Having had a few private requests for the history of BC’s involvement with independent power producers (IPPs), I provide this analysis.
What began more than 10 years ago as a not unreasonable concept for economic activity morphed into a financial disaster for taxpayers and non-industrial consumers of electricity in BC.
Not accidentally, it was a a financial windfall for private power producers and politically connected promoters who did deals with BC Hydro then flipped contracts to utility operators, mostly outside BC. Many a good Liberal stuffed his pockets with cash and the enabling government of the day was incredibly naive or dishonest; probably both.
Unfortunately, political inertia resulted in a situation grown worse. No party wants to admit it has been following a mistaken path; they believe doing so would shake the confidence of less committed followers. We see the same happening with LNG where everyone but the Clark Government admits opportunity is gone, yet Liberals change the dates and promise rewards are just ahead.
In three years of the early 2000s, BC Hydro sold power worth more than $11 billion to American customers. Gordon Campbell’s government thought there were good prospects for continuing sales in the USA. They encouraged private companies to plan generating facilities all over BC to create power for export. BC Hydro moved its transmission facilities into a new open access corporation – since reversed – and some believed Government’s energy plan plan was moving BC toward a privatized system.
Liberals publicized the new plan as one involving a “triple bottom line” balancing environmental, financial and social considerations. They believed the public would accept “run of river” projects as environmentally benign. However, proponents would only proceed if financial and marketing risks were limited. The solution was for private companies to build and operate generating facilities but to sell their entire output to BC Hydro, which would collect and resell it.
Politicians assumed that power demand would grow and prices rise so they readily agreed to BC Hydro purchase contracts that were decades long with annual price escalation tied to inflation. They carelessly assumed the arrangements would be beneficial to all. However, what private industry achieved was guaranteed sales with guaranteed profits. All of the financial risks were carried by the public.
Run of river facilities – recently described by BC Green leader Weaver as mere “water wheels” – often turned into “ruin of river” projects. Campbell’s neoliberalism believed that business should self-regulate so there were few constraints to protect the environment. This hands-off attitude was popular in Stephen Harper’s Ottawa and the once powerful federal fisheries ministry now turned a blind eye to ruination of fish bearing streams and rivers.
In the past decade, modern technology has allowed each of us to use less electricity and de-industrialization of North America contributed to softening of demand. In addition, alternative energy supplies have grown, particularly in the western USA. Improved techniques and materials reduced the cost and improved practicality of wind and solar power. The trend will continue.
BC Hydro hoped it would sell large quantities of electricity to domestic mining and energy companies. The main problem is that they want to pay a fraction of what it costs BC Hydro. So, yes, power can be sold but it cannot be sold profitably. In the most recent quarter, BC Hydro sold surplus power at 30% of the price it paid private power producers. (These are average prices published by the provincial utility.)
All of BC’s energy experts understand this situation. But, political inertia still applies. Government won’t admit it is forcing BC Hydro to follow a path to disaster so, rather than doing the right thing, it will hire more spin doctors to spread false information.
A collection of BC Liberals, closet Liberals and hangers-on gather to cheer Gordon Campbell’s devastating energy policies. The individual circled is now Leader of the Green Party and a strong proponent of private power producers.