This article was first published in April 2016 and is repeated because is explains how BC Hydro got into the private power mess that continues to cost ratepayers hundreds of million of dollars each year.
Readers may tire of reports on BC Hydro but the more I examine this public utility, the more convinced I am that citizens of BC are victims of massive financial deception.
In 20 years leading up to 1996, BC Hydro’s average annual revenue from trading in North American electricity markets was $115 million. In three years ended March 2003, the utility realized gross trading revenue of $11.25 billion, although that sum was tempered by the $1 billion or so BC Hydro paid to end a subsequent lawsuit by California.
Although the American power market had been manipulated by Enron and other criminal fixers, Gordon Campbell and his colleagues believed that British Columbia could become a permanent power supplier to the western USA. Liberals wanted the electricity to be created by private operators, but it was soon clear that private entrepreneurs were not prepared to take significant financial risks.
The provincial government was determined to proceed so it decided that BC Hydro would sign long-term contracts to purchase power produced by independents at prices that made projects attractive to investors. This effectively transferred all business risks from private operators to the public. While dumb, it’s a fairly common occurrence today when governments are keen to be seen as business-friendly.
Compounding the situation was the Liberals’ misjudgment of future markets because they didn’t anticipate improved technologies and growing availability and affordability of alternative power. Consumption efficiencies, declining heavy industries and falling costs of solar and wind permanently changed the energy industries.
BC Hydro has contracted with independent power producers for increasing quantities at prices adjusted upwards each year for inflation. But, domestic demand has been flat for a decade and the export market in the last five years has returned only 2.8¢ per KWh, a fraction of the 22.8¢ gained in the heyday of 2001.
Because it is buying each KWh from IPPs at over 9¢ but has no need for the total it must buy, BC Hydro is left with two choices. One is to generate less power in its own facilities and the other is to dump power outside the province at prices less than 1/3 of the amount IPPs are paid. BC Hydro is doing both.
I’ve had utility defenders argue the company has never reduced its own output to accommodate private power so I reviewed sources of power reports for more than two decades. Here is a chart showing the last five years under Premier Clark’ leadership and the five years between 1996 and 2001.
The situation is not improving. In FY 2015, BC Hydro facilities generated 41,443 GWh of electricity. In FY 2001, those very same sites produced 49,940 GWh, which is 20% more.
However, here’s a vital point. In 2001, BC Hydro had assets of $12.6 billion. In 2015, assets had grown to $27.8 billion. The company has been spending heavily, allegedly to make the system more efficient. In fact, what is continuing is misappropriation of public wealth for the benefit of suppliers, contractors and other BC Liberal friends.
Some people believe the government intention is to privatize BC Hydro. However, I believe the present situation, with another $10 billion of public funds being thrown at Site C, is working just fine for Christy Clark, her cabinet colleagues and their sponsors.
Citizens should be asking for explanations, from politicians and the pro-media journalists who choose to ignore these facts.
#BCHydro paid 11.25% per GWh more to independent power producers in 4th quarter of CY2017 than the utility paid IPPs in 3rd quarter of CY2017. IPPs continue to be favourites. #bcpoli
— Norm Farrell (@Norm_Farrell) March 1, 2018
Categories: BC Hydro, BC Liberals, Chicanery, Independent Power Producers (IPP), Power Generation
I never tire of hearing about BC Hydro’s gross mismanagement by the Christy and the BC Liberal malfeasance mob. The more the absolute theft of a public asset is driven home the more likely the situation might see the light of day. I am trying to shame the local newspaper into publishing some of this.
Keep up the pressure Norm, we need people like you to turn over the rocks to see what scurries out.
In addition to the obvious problems caused by the BC Liberals mismanagement (to put an undeserved whitewash upon what they actually did), the combination of the BC Liberals schemes and the less than stellar internal management of BC Hydro, together with new technology (storage, generation, etc.) and rapidly changing market forces for electrical demand has put BC Hydro at dire risk of systemic failure.
It seems that flat, low, and falling demand for electricity is now the norm throughout North America. BC Hydro’s politically driven decisions to build Site C and enter into utterly unneeded IPP projects may well, given flat and falling demand, thoroughly bankrupt a public utility that once was the pride of BC:
At one time it was a fair question to ask whether the BC Liberals and senior management at BC Hydro were fools or knaves. It is beginning to look like the answer is that they were and are both!
