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.
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.
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.
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:
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.
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:
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.