BC Hydro

Government review of BC Hydro is specious

To many, BC Hydro might seem a healthy corporation. After all, its domestic revenues rose 88% from FY 2006 to FY 2017, an achievement that is almost 5x the inflation rate.

Revenues 380

With far greater revenues being collected from residential and business consumers, it appears logical for the company to have invested in more internal generating capacity. At great expense, BC Hydro added capacity equivalent to about 1½ Site C projects.

Capacity 380

To provide greater assurance that BC consumers would enjoy uninterrupted supplies of power, the utility signed over 100 purchase contracts with independent power producers (IPPs). That brought in nearly 7,000 extra gigawatt-hours of electricity, about equivalent to the output of 1½ Site C projects.

Unfortunately, that private power was expensive, since BC Hydro was paying about 3x market price and the contracted prices were escalating through inflation protection clauses. IPP purchases increased $764 million.

IPP Purchases 380

The  charts directly above don’t paint a complete picture of BC Hydro’s financial situation. They might even seem logical until examined with the following graph:

Sales 380

That 88% increase in domestic revenues shown at the top came almost entirely from price increases. The quantity of electricity delivered to residential, commercial and industrial consumers was unchanged from 2006 to 2017.

BC Hydro increased its own generating capacity and contracted for vast amounts of additional private power because it mistakenly assumed domestic demand would rise or export markets would be profitable. Even with a decade of flat power deliveries to BC consumers, the utility still dreamed that demand would grow like it did in earlier days. Years of evidence in BC and elsewhere didn’t stop BC Hydro’s plans to spend billions on expanding its empire.

Capital spending and the provincial government’s thirst for additional revenue meant the public utility was forced to borrow large sums.

Total Liabilities 380

All of us in British Columbia depend on the public utility that powers our homes and businesses. Some may be able to moderate use of electricity from the provincial grid but almost no individual can stop being a BC Hydro consumer.

That fact obliges politicians to ensure the company is operated with maximum efficiency for the benefit of every citizen, not the relative handful rewarded by BC Hydro’s misconceived spending plans.

Sadly, the Horgan Government does not agree. Utility policies and company management are almost unchanged during the last 11 months and the recently announced review is completely specious. In the words of political spin doctors:

…government is working with BC Hydro to identify cost savings, efficiencies, new revenue streams and other changes, to keep electricity rates low and predictable over the long-term, while ensuring BC Hydro has the resources it needs to continue to provide clean, safe and reliable electricity.

An advisory group, consisting of staff from the Ministry of Energy, Mines and Petroleum Resources, the Ministry of Finance and BC Hydro, will perform the first phase of the review…

In other words, the very people who dug the financial crater into which BC Hydro tipped are tasked with examining how the hole might be made more comfortable.

Frankly, I dont understand why more citizens are not alarmed and loudly complaining. Perhaps it is because much of the financial burden is being hidden away as debt and left for the next generation to deal with.

In this article, I’ve tried to simplify the picture of BC Hydro’s financial position. Simplification is something the utility, its regulator and political overseers avoid. They prefer circumlocution to explanation. That hides the harsh reality.


For further information about dishonesty of the Horgan Government, don’t miss this piece in The Narwal by Sarah Cox:

Bureaucrats prepared Site C dam press release a week before NDP reportedly made decision to proceed

The FOI documents raise the question of why government staff appear to have been instructed only to prepare communications materials for an announcement to proceed with the Site C project, days in advance of the final Cabinet deliberations.

Categories: BC Hydro, Site C

12 replies »

  1. With any luck (snort!), an upcoming byelection will give the Horgan government an opportunity to rethink things. May they warm opposition benches again until they realize it doesn’t pay to make hopeful fools of those who elected you.

    Liked by 2 people

    • We need to be careful what we wish for. Please recall who it was who said she would get this project beyond the point of no return. There are no good outcomes here, other than perhaps changing some New Democrat minds, though, as perhaps in the case of JT and FIPPA, the reasons for some of these decisions may go beyond simple stupidity.

      Liked by 3 people

  2. Staff from the Ministry of Energy, Mines and Petroleum Resources, the Ministry of Finance and BC Hydro should have already been identifying cost savings, efficiencies, new revenue streams and other changes AS A PART OF THEIR REGULAR DUTIES!!

    If this group comes up with any significant measures to materially effect a change in hydro rates for the long term, it means they’ve been derelict in their past duties, and they should be sanctioned. They surely know that. Which of course makes it very unlikely any significant savings or efficiencies will result and that this whole exercise is just designed to kick the can down the road.

