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.
BC Hydro residential revenue history per KWh
Categories: BC Hydro, Independent Power Producers (IPP)
in-sights.ca 
Hey Shawn, it isn’t a question of “renewable” or not , it’s about the Gordo Libs having entered into contracts with their buddies the independent producers for WAY more than the power is worth, when it wasn’t needed in the first place.
It’s turned out just the way Rafe and very very many of us predicted when we vociferously opposed this proposed IPP scheme way back when. (another ground for our opposition, was that if the need for more power was truly forecasted, BC Hydro should be doing the projects rather than these contracts with locked-in prices for their power that was — and still are — way higher than market value. They did it to grease the palms of their IPP buddies, not in the interests of either the Provincial taxpayers or us ratepayers)
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i find this whole thing , biz with I somewhat bs, not because of IPP tho seems to me this is BCH and LIB and a bullshit attempt at shooting down renewable…i mean comon who are these IPP there wind farms, solar farms, all alternatives that BCH has to by law pay these produces for their power…if they had not been bullshitting the forecasts in the first place they wouldn’t be in the IPP mess
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I remember Jessica… an entry level policy analyst working for the NDP government while, along with a few others, spending their hard earned time supplying all sorts of policy info to the government in waiting headed by Gordo. And hasn’t she been richly rewarded?
Anyhow, Norm, there is an interesting blog http://www.albertapolitics.ca that has a recent article about the NDP looking to the courts to have a Conservative (Klein et al) deal with electrical marketers that leaves the province’s consumers holding the bag for billions of dollars if things go awry. This might prove interesting (one hopes).
Shouldn’t there be some process whereby these kinds of contracts/deals signed by politicians that leave residents of the province in such a precarious financial situation whereby we must anti up through no fault of our own?
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From the Alberta Politics story:
“The details are complicated – just the kind of news story that makes readers’ eyes glaze over and their attention wander. Which is what conservative governments count on when they cook up this stuff.”
That’s why it’s important to have scribes, such as Norm, to simplify (and chart) such complex stories, so the general public can have a chance at knowing what is being foisted on them.
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A couple of interesting comments from the Liberal friendly CEO of Hydro today in BIV. The CEO explains why the huge financial lost reported this week took place: ” It includes a load forecast that assumes three liquefied natural gas plants that would be electrified going forward.”
Funny how the Liberals keep saying LNG will not be a factor in Hydro demand….. thus the need for Site C.
Then we have: ” a plan to reduce how much it pays independent power producers when their long-term power purchase contracts come up for renewal, as well as a review its standing offer program “to reflect the declining costs of new power technology.”
When are these contracts up for renewal ???
I like this one: ” Other cost-cutting measures include reducing capital expenditures by $380 million over three years, and a workforce reduction in which the work contracted out to private contractors will be brought in house – a move BC Hydro says will save $20 million over three years. ”
Shouldn’t that be part of the CEO’s job on an on-going basis ? And not when you’re headed downward…… again. It wasn’t that long ago another Hydro CEO told us about a “workforce reduction”
Guy in Victoria
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I have been saying for years, as have others, that demand for power by BC consumers is not rising. BC Hydro sold more to residential, commercial and industrial customers in 2005 than in 2016. However, in 2005, they bought 6,444 GWh from private producers at 6.1¢ per KWh, a total of $394 million. In 2016, they bought 14,319 GWh from private producers at a much higher average unit cost, a total of $1,229 million.
Critics have long argued that BC Hydro was being dishonest in its forecasts. That is proven true by readily available facts.
Reducing how much it pays IPPs when contracts come up for renewal? Ha! They don’t bother to mention that those existing deals extend out as far as 2075 and that the contracts call for annual increases based on cost of living. (That’s a courtesy Liberals don’t extend to public school boards.) In addition, when those contracts are renewed almost any payment is profit for the contractors because they will have already recovered their capital costs many time over.
Workforce reductions allowed BC Hydro to eliminate operating staff but many of them were employed by contractors who were paid even more because Liberals love to employ companies owned by their pals and financial contributors. A technician paid by BC Hydro isn’t going to write large cheques to the Liberal Party as part of a pay-to-play scheme but large contracting firms do it routinely.
Another price paid when BC Hydro eliminates its response capability is that, after a storm or system mishap, people are not available to respond. Jessica McDonald ought to remember that because she was the one issuing apologies when customers went without power for days and couldn’t even get information from the utility.
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I really like it when you express these figures in FFU’s……Fast Ferry Units…..that works much better than “billions”…..we should not bother with the actual dollar value of any of their boondoggles and just use FFU’s.
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OK We’re down to two possibilities.
1.This is part of a deliberate effort started in 2002 by Premier Campbell to destroy BCH so it would be sold. Isn’t this in keeping with the Fraser Institute’s (Campbell’s economic guru) position on Crown Corporations?
2. Or, it is a massive example of bleep-up as yet unseen in the world history of Government bleep-ups.
Add 3. #2 was the way this band of bent half wits chose to “subtly” accomplish #1
Now, I’m a fair man. Let me direct this question to Mike deJong, the Finance Minister who, though unsble to email, Is the man who should know.
Mike – simple question. The demand for power since you took over has remained constant, How, then, did this (in $2016) happen? BC Hydro’s debt has increased by 341%, from $19.2 billion in 2001 to $85 billion today.
Let me perhaps put that differently, Mike, HOW THE BLEEP DID THAT HAPPEN OTHER THAN HOW I SUGGEST!
The Public is entitled to know, Mike.
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Gosh.
Can’t help but notice which government generated a flat residential price for British Columbians for almost a decade.
Thanks Norm.
.
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How is this not criminal activity? Stealing money blatantly from BC residents to hand over to these IPP’s.
I guess it’s time to invest in some solar panels for the house.
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Thanks for the extra effort you’ve been putting out this past week, Norm. No holidays here!
I know it’s hard to keep track of where each electron of power is sourced from (legacy dam or IPP)… but bear with me on my simplified math here:
After buying the boutique-priced IPP power and sending our legacy power south, we still had a net export of 403 GigaWatt/hours of electricity… meaning we could have KEPT our legacy dam power and told the IPP guys to get lost.
Except for the damned long-term contracts…
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It’s not quite that simple although close to it. Yes, had we not bought private power, we’d have had little or nothing to export but made hundreds of millions in profit. Had we made serious efforts at conservation, we could have substantially reduced demand for power.
In the days when BC Hydro was well managed, they would save legacy power at night and import cheap power from USA. Then they’d crank up the generators for peak times and send higher value power south during the day. They used the markets to their advantage.
In one year long ago, they realized more than 20¢ a KWh from export sales.Lately, it’s been 1.9¢ to 3.6¢ on average. The American market changed permanently but Liberals have been acting as it is still the 90s.
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