BC Hydro’s quarterly report for the three months ended December 31, 2016 is finally released to the public. The company departs from a practice of decades and does not report its “trade” sales of electricity. Instead, it combines electricity and gas trade sales.
No doubt they are sensitive to reporting very low trade prices, particularly when proceeds of surplus power sales are about 1/3 of the average price paid to independent power producers (IPPs). This is getting worse because IPP prices are rising quickly and journalist Jonny Wakefield reported this week that 20 new IPP facilities are under construction.
Although we do not know the quantity of power shipped out province, we know the volume of sales to residential, commercial and industrial customers. This chart shows those sales for the last twelve calendar years. 2016 almost matches the preceding year and is the tenth lowest in the past dozen years. This is despite brisk sales in the final quarter of the calendar year.
In various places, I’ve noted that flat demand and increased intake of private power leaves BC Hydro in a position of dumping excess power on the open market at a loss or reducing power generated at its own facilities.
Since BC Hydro is buying more than $100 million a month of private power and incurs expenses and line losses to send it to markets that value it at about one-third, annual losses on surplus power sales are now about $800 million.
Despite the flat demand for power, BC Hydro is not only buying more private power, its capital spending program is out of control. As a result, despite a reduction in sales to BC customers since 2005, the utility’s assets in 2016 are 256% of the total eleven years ago.
With Site C and other major capital projects, we can expect assets to grow by another 15-20 billion dollars in the near future.
BC Hydro’s politicized management, under directions from Victoria, are hiding bad news with accounting trickery and, while they’ve increased the average price to residential and business consumers by 74% since 2005, the rates must rise significantly or the province must reverse the flow of cash from the public treasury to the accounts of BC Hydro.
There is no alternative.
Two plus two must always equal four.