    I suggest that Mr. Horgan and his cabinet would arrive at a very clear understanding of what the problems are by sitting down and reviewing the work Norm has historically done here at In-Sights. They would then, if they were truly interested in finding meaningful solutions, quickly realize that bold and courageous initiatives are necessary. Decisions that will move the needle by billions of dollars are needed. This typical and disappointing bureaucratic navel-gazing exercise (like a multitude of previous politically-motivated examples) won’t cut it.

    The question is whether Mr. Horgan has the foresight and the courage to do any more than issue his existing troops extra lipstick.

    Liked by 3 people

  3. Thank you Norm for being a messenger of truth and fact backed evidence. It is unfortunate that our politicians are not held accountable for their actions or lack thereof. The taxpayer suffers the consequences.

    Liked by 1 person

  4. It’s not Premier Horgan that is running the show, rather it is Premier Meggs, with Horgan acting as a ventriloquist’s dummy.

    Why do you think Krog is jumping ship.

    Liked by 1 person

    • The influence on NDP leaders involves many more than Meggs although I understand people see him as a lightning rod.

      I suspect leadership believes the party’s prospects are best served by being seen as a centre, even centre-right, organization.

      Dave Barrett wanted to do things that mattered even if it meant a short time in power. The current government is more driven by politics than by principle so they’re aiming to be less controversial and more likely to stay in power beyond the present term.

      Liked by 1 person

  5. Thank you for not giving the Horgan government an easy pass. They deserve scrutiny, as they are at the helm. I believe they are making good moves elsewhere (Eby and Dix, notably) — but I think many of us here expected new paths, not more of the same practices on the Hydro file.

    Liked by 1 person

    • I agree to a point, but I do think the NDP are taking the advice from people who have got it wrong.

      The NDP’s loss (and it was a loss as they got less seats than the Liberals) came from not having bold new ideas and what we see is a rehash of old policies and a “blame it on the rich” attitude.

      The NDP will lose the next election and the Liberals, god help us will win, with the possibility of the Greens forming the next official opposition.

      Eby’s seat is lost, with the so called “School Tax” on houses worth more than $3 million and it is this old tax and spend nonsense that will sink the NDP.

      Reluctantly, the ‘Eye’ will vote for the Greens or a quality independent in the next provincial election as the Liberal party is ‘toxic’, but the NDP is a yesterday’s party, fighting yesterdyay’s battles.

      It is so, so sad to see.

      Like

  6. BC Hydro in a revolutionary time and place – but still using old and dying assumptions

    I do have some limited sympathy with the difficulties faced by the BC Hydro Board and senior management. However, it is increasingly obvious that politics and its world are a very poor mix with the physical worlds and scientific worlds of power use and generation.

    Norm and this blog have shown time and again that the assumptions upon which BC Hydro has operated for several decades (power use will always go up, the Americans will always take and pay a premium for all the power we can generate, the private sector will always produce power at lessor cost that the public sector, etc.) are foolish and have opened up BC Hydro to scandalous abuse and mismanagement.

    We also appear to be in a period of revolutionary technical change which will – fortunately for our species – radically change how prudent power producers and power consumers operate. Much has been written on how renewable power producers have become not only preferable for ecological and environmental reasons but also for lower cost of power production reasons.

    In addition, it appears that digital technology is now on the cusp of changing how we produce and consume electrical power. Indeed, the initial results suggest that by applying currently available digital control technology to cut waste out of the production/consumption cycle, our current power generation facilities could produce three times more usable power. The implications are staggering and make the already foolish justifications for Site C, for example, appear to be even more childish.

    The technology was developed by the 3DFS group at the University of North Carolina and are being provided at cost to speed up the transformation of the power grid to further the transformation over to a truly sustainable environment. If you have not yet seen the following, it is well worth a read: https://www.vox.com/energy-and-environment/2018/6/5/17373314/electricity-technology-efficiency-software-waste-3dfs

    Liked by 1 person

  7. I’m rank and file NDP and I’ve served many hours working hard for them over the years. I’ve had disagreements and beers with many of them, especially over Site C.

    Norm, you’re too late and about $5Bn, short. By the time Site C is complete the demand to power electric transportation will spike demand for electricity

    Our best asset is John Horgan, who was profoundly affected from witnessing the mess from the Nathan E. Stewart sinking and told Rachel Notley and Justin Trudeau to Go to Hell.

    Like

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