BC Hydro

Unprecedented financial scandal

numbersIn calendar year 2016, BC Hydro bought 14,180 GWh from Independent Power Producers (IPPs) and paid $1,244 million. Ten years before, in 2006, it bought 4,940 GWh of IPP electricity for $368 million, a difference of $876 million.

However, according to annual and quarterly reports, BC Hydro’s residential, commercial and business consumers bought less power in 2016 than in 2006.

Purchases from IPPs have increased steadily in both quantity and unit price while demand by BC customers has been flat for a dozen years.

BC Hydro’s sales of resulting surplus energy have been to oversupplied markets where prices have averaged about one-third of what Hydro has been paying private producers. This a perversion of free enterprise that Liberals claim to support.

In addition, BC’s public utility has behaved like a spendthrift and, despite no increase in demand, its assets grew from $13 billion in 2006 to $31.5 billion at December, 2016.

newsThe mismanagement of BC Hydro is a financial scandal unprecedented in BC’s history. Unfortunately, the corporate media refuses to report these facts. Their loyalty is to not to citizens and taxpayers but to the vested interests that have hands firmly in our pockets.

In the early 1960s, Premier W.A.C. Bennett created a publicly owned utility – BC Hydro – because private operators refused to meet the province’s electrical needs. (Further details here.)

Power producers in the mid-twentieth century focused mainly on profitable services in the southwest but Bennett’s government had a province-wide vision. It was an audacious plan, but appropriate and successful. BC Hydro became indispensable, serving citizens and business enterprises throughout British Columbia.

pirateHowever, the financial success of BC Hydro guaranteed it would be attacked by raiders aiming to convert public wealth to private. To be successful, they needed the cooperation of BC’s political rulers and, whether motivated by covert rewards or philosophical bent, BC Liberals cooperated fully. Ironically, among the facilitators is W.A.C. Bennett’s grandson (and Clark pal) BC Hydro Chair Brad Bennett.

According to BC Hydro records, electricity consumption by residential, commercial and industrial users was lower in 2016 than in 2005. (And 8% lower in the first half of fiscal year 2017 compared to the prior year.)

Yet, between 2005 and 2016, independent power producers more than doubled deliveries and the amounts paid by BC Hydro more than tripled. Surplus power has been dumped outside the province at an average, since 2005, of 28 cents on the dollar, not including distribution and sales costs.

chart-1

chart-3

chart-2

chart-4
demand 2


The following, written by economist Erik Andersen and included here by permission, adds related information and commentary:

Economists have a term describing enterprises such as BC Hydro, ICBC and BC Ferries, etc. The term is “NATURAL MONOPOLY”.

IT IS IMPORTANT TO FOCUS ON THE WORD MONOPOLY AS IT IS A TYPE OF SOCIAL/FINANCIAL ARRANGEMENT THAT KNOWINGLY SHUTS OUT COMPETITION BECAUSE IT MAKES NO COST SENSE TO HAVE TWO OR MORE PROVIDERS.

A natural monopoly is of course a desirable investment to own so it is understandable that private investors want ownership or at least indirect ownership that comes from structuring supply contracts so as to get the public’s financial guarantees.

Economists use another term , economic rent, to describe income that is obtained simply from ownership, income that is not “earned” in the sense that no one works or takes capital risks. The level of income is not determined by competition in the global market place, or any place for that matter. A look at BC Hydro is a good way to see how it was done well and then not well.

Prior to about the beginning of the current century  BC Hydro was by most measures a well managed and solvent public utility. The BC Utilities Commission successfully looked after the public interest by riding herd on the occasional departure of Hydro into speculative ventures that did not make sense economically and financially.

In the 80s, BCUC gave the development of Site C a thumbs down for the reason of insufficient need for the added power. BCUC left the tracks when it failed to step into Hydro’s involvement in the Enron fraud and has been a spectator agency ever since.

So what changed? Private investors lusted after ownership of one of North America’s last remaining large electricity producers and began a campaign to change the BC Hydro ownership. Mr. Campbell ran into big public opposition when the idea of selling off BC Hydro was first tried on. To get around public opposition he and some bright sparks framed a need for more BC located power sources. This was covered with a fig leaf piece of legislation.

