BC Hydro

What’s wrong with this picture?

What’s really wrong is that BC Hydro has been spending billions on new capacity but producing less power. Demand has not grown since 2005 but purchases from IPPs, between FY 2005 and FY 2015, rose 108% from 6,444 GWh to 13,377. The purchasing is up again in 2016, by about 11%. The cost of IPP power was almost $500 million more in FY 2015 than in 2013.

When you’re determined to reward IPP friends but have too much power and no profitable export markets, you shut down your own low-cost operations:

power sources

One other route is to pay IPPs to do nothing.

BC Hydro Paying Millions to Independent Power Producers to Not Produce Power Due to Oversupply, Desmog Canada, April 5, 2016

Economist Erik Andersen drew my attention to substantial cost differences between BC Hydro projects:

The evidence in this article, and quoting BC Hydro, is that by expanding generation capacity at Mica Creek (legacy dam of course), production has been increased by 1,000 MWs to 2,805 MWs for an investment of CDN$714 million. That works out to an investment of $714,000 per MW of additional productivity.

Now compared that with the investment and productivity posted for Site C. For a $9 billion investment Site C is projected to produce about 4,200 MWs (about 17% more than the BCH engineers expected to get from the 1989 version of Site C) . If you do the numbers BC Hydro is investing $2,142,857 to get one MW. That is three times more borrowed money needed to get the same unit of electricity that has been obtained from expanding generation at an existing dam.

It seems the provincial government and BC Hydro don’t believe in the merits of going after the “low-hanging fruit” first. It is obvious spending big is an overriding passion in Victoria.

Another interesting item is that BC Hydro added 500 MW capacity with Revelstoke 5 in 2011, a smaller scale project with a cost of $250 million or $500,000 per MW. So Mica is 43% higher although general inflation between 2011 and 2015 was 6%.

revelstoke 5

BC Hydro’s operating statistics demonstrate little need for new power. Any normal demand growth could easily be met through a program of serious conservation. Indisputably, it would be less costly to increase efficiency of current users than to build new supply.

However, British Columbia’s utility is managed to foster huge capital expenditures. BC Hydro is like a person who has a car for every anticipated need but just can’t stop buying more cars because, well, that’s what they do and it makes people feel important to spend large sums of money.

assets

The rapid growth in property, plant and equipment assets is partly explained by BC Hydro’s accounting policies. By design, the company is aggressive in capitalizing operating expenses. Instead of recognizing some expenses as they are incurred, the company adds them to asset values, which along with regulatory account deferrals, creates an appearance of profits that can be used to create phony surpluses in the provincial treasury.

Deferrals now amount to more than $6 billion of spending that will have to be recovered from future electricity rates. Industrial users pay less than the average cost of power and, along with rising costs of IPP power and reduced production at heritage facilities, a perfect storm is brewing to cripple BC Hydro. What lies ahead are huge rate increases for power users, particularly residential consumers.

prices

5 replies »

  1. In the not very distant past, the perpetrators of this larceny would be named in front-page newspaper stories below featured graphs identical what Norm has presented here. They would also be sitting in the hot seat in front of on-air titans like Rafe Mair or Jack Webster. And for that very reason, they would never, ever, consider this open cronyism and disregard for the province and its electorate. Today they get a free ride. And if we aren't each doing our part to rectify it we must share the blame.

    I urge everyone who reads what Norm has presented to copy the link and send it to multiple members of what's left of the fourth estate demanding an answer to why they are ignoring this information.

    Like

    • This absolutely first class summary just can’t be true – BUT IT BLUDDY WELL IS! Every British Columbian must read this before the next election and see how the Campbell government, abetted by Christy, gave away the jewels to political pals. Many, including Norman and me, predicted this in the 2009 election. Damien Gillis, Joe Foy and I campaigned all around the province predicting this. It was not hard to predict – what was difficult was convincing decent British Columbians that any man, even Campbell, would do this ro his province.
      BC owes Norman a great deal for his oustanding work – and plain guts
      You might be as shocked and horrified to know as I was that this policy was, and still is, supported by Dr.Andrew Weaver, leader of the BC Green Party.

      Like

  2. So the BC Clean Energy Act of 2010 results in thoroughly messing up BC Hydro.

    Jessica McDonald, the current CEO of BC Hydro, was Deputy Premier to Gordon Campbell when the BC Clean Energy Act was being put together. Maybe she can explain things.

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  3. I must be a bit of a masochist. Every morning I log onto a blog – Leila's, Norm's or whoever and am in a foul mood for the rest of the day. What a good idea Lew. How much more sensible to ruin everyone else's day! I have been adding my two bits to these blogs for about 4 years now, with little to show for it. It might help to know that there are others out there just as disgruntled as I. Wouldn't be wonderful to have Jack Webster back – even for a day.
    A positive note though. I keep getting up every morning to make sure that I'm around when these bastards get their just reward. Just colour me tenacious!

    Liked by 1 person

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