(As I struggle to partially put on my impartial hat.) It sounds like the BC Liberals had no (or fewer) evil intentions in the beginning of the push for IPPs; they simply wanted the province to benefit from lucrative sales of electricity to the USA… never mind the damage to the rivers and streams.
(Hat fell off.) Their lack of reading the markets and technological advances is less easy to forgive. How could they get it so wrong — and not write escape clauses in the IPP contracts?
Now able to see what a disaster the experiment has been: you’d think the BC Liberals would put a stop to any further IPP start-ups. But no, there are more in the approval stages. They can’t blame anyone but themselves, so they proudly/foolishly soldier on, leaving us with a damload of debt.
See lower part of this page, for the IPPs under development, waiting final approval: https://www.bchydro.com/energy-in-bc/acquiring_power/current_offerings/standing_offer_program/current-applications.html
A 2009 report prepared for the Independent Power Producers Association of British Columbia contains some interesting assumptions about future (2020) demand for domestic and export use, but includes this regarding project risk:
“4.7.1 Benefits of Risk Transfer from Public to Private Sector
Investment in IPP projects by private investors provides a benefit to ratepayers in BC. Private investors assume the project risk by taking on the exploration and development costs of new electricity projects as investment in new electricity projects is considered
to carry significant risk. Risk stems from uncertainty around the public acceptance of new power projects or potential cost volatility associated with certain fuel sources. By taking on this risk, IPPs have been noted as responding to the gap in electricity generation investment and in this role have reduced the financial risk to ratepayers and tax payers.”
It also contains this proviso:
“This document in its entirety can never be entered as evidence in any British Columbia Utilities Commission or other regulatory proceedings.”
Maybe that statement should have been inserted under the title header to save anyone from taking it seriously.
Click to access PriceWaterhouseCoopers_IPPBC_report.pdf
Seems to me the fiduciary duty of our elected officials might have been better fulfilled had the IPPs been contracted to supply power only if, as, and when required by BC Hydro for domestic use after all heritage facilities were developed to their maximum capacity, and mechanisms were installed to have the IPPs paid for export power at prevailing rates.
To which the BC Liberals and their cronies would retort, “Why would we need IPPs then?”
And we might reply, “Why, indeed?”
Great work Norm.
This message needs to be heard by more people in BC.
The real story needs to be told somewhere…it’s too bad no one in the Lamestream Media is brave enough to report the truth to the rest of their low information readers.
The MSM is a part of the “grift”. For too long they have been nothing more than a propaganda source, full of yellow journalism.
When confronted with BC Hydro’s mess, the BC Liberal apologists (and Her Christiness herself during the 2013 election) throw out the “Johnny did it too!” deflector defence. They point to the Raiwind debacle in the late 1990s. Back then the NDP were rightly hounded mercilessly and keelhauled by the media (and therefore by an informed public) for the ill-considered foray into a power project in Pakistan. Senior heads rolled at BC Hydro. Total loss? About $10 million.
Today the public is getting royally fleeced to the tune of billions of dollars on several different BC Hydro fronts, through a combination of ineptitude, political expediency, and what would undoubtedly result in criminal complaints by shareholders (or the government itself in other jurisdictions) if Hydro was a private corporation. What do we hear from essentially the same media players? Crickets. And because of that, we hear the same from a mostly ill-informed electorate. They’re squawking about a 4% increase in Hydro rates, unaware that’s a sliver of what’s coming or why. That has to change. And time is of the essence.
I don’t think we should waste our time complaining to the contemptible sycophants elected on lies; they can and will be replaced given an informed populace. We need, for the sake of this province, to mercilessly hound the media the way it used to hound the government of a different stripe until it starts fulfilling its duty to the public.
Today, I have e-mailed CBC’s Marketplace, with an appeal for them to look into our IPP disaster. I’ll give it a month, then make the same appeal to W5 and Fifth Estate. Others here can also contact them. We need some traction.
Since Lady Godiva, people have been using nudity to draw attention to their causes. Nude protesters would get media attention for a campaign called: “The Naked Truth”. Even the most lame of causes receive attention by appealing to the media’s love of “shock”.
You go first.
Don’t want to hurt the cause. lol
BC Hydro is expected, as a publicly-owned company, to pay a dividend from profits.
Since BC Hydro must pay a $massive amount every year to IPPs, it can’t pay the dividend.
As Energy Minister Bill Bennett said recently, the BC Government needs that dividend in order to balance the BC Budget.