All unprincipled insurance sales folks mostly want to talk about the benefits and talk about the insurance premiums is avoided or rushed through at the end. That is mostly what BC Hydro/BC Government did, not talking about the premium/future expenses. Everyone was given the chance to feel good because we were after all contracting the building green generation.

Well now, nearly 15 years later the bill for all this new privately owned generation capacity is at hand and it is choking off new businesses in the province because BC is no longer the least expensive jurisdiction to buy electricity in North America.

BC deliberately gave away its electricity cost edge that it previously enjoyed over other jurisdictions. We know that private BC citizens now pay 70% more than they paid in 2004. We also know they buy less, partially because of  higher costs.  Demand from BC only customers had peaked at about 52,000 GWh and has declined since. To fool the trusting, BC Hydro is now selling electricity into the Western grid at almost give away prices but labelling it “domestic” sales.

One test of the measure of vulnerability customers of this natural monopoly have when price increases happen, is to determine “demand elasticity” when prices of a good or service increase.  (Inelastic is an economic term used to describe the situation in which the the quantity demanded or supplied of a good or service is unaffected when the price of that good or service changes.)

Using a traditional formula one looks to get a value for “N”. When the value of N equals zero, demand is perfectly inelastic; when N is above 1 it is elastic, more so as the value for N gets larger.

Across the years 2004 to 2016, in BC`s electricity marketplace,  N was .19. At that number, demand elasticity might just as well be zero; realistically there is no elasticity what so ever.

The customer pays the price demanded because they have almost no options to do other wise, except if they are prepared to invest the thousands necessary to “go off the grid”, something more and more BC citizens are doing, mostly out of anger and self defence from their government.

22 replies »

  1. During the sale of our farm Hydro snuck onto ppty & installed the smart meter that had been refused. They had been told not to trespass. Rates have MORE than doubled!! #payingforthedeficit 😈

    Like

  2. Clark’s smile hides many skeletons. Thank you Norm for shining the light. I do hope Weaver/Horgan have prepared the way for a forensic audit at the earliest convenience. Perhaps only then will the lady begin to frown.

    Like

  3. Check Rich Coleman and Mike de Jong
    And the Ministry of Finance, Natural Gas Revenue Branch.

    The thefts, payoffs, bribes and uncollected royalties are in the billions.

    The Campbell-Clark plan was for giving away provincial resources (timber, oil and gas, minerals, and hydro) so as to bankrupt the province to hand it over to the international bankers and bankrupt Hydro to hand it over for pennies on the dollar to BCIMC in Victoria and the big shark, CAI Private Equity Partners in New York… These financial criminals view BC the same way their international counterparts see Syria, Iraq, Libya, Yemen and Afghanistan: as helpless victims ready to be looted of their resources, thrust into poverty and homelessness, and drug addiction or killed.

    …Watch out BC. You’re being taken to the cleaners!

    Homelessness, debt, suicide, drug addiction and depression is what they give the people in exchange for stealing all the wealth of our province.

    We are the Yemen and Afghanistan of Canada.

    Truth hurts don’t it.. Go back to your fairytales.

    Site C will go ahead and IPP payments won`t stop. Hydro will be bankrupt before the next election.
    It will be corruption as usual…

    Sorry Boys and Girls, they will say, we tried our best, but we’re bought and paid for and we just take orders.

    It’s ALL corrupt, bought and paid for…

    (edited for legal reasons)

    Like

  4. In the hour-long interview I had with John Horgan , he said: “I am grinning like the Cheshire cat at the thought of opening the books on three crowns – BC Hydro, ICBC and BC Ferries, with a magnifying glass and an eye to serving the public.”,

    Like

  5. Norm Farrell deserves an OC, OBC, and the gratitude of all British Columbians for exposing this monumental outrage 10 years ago and regularly ever since. Anyone can, in 30 seconds google an extensive mutual masturbation agreement between Postmedia (Vancouver Sun, Province, National Post) and the Canadian Association of Petroleum Profucers and see this wicked abandonment of virtually every journalistic princiiple by Postmedia and just just what everyone expects from the petroleum industry. One can look in vain for the past 16 years in the Sun and Province for a hint of criticiism of the ongoing massive sinning of the Liberal government’s deliberate stripping of BC HYDRO assets and payoffs to Liberal donors, who were given what hitherto was Hydro’s right to make power.

