated at BC Hydro facilities or they export the surplus power. Either way, it's a bad deal for taxpayers because the exported power in the last quarter was sold for 3.5¢ a KWh and they were paying 9.1¢ a KWh to IPPs, plus the cost of collecting the private power for BC Hydro's system.

    Had BC Hydro not purchased power from IPPs, domestic customers could have used the electricity instead of users outside BC. Taxpayers would have been ahead more than $100 million a month.

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  15. Quote from a 2012 article:

    “After a bumper year for precipitation in the Pacific Northwest, BC Hydro stations around British Columbia are sitting idle while independent power producers run flat out.

    There's so much water available for hydroelectric power that a Washington-Oregon utility, which runs full-time to protect salmon and trout, is paying other utilities to take electricity off its hands.

    That means bargain-priced import electricity is available to BC Hydro from the Bonneville Power Authority, but it's a bittersweet opportunity.

    It's difficult for BC Hydro to tap into the cheap power because of contractual obligations to purchase power from about 75 independent power producers (IPPs). Hydro is forced to buy from IPP operators, including big industrial ones such as Rio Tinto Alcan and Teck Resources, even as its own generation stations wait on standby. For example, at Peace Canyon generating station downstream of W.A.C. Bennett Dam on the Peace River, the primary source of hydroelectricity for all of B.C., the turbines are sitting idle for the first time in a decade.”

    http://www.vancouversun.com/technology/Hydro+awash+private+power/6605915/story.html?__lsa=b3bf-4fbf

    The article quotes David Austin at the bottom, who works for IPPs:

    https://www.cwilson.com/people/10-profiles/101-david-austin/profile.html

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  16. In your previous post you showed the cost of IPP power this year averaging $0.091 per KWh. In MWh wouldn't that be $91 per MWh?

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  17. Austin claims breathlessly that prices “shot above $1,000 per megawatt – more than 20 times Hydro's average production cost.”

    Makes a good quote but Austin is selling absolute B.S.

    Look at data prepared by the U.S. Energy Information Administration and you will find recent market prices have varied between $20 and $45 per megawatt. Additionally, the power purchased from IPPs cost over $90 per MWh according to BC Hydro's latest quarterly report and government admits the cost of Site C power will be $120 per Mwh, although it's more likely to be closer to $150.

    There is so much misinformation being spread by people whose hands are in the public trough and newspapers like the Vancouver Sun happily echo the lies. The owner Postmedia now sees itself a “partner” with industries that are taking advantage of crooked politicians and uninformed citizens.

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  18. Hugh, you are sharp eyed and correct.

    Switching between KWh, MWh and GWh, I create difficulties for readers and myself. As consumers, we think in terms of kilowatts (1,000 watts) but suppliers and system operators think of Megawatts (million watts) and Gigawatts (billion watts).

    I've corrected the mistakes in a revised comment. Thanks for pointing out the mistake.

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  19. From BC Hydro 2014/2015 Annual Report, p. 17:

    “Strategies:
    • As outlined in the Integrated Resource Plan, advance a set of actions that support a healthy, diverse clean energy sector (IPPs) and promote clean energy opportunities for First Nations (IPPs).

    • Support the Province’s economic development priorities with implementation of such projects as: the Northwest Transmission Line; transmission upgrades required to supply the initial 3,000 gigawatt hours of LNG load and to prepare to meet future LNG requirements; and, clean energy opportunities for First Nations.”

    In other words, get BC Hydro to purchase even more power from IPPs, in anticipation of power demand growth from LNG plants in BC. This also explains Site C, and the expensive new power-lines.

    Except that LNG is not happening because it doesn't make any economic or environmental sense. This is highly problematic.

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  20. Let us cast our minds back and consider if there is any precedent in BC History for:

    – A major expenditure of public dollars committed with the hope of stimulating growth of an industry.

    – A project conceived and planned by politicians instead of specialists with knowledge of subject international markets.

    – Substantial spending made without a business plan examined and approved by experts and available for public review and comment.

    If you think of anything, compare the role of mainstream media then and now, particularly involving political pundits in the Press Gallery. In all cases, did they routinely dig for facts, ask probing questions, get information and inform the public? Did stories of questionable public actions and expenditures make headlines without regard for vested interests?

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  21. Vaughn Palmer is rather late to this position. So late, that his motives can be questioned. Where was he when citizen journalists and independent experts started pointing out the obstacles to any significant LNG industry?

    It has long been apparent that LNG was a scheme created for political advantage by BC Liberals. The lied about potential benefits and costs in a manner that jumped the shark like no political strategy in our history.

    IMO, this is part of the puff ball Palmer style. Had he and his mainstream media colleagues been diligent in reporting misdirection and fraudulent claims of the BC government, we might have saved billions of dollars, not just with Site C but also the IPP ripoffs.

    Like

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