So the BC govt makes BC Hydro borrow money in order to pay the dividend.
“But we couldn’t. We’re on a fiscal plan and we want to balance the budget every year and we just couldn’t afford to do it before we did.”, says Bill Bennett.
At the same time, BC Hydro pays $17.5 million to IPPs to NOT produce power:
The total BC provincial debt (not including contractual obligations) is growing by about $2 billion every year, so the budget is not balanced anyway.
BC Hydro’s debt is also growing rapidly.
To clarify, the Total BC Provincial Debt includes BC Hydro debt, but not the $56+ billion that BC Hydro owes to IPPs in long term contracts.
See p. 132:
Click to access 2016_Budget_and_Fiscal_Plan.pdf
For Bill Bennett’s brilliant quote above, find it here:
Apparently, BC Hydro is no longer profitable. Can’t imagine why, maybe that $56 billion it owes the IPPs?
Kudos to G. Barry Stewart at 5:58PM. We can blog about this till the cows come home but until it somehow goes national we can expect no change. The media in this province obviously, time and time and time again have proved themselves unwilling. Let us never forget that!
A number of years ago when one of the first “run of river” IPPs was seeking approval, a friend of mine at the time, an engineer, crunched the numbers and concluded that there was no way the project would go ahead as it could not possibly be economically viable. Upon receiving the “green” light, he concluded that this particular “run of river” IPP, and by extension all “run of river” IPPs would have to be heavily subsidized in order to be economically viable.
Definitely a misappropriation of public funds.
Not exactly on topic, but Nelson BC, the only city in western Canada with its own hydro plant, our printing press, money machine reducing our taxes by 36% they tell me, doesn’t seem like we are getting any value our taxes are as high if not higher than elsewhere. Solar Panels, can you believe Nelson hydro is putting up a community solar garden so the mayor and council can call Nelson the “green” city. Our dam makes power for 2c/kWh, sells for 10 and now they want us all to pay for solar panels!!! We will watch the cleanest greenest power spill over the dam. I can’t get anywhere with this city. My blog nelsonsolarpower.blogspot.ca City council refuses to allow me to present, our power rates have increased 50% in the last five years. More than the previous 40 years. Electricity in this city is a hidden tax.
It appears the issue of “orders in council” will become standard operating policy the moment this province elects a government, other than the BC Liberals.
The rescinding of IPP contracts, the removal of impediments to regulatory bodies, the opening of a corruption enquiry and a host of other “fixes” to repair the damage done by the current regime, will be long. The “work” to remove the stench of corruption from this province, will be money well spent. The reputation of the “crown” will be restored, and those found guilty of corruption, jailed.
The political coercion and manipulation of the taxpayer, and the “peoples” fiscal resources, to “enable”, a serving corrupt government to engage in fiscal practices called into question repeatedly by auditors and outside financial authorities, is the wedge issue by which a corruption enquiry can be called.
My own opinion is that the misappropriation of public funds to “enable” corporate and contractor arrangements, while at the same time accepting large “political donations”, from those same groups is graft, and gives the public, the perception of bribes occurring.
Are we living as a third world regime would, and why is it allowed?
The BC NDP explains the problem of the IPPs here in backgrounder #2.
BC Hydro was forced into IPP power contracts through the use of lies and deception.
For example, future BC power demand was consistently overstated. They also said BC Hydro was not good at small hydro; it can only handle large projects such as Site C.
To me this meets the definition of “Fraud”.
Quote from Wikipedia:
“In law, fraud is deliberate deception to secure unfair or unlawful gain,”
The Liberals may have done something “fraudulent”?
I’m sure Christy Clark would have nothing to say about that…….if anyone could find her.
Another BC Liberal dumpster fire. Apparently there’s a mess at BC Hydro.
“The panel expressed concern about “the apparent decoupling of revenues and expenditures,” finding that expenditures are rising faster than revenues “and this situation is not sustainable.”
“The capital cost (for Site C) is $10.7 billion. But over the next 70 years the interest cost on that is going to be huge. Although the capital cost left to go will be about nine and a half billion dollars — because they’ve already borrowed two billion — the interest costs alone on that borrowed capital will be over $20 billion on top of the $10.7 billion to build it.
You’ve got to pay back the capital costs over 70 years, you have to pay the interest on the money you borrowed over 70 years, and you have to pay the operating and maintenance costs of Site C. And then you’ve got to find a buyer.”