    Have you heard of Resource Works? They are the high and the mighty in the business world with special emphasis on LNG – in fact they spend a fortune shilling for Woodfibre LNG, the hugely controversial proposed LNG Facility for Squamish. Now, of course the Vancouver papers will be our warchdogs, won’t they? No monkey business with good old sharp-eyed Postmedia on the job, journslists extraordinaire! Tell you what – google Resource Works and check out who their psrtners are and tell if you recognize anyone. A little hint, begins with P.

    My question, forgive my repetitiveness – WHEN THE HELL DO WE CALL THE COPS SINCE THE LIBERAL ATTORNEY-GENERAL IS TOO PARTISAN TO DO SO!

    Like

  6. Looks like Christy Clark is still trying to sell the Site C Family Farm. If the Site C doesn’t fly, she’ll flood it … selling the ALR land off through the Liberal Bank of China … give the Asian buyers a “tax break for a donation” and call Site C a waterfront investment.

    The BC government will run out of money and won’t have the cash slush fund to continue day to day operations.
    BC Hydro will be forced to shut off the lights to the Legislature.

    Christy Clark’s non-confidence vote will be her final power failure.

    Liked by 1 person

  7. I want to point out for interested people that Site C and the IPPs were given passes by the Liberals in the sense that all decisions were by cabinet decree. The likes of which hasn’t been seen since the early Social Credit days. The government denied local and regional governments the right to decide on or even have any say on developments within their watersheds and local jurisdictions. BC Hydro also got a pass by the BCUC and the Agricultural Land Commission, and even the first nations rights issues have not been resolved yet, and Hydro has spent better than one and a half Billion Dollars.

    The Liberals mad rush, isn’t to get Site c beyond the point of no return, I think the mad rush is just to steal as much as possible before enough people get mad enough to not take it anymore.

    Liked by 1 person

    • You nailed it Randy!

      The Liberals were like shoppers that win one of those contests where you get to dash through the supermarket for 5 minutes and grab whatever you can. Christy Clark and her cronies and partners in crime did just that for six years of grand corruption and theft and payoffs on a scale never seen before in this country.

      Like Hillary Clinton in the US, there should be an Independent Special Prosecutor appointed (preferably brought in from the US so as to guarantee total impartiality) to investigate Christy and all of her Liberal MLA’s and political appointees for corruption and criminal malfeasance.

      If John Horgan and Andrew Weaver jointly announced their intention to bring forward a resolution to do this when the Legislature reconvenes I’m guessing there would be a lot of empty guilty seats with inexplicably missing Liberal MLA’s on opening day in Victoria.

      Like

      • Every where you look all you find is dishonesty and thievery We arent governed by honest people any more Its really disgusting

        Like

  8. Once the NDP/Greens are in power, they can legally stop or pause Site C. An Order in Council will do it … just like the Liberals would. No need for wasting time at BCUC. Move the workers into restoration and a massive electricity “conservation corps” effort. Turn the “workers camp” $470 million into a world class university. Relax the flood zone so the ranchers and farmers can plant the valley fully. Save $ Billions! Let’s get moving on “BC’s Future and OUR BC Hydro”

    Liked by 1 person

  9. Yes…Roger you are indeed making a good point! Turns out the “worker’s camp” already rivals, at least in appearance a university styled campus.

    Like

  10. The Green Party posted this article on this morning’s newsletter. It will be interesting to see if there is the courage to employ the Site C workers onto better green energy projects.

    I’ve known Adam Olsen since he was born and I’m certain he will do his best to stop Site C.
    His mother ( author Sylvia Olsen) has won some awards for the youth books she has written.

    http://www.princegeorgecitizen.com/opinion/columnists/site-c-is-killing-green-power-1.2282021

    Like

  11. Apparently, Christy Clark believes in “wind power” but forgot that she helped her brother in the process. Site C helps her friends and donors only.
    Everyone else sees a conflict of interest…. but she just spits in the wind.

    http://rabble.ca/blogs/bloggers/sarah-miller/2016/05/christy-clark-gave-150000-to-haida-gwaii-chief-business-her-brot

    https://beta.theglobeandmail.com/news/british-columbia/christy-clark-accused-of-interfering-in-band-election-to-aid-brothers-deal/article27654979/?ref=https://www.theglobeandmail.com&

    Like

Leave a reply but be on topic and civil.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s