According to Financial Post writer Geoffrey Morgan, BC Hydro sent an October 3 communication to the BC Utilities Commission (BCUC). The letter explained why it continues to forecast a surge in electricity demand, despite a dozen years of flat sales to BC consumers.
Hydro claims it is forecasting new demand by companies that are not committed customers but have made inquiries:
- Shell’s LNG Canada (Kitimat)
- Sukanto Tanoto‘s Woodfibre LNG (Howe Sound)
- Future expansion of FortisBC’s Tilbury LNG storage facility.
In addition, in a redacted section, the utility claims another, unnamed operation is exploring a fourth project.
Skeptical people might remember Liberal claims that 20 LNG projects were on the boards just a few years ago and wonder how the market economics that caused most to be abandoned are different for the remaining few.
I also find it revealing that BC Hydro’s demand growth claims have remained more or less the same whether there were 20 prospective LNG operations – some of them rather large – or the three noted above, two of which are small.
In fact, BC Hydro has been married to “40% growth over 20 years” projections for a very long time. This despite no growth in sales to BC consumers for a dozen years and the addition of private power sources during that time equal to almost double the output of Site C. That doesn’t account for increases in Hydro’s internal capacity through additional production from Revelstoke and other generator upgrades or additions. (Additionally, the Canadian Entitlement of downstream Columbia River production could be returned.)
Those factors have resulted in surplus power that can only be dumped at a fraction of the prices paid to private producers. Unfortunately for ratepayers, more private power suppliers are coming on stream soon, while others have been paid to not deliver electricity.
At one point a BC Hydro executive told me that, while the volumes of domestic power sold each year were not increasing, peak demand was growing. However, when I reviewed years of reports published by the utility, it was soon apparent that peak demand has remained stable for years.
How many explanations have we heard to justify Site C?
My favourite was one voiced a few years ago by the then Liberal Energy Minister Kootenay Bill Bennett, who apparently missed the fact that lighting, small motors and electronics use about one fifth the power of devices when he was cognizant of energy matters:
There are new and increasing uses for electricity: electric cars, the things that we tape our favourite television shows with, our phones, our iPads, our laptops, etc.; a lot more electricity being needed.
Christy Clark’s Liberal Government stated that Site C was needed to feed new industry but the province, like other regions of North America, has been moving toward a post-industrial economy. In British Columbia, the proportion of jobs in goods-producing enterprises has been in decline with heavy industries, typically large power users, accounting for most job losses.
Conservation, of course, is the solution able to modify demand growth further. Economists argue about exact demand elasticity of utility-supplied electricity but it is clear that higher prices result in users reducing usage and turning to alternative supply sources. These are increasingly available at prices that allow reasonably quick capital cost recovery.
We should also be interested in knowing that, while Site C power will cost from 9¢ to 12¢ for each KWh, BC Hydro is scheduled to sell electricity to LNG operators for 5.4¢ a KWh. Other large users of power, particularly the mining industry, also pay electricity prices far below BC Hydro’s marginal cost of power.
It appears BC Hydro’s plan is lose money on every watt of private and Site C power sold, but, with fingers crossed, they hope to make up the losses with volume.
Site C contractors recently laid off many of the worker resident at the job site. There will be no better time to suspend the project.
Delay means even larger losses for taxpayers.