In the long run, a company cannot sell product for less than it pays to acquire the same product. BC Hydro does that and finances the activity by raising power rates charged residential users, the only profitable customers for BC Hydro.
In fiscal year 2016, the company bought 14,329 GWh of power from private power producers. It paid $1.23 billion to acquire the electricity and paid additional collection and distribution costs to move it through the grid.
In the same period, BC Hydro exported 14,732 GWh of power from the province and received only $460 million. The utility’s export markets have returned less than 3.6¢ a KWh since 2003 so there have been no significant profits from exporting surplus power for 13 years. The cost of power from independent power producers (IPPs) now averages 9.8¢ a KWh.
But, despite no growth in consumption by residential, commercial and industrial consumers in British Columbia and no profitable export marketplace, BC Hydro substantially increased purchases from IPPs.
In the last five years, the delivery of cash to IPPs totaled $4.6 billion. If the established trend continues, the amount will be $8.3 billion in the next five years.
Amounts flowing to IPPs and the necessary write-off of more than $6 billion in deferred costs means in the next five years, consumers will pay rates 60% higher than they’ve paid in the last five years.
In addition, more than $10 billion dollars is committed to Site C and BC Hydro has been spending over $2 billion a year on capital expenditures. Without profitable new markets – none are anticipated – the 60% price rise for electricity could be 100% in the foreseeable future.
Note: BC Hydro has been deferring expenses to avoid declaring operating losses. Money was disbursed but instead of treating payments as expenses, the company treats some of them as “temporary” assets. It is like a dairy farmer buying hay but not counting its cost as an expense, arguing that feeding cows today allows them to grow larger and healthier and perhaps produce more milk in the future. It is trick accounting, allowed because government writes its own accounting rules.